Presentation at Dulles Area Association of REALTORS

1
Market Trends and Forecasts
Lawrence Yun, Ph.D. Vice President of
Research NATIONAL ASSOCIATION OF REALTORS
Presentation at Dulles Area Association of
REALTORS Leesburg, VA October 11, 2007
2
U.S. Home Price Growth
change from a year ago
Source NAR
3
DC Metro Home Price Growth
change from a year ago
Source NAR
4
Where is the Housing Correction?
5
U.S. Existing-Home Sales
In thousand units
16 Retreat from Peak
Source NAR
6
Existing Home Sales in Virginia
In thousand units
32 Retreat from Peak
Source NAR
7
U.S. New-Home Sales
In thousand units
33 Retreat from Peak
Source NAR, Census
8
U.S. New Single-Family Construction
36 2-year Tumble
Source Census
9
Investor (Speculative) Home Sales
In thousand units
29 Fall
Source NAR
10
Investor-Heavy MarketsNow Taking a Hit
(Existing-Home Sales 2007 Q2 vs 2006 Q2)
Also had a large sales decline in last year
Source NAR
11
Construction Jobs Now Falling
Source BLS, residential construction and
contractors
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Income of REALTORS
Source NAR
13
Fight the Bubble
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Something appears Out of Whack!
Income and Price set to Index of 100 in 1990
Source NAR
15
Rates Near 45-Year Lows
1970s 9 average
1980s 13 average
1990s 8 average
2000s 6.5 average
Source Freddie Mac
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Mortgage Obligation to Income Manageable

Source NAR
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Mortgage Obligation to Income Very High in Some
Markets
45 !!!
San Diego
Source NAR
18
Mortgage Obligation to Income Manageable
DC Area
Source NAR
19
Home Price Distribution(2006)
Source NAR
20
Renters Beginning to Get Squeezed U.S.

Source Torto-Wheaton Research
21
Subprime Impact
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Subprime Loan Implosion

• Homeowners facing higher resetting rates and
  foreclosures
• Wall Street reassessing risk
• Sub-prime brokers desperate for Wall Street
  funding
• Potential homebuyers left out in the cold

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Subprime Loan Exposure
Source NAR Estimate
24
Foreclosed Homes
Source NAR Estimate
25
Foreclosure Rates by Loan Type 2007 Q2
Data MBA
26
Virginia Foreclosure Rates
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National Mortgage Delinquencies(Big swings for
subprime no real change in prime)
Stagnant Prices
Job Losses pushes up delinquency
Housing boom permits re-financing and lowers
delinquency
Data MBA
28
Foreclosure Variations(2007 Q2)
Very High
Data MBA
29
Delinquency to Foreclosure (Latest
Foreclosure/Delinquency ratio)
Better Loss Mitigation Programs for VA and FHA
30
Jumbo Loan Rate Spread(August panic over but
still not back to norm)
Basis Points
Source Freddie Mac
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Not All Markets are Suffering States with
Falling Foreclosures
Percent change in foreclosure rate in 2006 Q2 vs
2007 Q2
Mostly Strong Job Growth and Price Appreciating
States
32
Economic Backdrop
33
Steady U.S. Job GainsNear 2 Million in Past 12
months
12-month payroll job changes in millions
Source BLS
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Job Gains in D.C. Area
12-month net payroll job changes in thousands
Source BLS
35
Jobs Detroit Region
12-month net payroll job changes in thousands
Source BLS
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Wage Growth Picking Up

Source BLS
37
Aggregate U.S. Wages and Salary Disbursement
billion
Source BEA
38
Corporate Profits Record High
billion
Source BEA
39
Stock Market at Record HighSP 500 Index
Source NYSE
40
Business Spending
annualized growth rate
41
Dollar vs Euro
U.S. homes are selling at a 30 to 40 discount
Source BLS
42
Export Growth
billion
43
Consumer Spending
annualized growth rate
44
Worry Spot - Oil Price
per barrel
Source Wall Street Journal
45
Economic Outlook
The Fed cuts rate imminent
46
Stable Mortgage Rates
Source Freddie Mac
47
House prices 'to soar 40 percent within next five
years'

• News from National Housing Federation in U.K.
  August 2007
• U.K. home prices soared 156 past 10 years
  twice as fast as U.S. home prices
• Not building Enough Homes! Housing Shortage!

48
States with Sharp Construction Contraction(YTD
May 2007 vs YTD May 2006)
49
D.C. Area New Single-Family Construction
Source Census
50
Buyers Lining Up ?
51
FHA Market Share for Home Purchase
Source HMDA,NAR estimate
52
Healthier Future Market

• Job growth leads to accumulating and releasing of
  pent-up housing demand
• Cut back in new home construction thins out
  inventory and strengthen home prices
• Shift to traditional products
• Reckless lenders going belly up
• Wall Street tightening
• FHA revival
• Higher prevalence of fixed-rate mortgages
• Short-term Pain from lower home sales
• Long-term Gain from lower defaults

53
National Housing Outlook
54
Local Forecast ???
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Wealth Accumulation The Power of Leverage for
Homeowners (10,000 down payment on a 200,000
home)
10 appreciations
15 appreciations
5 appreciations
56
Best EvidenceHousehold Wealth Accumulation
184,400
Median Net Worth
4,000
Source Federal Reserve
57
Why Buy Now?

• Time of crisis often turns out to have been a
  time of opportunity in hindsight
• Wide selection of housing inventory
• Favorable mortgage rates
• Prime borrowers low favorable conforming rate
  loans
• Jumbo borrowers rates coming down after August
  credit crunch
• Non-prime borrowers moving away from the risky
  subprime loans into safer FHA loans (Major reform
  in FHA program taking place)
• Worst in credit crunch is over Alan Greenspan
• More jobs, more income, more wealth ---
  significant pent-up demand --- buy before others
  do
• Homeowners in it for the long-term nearly always
  come out ahead in building wealth