The Real Story About Today’s Real Estate Boom

The Real Story About Today’s Real Estate Boom

David Lereah, Ph.D., Chief EconomistNATIONAL ASSOCIATION OF REALTORS®

August 2005

David Lereah, Ph.D., Chief EconomistNATIONAL ASSOCIATION OF REALTORS®

August 2005

Painting the BoomPainting the Boom

• Booming Prices

• Record Home Sales

• Second Home Buying Frenzy

• Stretching Credit

• Media Frenzy

• Doom/Gloom Predictions

• Booming Prices

• Record Home Sales

• Second Home Buying Frenzy

• Stretching Credit

• Media Frenzy

• Doom/Gloom Predictions

Hot Markets in the Past 3 Years(2005 Q2 vs 2002 Q2)

Hot Markets in the Past 3 Years(2005 Q2 vs 2002 Q2)

0%

20%

40%

60%

80%

100%

120%

Price Appreciation

0%

20%

40%

60%

80%

100%

120%

Price Appreciation

Source: NARSource: NAR

Cool Markets in the Past 3 Years(2005 Q1 vs 2002 Q1)

Cool Markets in the Past 3 Years(2005 Q1 vs 2002 Q1)

-10%

10%

30%

50%

70%

90%

110%

Price Appreciation

-10%

10%

30%

50%

70%

90%

110%

Price Appreciation

Source: NARSource: NAR

Under the RadarUnder the Radar

Home Price Distribution(2005 Q2)

Home Price Distribution(2005 Q2)

0

100

200

300

400

500

600

700

800

Median Price in $ thousands

0

100

200

300

400

500

600

700

800

Median Price in $ thousands

Source: NARSource: NAR

Real Home Price GrowthReal Home Price Growth

-10

-5

0

5

10

15

Home price growth minus CPI inflation

-10

-5

0

5

10

15

Home price growth minus CPI inflation

Source: NARSource: NAR

All-time HighAll-time High

Recession ImpactsRecession Impacts

Record Existing-Home Sales Record Existing-Home Sales

0

1

2

3

4

5

6

7

8

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

YTD

Total existing home sales

0

1

2

3

4

5

6

7

8

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

YTD

Total existing home sales

In million unitsIn million units

Source: NARSource: NAR

Record New Home Sales Record New Home Sales

0

250

500

750

1000

1250

1500

1980

1985

1990

1995

2000

2005

YTD

Total new home sales

0

250

500

750

1000

1250

1500

1980

1985

1990

1995

2000

2005

YTD

Total new home sales

In thousand unitsIn thousand units

Source: CensusSource: Census

Second-Home Buying on the RiseSecond-Home Buying on the Rise

64%

23%

13%

Primary Investment Vacation

64%

23%

13%

Primary Investment Vacation

Source: NARSource: NAR

Stretching CreditStretching Credit

• ARMS (33% of all loans in 2005)

• Interest-Only Share (23% of all loans in 2004)

• Low Documentation Loans

• Low Down Payment Loans

• Stretching to get a 40% larger loan– $250,000 traditional loan at 6% rate equals $1,499

per month

– $350,000 interest-only loan at 5% rate equals $1,458 per month

• ARMS (33% of all loans in 2005)

• Interest-Only Share (23% of all loans in 2004)

• Low Documentation Loans

• Low Down Payment Loans

• Stretching to get a 40% larger loan– $250,000 traditional loan at 6% rate equals $1,499

per month

– $350,000 interest-only loan at 5% rate equals $1,458 per month

Media FrenzyMedia Frenzy

• The Economist – After the Fall (from the biggest bubble in history)

• Fortune – Real Estate Gold Rush

• Businessweek – After the Housing Boom

• Newsweek – Real Estate Gone Wild

• Money – Are Home Prices Really So Crazy?

• Kiplinger’s – The 13 Riskiest Housing Markets

• The Wall Street Journal - Crash Test: Does A Housing Bust Hurt More Than A Stock Collapse?

• The Economist – After the Fall (from the biggest bubble in history)

• Fortune – Real Estate Gold Rush

• Businessweek – After the Housing Boom

• Newsweek – Real Estate Gone Wild

• Money – Are Home Prices Really So Crazy?

• Kiplinger’s – The 13 Riskiest Housing Markets

• The Wall Street Journal - Crash Test: Does A Housing Bust Hurt More Than A Stock Collapse?

Chicken Little’s Sky is FallingChicken Little’s Sky is Falling

• Robert Shiller (Yale) – predicts 50% decline in real prices in the next decade

• Dean Baker (Center for Economic and Policy Research) – claims Bush’s House of Card

• PMI Group – 6 markets with greater than 50% chance of price decline in the next 12 months

• Robert Shiller (Yale) – predicts 50% decline in real prices in the next decade

• Dean Baker (Center for Economic and Policy Research) – claims Bush’s House of Card

• PMI Group – 6 markets with greater than 50% chance of price decline in the next 12 months

The Real StoryThe Real Story

• Strong Demand

– Historic low rates

– Second home demand

– Job additions

• Lean Supply

• Demographic Shifts

• Little Overstretching

• Favorable Affordability

• Strong Demand

– Historic low rates

– Second home demand

– Job additions

• Lean Supply

• Demographic Shifts

• Little Overstretching

• Favorable Affordability

Seismic Population ShiftsSeismic Population Shifts

• Baby boomers nearing retirement – seeking retirement destinations

• Faster job creations in low cost “business- friendly” regions

• Faster job creation in new high-tech industries

• Immigration concentrated in few markets

• Baby boomers nearing retirement – seeking retirement destinations

• Faster job creations in low cost “business- friendly” regions

• Faster job creation in new high-tech industries

• Immigration concentrated in few markets

U.S. Migration Trend2000 to 2003

U.S. Migration Trend2000 to 2003

-103-103OhioOhio

+108+108North CarolinaNorth Carolina

+140+140GeorgiaGeorgia

-551-551New YorkNew York

-277-277CaliforniaCalifornia

-238-238IllinoisIllinois

-102-102MassachusettsMassachusetts

+146+146NevadaNevada

+194+194ArizonaArizona

+541+541FloridaFlorida

Net Domestic Migration (in thousands)Net Domestic Migration (in thousands)StateState

Source: CensusSource: Census

Doubling of FloridaDoubling of Florida

• Florida population growing twice as fast as the U.S.

• Population to double by 2040

• Adding more than 17 million people

• Equivalent to adding everyone currently in Pennsylvania and Maryland

• Florida population growing twice as fast as the U.S.

• Population to double by 2040

• Adding more than 17 million people

• Equivalent to adding everyone currently in Pennsylvania and Maryland

Source: NAR Source: NAR

Doubling of NevadaDoubling of Nevada

• Nevada (Las Vegas) population growing the fastest – nearly four times as fast as the U.S.

• Population to double by 2023

• Adding more than 2 million people

• Equivalent to adding a Seattle or Tampa-St. Petersburg

• Nevada (Las Vegas) population growing the fastest – nearly four times as fast as the U.S.

• Population to double by 2023

• Adding more than 2 million people

• Equivalent to adding a Seattle or Tampa-St. Petersburg

Source: NAR Source: NAR

Baby Boomer RetirementBaby Boomer Retirement

• Northeasterners (with huge housing equity) move to Florida – FL markets may experience affordability pressures

– Northeast home prices supported by minimal new home construction

• Midwesterners (with minimal housing equity) forced to look outside FL or just stay put – Net outflow and active building keeps prices low in the Midwest

• Californians head to nearby low tax states of AZ, NV, and WA– These markets may soon experience affordability pressures

– California home prices supported by minimal new home construction

• Northeasterners (with huge housing equity) move to Florida – FL markets may experience affordability pressures

– Northeast home prices supported by minimal new home construction

• Midwesterners (with minimal housing equity) forced to look outside FL or just stay put – Net outflow and active building keeps prices low in the Midwest

• Californians head to nearby low tax states of AZ, NV, and WA– These markets may soon experience affordability pressures

– California home prices supported by minimal new home construction

Months Supply of Inventory Months Supply of Inventory

-1

1

3

5

7

9

11

13

15

Months Supply of Single Family Homes

-1

1

3

5

7

9

11

13

15

Months Supply of Single Family Homes

Source: NARSource: NAR

Low Interest Rate DecadeLow Interest Rate Decade

0

5

10

15

20

Mortgage Rate

0

5

10

15

20

Mortgage Rate

Source: Freddie MacSource: Freddie Mac

1970s9% average

1980s13% average

1990s8% average

2000s6.5% average

Loan-to-Value Suggests Manageable Household Balance Sheet

Loan-to-Value Suggests Manageable Household Balance Sheet

6567697173757779818385

LTV

6567697173757779818385

LTV

Source: Federal Housing Finance BoardSource: Federal Housing Finance Board

Adjustable Rate Mortgages High but Trending Down

Adjustable Rate Mortgages High but Trending Down

0

10

20

30

40

50

60

ARM share

0

10

20

30

40

50

60

ARM share

Source: Federal Housing Finance BoardSource: Federal Housing Finance Board

Typical Homebuyer’s Mortgage Payment

Typical Homebuyer’s Mortgage Payment

15

20

25

30

35

Mortgage payment as % of income for median priced home by a median income family

15

20

25

30

35

Mortgage payment as % of income for median priced home by a median income family

Source: NARSource: NAR

Housing Affordability Still HighHousing Affordability Still High

50

75

100

125

150

Housing affordability

50

75

100

125

150

Housing affordability

Source: NARSource: NAR

Rates have to rise to 7.2%to bring Affordability to 100

Why a “Bubble” is not a BubbleWhy a “Bubble” is not a Bubble

• Fundamentals

• Market Analysis

• Influencing Factors

• Stress Test

• Fundamentals

• Market Analysis

• Influencing Factors

• Stress Test

FundamentalsFundamentals

• Local Economic Conditions (jobs, diverse economy)

• Population/Migration Trends

• Supply Conditions

• Affordability

• Investor Share

• Mortgage Composition

• Local Economic Conditions (jobs, diverse economy)

• Population/Migration Trends

• Supply Conditions

• Affordability

• Investor Share

• Mortgage Composition

Market AnalysisMarket Analysis

• Jobs

• Construction Activity

• Local vs. National Prices

• Mortgage Debt/Median Income

• Affordability Analysis

• Jobs

• Construction Activity

• Local vs. National Prices

• Mortgage Debt/Median Income

• Affordability Analysis

Influencing FactorsInfluencing Factors

• Demographic Trends

• Population Growth

• Building Growth Restrictions

• Demographic Trends

• Population Growth

• Building Growth Restrictions

Stress TestStress Test

• Flat Rates

• Rising Rates

• Job Losses

• Price Increases

• Flat Rates

• Rising Rates

• Job Losses

• Price Increases

Sample Metro Market AnalysisWashington, D.C.

Sample Metro Market AnalysisWashington, D.C.

Key Market FactsKey Market Facts

• Median Price $429,200

– 106% higher than national median

– 23% rise in 2004 and 108% rise in 5 years

• Solid Demand/Supply Fundamentals

– 110,000 net new jobs in the past two years easily beats 57,000 new single-family home construction

• Median Price $429,200

– 106% higher than national median

– 23% rise in 2004 and 108% rise in 5 years

• Solid Demand/Supply Fundamentals

– 110,000 net new jobs in the past two years easily beats 57,000 new single-family home construction

Home PriceHome Price

0

100

200

300

400

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

0

100

200

300

400

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

No growth

Takeoff

Residual-Hangover Impact(5-year job gains vs 5-year new housing units)

Residual-Hangover Impact(5-year job gains vs 5-year new housing units)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Prices still couldn’t get on positive traction due to hangover effectPrices still couldn’t get on positive traction due to hangover effect

Accumulating demand over supply unleashed with the fall in rates

Mortgage Servicing Cost to Per Capita Income

Mortgage Servicing Cost to Per Capita Income

0%

20%

40%

60%

80%

100%

120%1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

6% rate 8% rate 10% rate average

0%

20%

40%

60%

80%

100%

120%1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

6% rate 8% rate 10% rate average

Not alarming, just at long-term historical average

Worrisome forecast only if rates rise to 10%

Current Mortgage Market StressCurrent Mortgage Market Stress

LowLow1212Percent with LTV greater than 90%

Percent with LTV greater than 90%

Moderately highModerately high3131Interest-Only Interest-Only

Average Average 3333ARMsARMs

CommentComment% of Total% of Total

Washington, D.C. Washington, D.C.

• Prices can increase 8% to 12% without undue stress if mortgage rates rise to 7% and job gains continue at recent pace

• Price can increase 15% to 20% without undue stress if rate remain near 6% and job gains continue at recent pace

• If jobs suddenly stall, then prices can increase by only 5% without undue stress

• Prices can increase 8% to 12% without undue stress if mortgage rates rise to 7% and job gains continue at recent pace

• Price can increase 15% to 20% without undue stress if rate remain near 6% and job gains continue at recent pace

• If jobs suddenly stall, then prices can increase by only 5% without undue stress

Metro Market AnalysisSan Diego

Metro Market AnalysisSan Diego

Key Market FactsKey Market Facts

• Median Price $605,600 – Nearly 3 times the national average

– 20% appreciation in 2004

– Prices doubled in 4 years.

• Strong Demand/Supply Fundamentals – Job creations throughout recession; pace could weaken

due to affordability problems

– Limited supply help support prices, but any weakening in demand (job losses) could lead to price softening

– High percentage of risky loans

• Median Price $605,600 – Nearly 3 times the national average

– 20% appreciation in 2004

– Prices doubled in 4 years.

• Strong Demand/Supply Fundamentals – Job creations throughout recession; pace could weaken

due to affordability problems

– Limited supply help support prices, but any weakening in demand (job losses) could lead to price softening

– High percentage of risky loans

San Diego - Home PriceSan Diego - Home Price

Flat to Declining

Takeoff

0

100

200

300

400

500

600

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

0

100

200

300

400

500

600

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Demand/Supply Ratio(5-year job gains vs 5-year new housing units)

Demand/Supply Ratio(5-year job gains vs 5-year new housing units)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Accumulated pent-up demand largely satisfied with new housing

Mortgage Servicing Cost to Per Capita Income

Mortgage Servicing Cost to Per Capita Income

Under 50%, relatively low0%

20%40%

60%80%

100%120%

140%160%180%

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

6% rate 8% rate 10% rate average

0%20%40%

60%80%

100%120%

140%160%180%

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

6% rate 8% rate 10% rate average

Already Near Historic Highs

Mortgage Market StressMortgage Market Stress

Very lowVery low33Percent with LTV greater than 90%

Percent with LTV greater than 90%

HighHigh4848Interest-Only Interest-Only

High High 6767ARMsARMs

CommentComment% of Total% of Total

Stress TestStress Test

• Price appreciation could remain low or flat (air coming out of balloon) for the next two years if mortgage rates rise to 7% and job gains continue at recent pace

• Prices can increase 5% without undue stress if rate remain near 6%

• Price appreciation could remain low or flat (air coming out of balloon) for the next two years if mortgage rates rise to 7% and job gains continue at recent pace

• Prices can increase 5% without undue stress if rate remain near 6%

Preliminary Observations for Metro Markets

Preliminary Observations for Metro Markets

The Rolling BoomThe Rolling Boom

34.3%Sarasota-Bradenton-Venice, FL

36.5%Orlando, FL

40.0%Palm Bay-Melbourne-Titusville, FL

45.2%Cape Coral-Fort Myers, FL

47.0%Phoenix-Mesa-Scottsdale, AZ2005 – Q22005 – Q2

30.4%Los Angeles-Long Beach-Santa Ana, CA

37.5%San Diego-Carlsbad-San Marcos, CA

38.5%Riverside-San Bernardino-Ontario, CA

38.7%Anaheim-Santa Ana, CA (Orange Co.)

52.4%Las Vegas-Paradise, NV 2004 – Q22004 – Q2

21.7%Barnstable Town, MA

22.0%Providence-New Bedford-Fall River, RI-MA

22.4%Glens Falls, NY

23.5%Riverside-San Bernardino-Ontario, CA

24.1%Elmira, NY 2003 – Q22003 – Q2

Highest Price Growth by Metro(2005 Q2 vs 2004 Q2)

Highest Price Growth by Metro(2005 Q2 vs 2004 Q2)

N/AN/A24.8%24.8%367.6367.6Riverside-San Bernardino-Ontario, CA Riverside-San Bernardino-Ontario, CA 1515

5.15.125.7%25.7%244.9244.9Atlantic City, NJAtlantic City, NJ1414

1.91.926.2%26.2%429.2429.2Washington-Arlington-Alexandria Washington-Arlington-Alexandria 1313

2.32.328.1%28.1%577.8577.8Honolulu, HIHonolulu, HI1212

N/AN/A28.7%28.7%206.0206.0Hagerstown-Martinsburg, MD-WV Hagerstown-Martinsburg, MD-WV 1111

1.01.030.0%30.0%228.5228.5Tucson, AZTucson, AZ1010

N/AN/A30.9%30.9%198.5198.5Durham, NC Durham, NC 99

N/AN/A31.2%31.2%194.0194.0Deltona-Daytona Beach-Ormond Beach, FL Deltona-Daytona Beach-Ormond Beach, FL 88

2.12.131.7%31.7%371.6371.6Miami-Fort Lauderdale-Miami Beach, FL Miami-Fort Lauderdale-Miami Beach, FL 77

1.21.232.1%32.1%357.4357.4Reno-Sparks, NV Reno-Sparks, NV 66

3.73.734.3%34.3%367.8367.8Sarasota-Bradenton-Venice, FL Sarasota-Bradenton-Venice, FL 55

N/AN/A36.5%36.5%232.2232.2Orlando, FLOrlando, FL44

2.92.940.0%40.0%204.0204.0Palm Bay-Melbourne-Titusville, FL Palm Bay-Melbourne-Titusville, FL 33

N/AN/A45.2%45.2%266.8266.8Cape Coral-Fort Myers, FLCape Coral-Fort Myers, FL22

1.11.147.0%47.0%243.4243.4Phoenix -Mesa-Scottsdale, AZPhoenix -Mesa-Scottsdale, AZ11

Months SupplyMonths Supply

% Change

% ChangePricePrice

Established and Growing(Job centers and affordable)

Established and Growing(Job centers and affordable)

• Low cost labor, favorable job creating climate, low home price (for now) from active home building

– Dallas-Ft. Worth

– Charlotte

– Atlanta

– Orlando

– Houston

– Tampa-St. Petersburg

• Low cost labor, favorable job creating climate, low home price (for now) from active home building

– Dallas-Ft. Worth

– Charlotte

– Atlanta

– Orlando

– Houston

– Tampa-St. Petersburg

Quality Job Centers but Declining Affordability

Quality Job Centers but Declining Affordability

• High paying jobs with net positive migration; home prices getting expensive

– Washington D.C.

– San Diego

– Orange County

– Nassau-Suffolk

• High paying jobs with net positive migration; home prices getting expensive

– Washington D.C.

– San Diego

– Orange County

– Nassau-Suffolk

Desirable but Experiencing Affordability Issues

Desirable but Experiencing Affordability Issues

• High-paying jobs; but net negative migration due to high home prices

– San Francisco

– New York

– Boston

• High-paying jobs; but net negative migration due to high home prices

– San Francisco

– New York

– Boston

Young and Energetic Young and Energetic

• Strong in-migration trends

– Boise

– Sarasota

– Ft. Myers

– Las Vegas

– Phoenix

– Jacksonville

• Strong in-migration trends

– Boise

– Sarasota

– Ft. Myers

– Las Vegas

– Phoenix

– Jacksonville

High-Tech Swing CitiesHigh-Tech Swing Cities

• Educated work force; quality of living on the rise

• Net positive migration

• High-tech meltdown to high-tech resurgence

• Educated work force; quality of living on the rise

• Net positive migration

• High-tech meltdown to high-tech resurgence

–San Jose

–Denver

–San Jose

–Denver

–Seattle

–Austin

–Raleigh-Durham

–Seattle

–Austin

–Raleigh-Durham

Not yet on Radar(up and coming and little noticed)

Not yet on Radar(up and coming and little noticed)

• Up and coming and little noticed ocean destinations

• Fewer baby boomers retirees able to go to pricey South Florida

• Up and coming and little noticed ocean destinations

• Fewer baby boomers retirees able to go to pricey South Florida

– Wilmington, NC

– Charleston, SC

– Myrtle Beach, SC

– Panama City, FL

– Wilmington, NC

– Charleston, SC

– Myrtle Beach, SC

– Panama City, FL

–Pensacola, FL

–Port St. Lucie, FL

–Mobile, AL

–Virginia Beach, VA

–Pensacola, FL

–Port St. Lucie, FL

–Mobile, AL

–Virginia Beach, VA

Growing NeighborsGrowing Neighbors

• Affordable relative to its pricey neighbor

• Riding the high-tide of its neighbor

– Riverside-San Bernardino

– Baltimore

– Sacramento

– Providence

• Affordable relative to its pricey neighbor

• Riding the high-tide of its neighbor

– Riverside-San Bernardino

– Baltimore

– Sacramento

– Providence

Top Large Markets for Second-Home Purchases

Top Large Markets for Second-Home Purchases

0

5

10

15

20

25

Las V

egas

Wes

t Pal

m B

each

Tallah

asse

eRen

o

Orlando

Honolu

lu

Charle

ston

Mia

mi

Tampa

Ft. Lau

derda

le

% Loans for non-occupied home purchase

0

5

10

15

20

25

Las V

egas

Wes

t Pal

m B

each

Tallah

asse

eRen

o

Orlando

Honolu

lu

Charle

ston

Mia

mi

Tampa

Ft. Lau

derda

le

% Loans for non-occupied home purchase%

Source: 2003 HMDASource: 2003 HMDA

Some Markets Accelerating Some Markets Accelerating

0

5

10

15

20

25

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Seattle (% increase from a year ago)

0

5

10

15

20

25

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Seattle (% increase from a year ago)%

Source: NARSource: NAR

More Acceleration More Acceleration

0

5

10

15

20

25

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Tampa (% increase from a year ago)

0

5

10

15

20

25

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Tampa (% increase from a year ago)%

Source: NARSource: NAR

Some Markets with Soft Landings Some Markets with Soft Landings

0

10

20

30

40

50

60

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Las Vegas (% increase from a year ago)

0

10

20

30

40

50

60

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Las Vegas (% increase from a year ago)%

Source: NARSource: NAR

More Soft Landing More Soft Landing

0

5

10

15

20

25

30

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Providence (% change from a year ago)

0

5

10

15

20

25

30

Q1 '00

Q1 '01

Q1 '02

Q1 '03

Q1 '04

Q1 '05

Providence (% change from a year ago)%

Source: NARSource: NAR

High IOs and ARMs but Low LTVsHigh IOs and ARMs but Low LTVs

• No foreclosure danger, but may get pinched from rising rates

• No foreclosure danger, but may get pinched from rising rates

–Raleigh-Durham

–San Diego

–Seattle

–San Francisco

–Sacramento

–Raleigh-Durham

–San Diego

–Seattle

–San Francisco

–Sacramento

–Boston

–Chicago

–Denver

–Las Vegas

–Los Angeles

–Portland

–Boston

–Chicago

–Denver

–Las Vegas

–Los Angeles

–Portland

Housing OutlookHousing Outlook

9.3%9.3%

3.9%3.9%

5.8%5.8%

1.96 million1.96 million

1.20 million1.20 million

6.78 million6.78 million

20042004

5.2%5.2%10.5%10.5%Existing-Home Price GrowthExisting-Home Price Growth

5.2%5.2%4.5%4.5%1-Year ARM 1-Year ARM

6.5%6.5%5.9%5.9%30-Year FRM 30-Year FRM

1.86 million1.86 million2.02 million2.02 millionHousing StartsHousing Starts

1.20 million1.20 million1.26 million1.26 millionNew Home SalesNew Home Sales

6.73 million6.73 million6.98 million6.98 millionExisting-Home SalesExisting-Home Sales

2006200620052005

The True Story About Today’s Real Estate Boom

The True Story About Today’s Real Estate Boom

David Lereah, Ph.D., Chief EconomistNATIONAL ASSOCIATION OF REALTORS®

August 2005

David Lereah, Ph.D., Chief EconomistNATIONAL ASSOCIATION OF REALTORS®

August 2005