KCM Divided KCM Divided intointo Three SectionsThree Sections

2014PROJECTIONS

2012 - Recovery

2013 - Stabilization

2014 - Growth!

The Year of…

The ECONOMY

Calculated Risk 12/2013

“The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).

The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.”

Coincident indexes constructed from state employment data. From the Federal Reserve Bank of Philadelphia:

Calculated Risk 12/2013

2014 will be the year of the repeat homebuyer

- Trulia

“Demand for housing units increases as new immigrants enter the economy and form households,

accelerating the current housing recovery and fueling growth in this

sector of the economy.”

Projected annual increase in spending on residential construction

Bipartisan Policy Center 12/2013

Impact of Immigration Reform

$68B

HOUSEHOLDSin the U.S.*

2014-2017121M

Current Households in the United States

3.7%Projected Growth over

the Next 3 Years

*Urban Land Institute’s 2014

Emerging Trends in Real Estate

4.48MAdditional Households

to be Formed

Affordability is still good compared to any time over the last 50 years.

“Well, I think it’s a basic question of supply and demand. When you have that many more

renters coming into the market looking for housing, and the supply of housing isn’t

responding as quickly as it might, that’s going to push rents up, even if incomes are low.”

Christopher Herbert Research Director at the Joint Center

Affordability is still good compared to any time over the last 50 years.

"We are in the midst of the worst rental affordability crisis that this

country has known."

Shaun Donovan Secretary of Housing & Urban Development.

Federal Reserve

OVER 30X greaterthan renters

Homeowners Net Worth…

$174,500

$5,100

Homeowner Renter

An American Family’s

Net Worth

Federal Reserve

4,000,000

4,500,000

5,000,000

5,500,000

Existing Home Sales

S&P Case Shiller 12/2013

WEST

Down 10.1%

MIDWEST

Unchanged

SOUTH

Up 1%

NORTHEAST

Up 6.6%

NAR’s Existing Homes Sales Report 12.2013

Year-Over-Year % Change in House Sales

NAR 12/2013

100 = Historically Healthy Level

Pending Home Sales

Impact of Increasing

INTEREST RATES

ta·perˈtāpər/Verb – to diminish or reduce

$151.08

Affordability is still good compared to any time over the last 50 years.

“I think it is very likely that QE3 will be completed by the end of 2014. There are 8 meetings during the year, and I expect the Fed to reduce the pace of asset purchases at about $10 billion per meeting.

It appears they will only slow the taper if inflation declines sharply - or if the economy stalls

(I think both are unlikely).”

Bill McBride Calculated Risk

2013 30 Year Fixed Mortgage Rates

Federal Reserve 12/2013

Mortgage Rate Projections

Analyst Projected Rate 1Q 2015

National Assoc of Realtors 5.4%

Mortgage Bankers Assoc 5.3%

Calculated Risk 7/2013

70%63%

55%

35%

4.4% 5% 6% 7%

Percent of the country remaining affordable at different 30 year mortgage rates

Freddie Mac

13.6% 13.3% 13.6%

44.3%

8%

4.5 - 5% 5 - 5.5% 5.5 - 6% 6 - 6.5% > 6.5%

Rate deemed SIGNIFICANT threat*

*on the 30-Year fixed rate mortgage Pulsenomics

6.00 $ 1,079 $ 1,109 $ 1,139 $ 1,169 $ 1,199

5.75 $ 1,050 $ 1,080 $ 1,109 $ 1,138 $ 1,167

5.50 $ 1,022 $ 1,050 $ 1,079 $ 1,107 $ 1,136

5.25 $ 994 $ 1,022 $ 1,049 $ 1,077 $ 1,104

5.00 $ 966 $ 993 $ 1,020 $ 1,047 $ 1,074

4.75 $ 939 $ 965 $ 991 $ 1,017 $ 1,043

4.50 $ 912 $ 937 $ 963 $ 988 $ 1,013

$ 180,000 $ 185,000 $ 190,000 $ 195,000 $ 200,000

-10% -7.5% -5% -2.5%

Buyer’s Purchasing PowerR

AT

E

Principal and Interest Payments rounded to the nearest dollar amount.

6.00 $ 2,158 $ 2,218 $ 2,278 $ 2,338 $ 2,398

5.75 $ 2,100 $ 2,160 $ 2,218 $ 2,276 $ 2,334

5.50 $ 2,044 $ 2,100 $ 2,158 $ 2,214 $ 2,272

5.25 $ 1,988 $ 2,044 $ 2,098 $ 2,154 $ 2,208

5.00 $ 1,932 $ 1,986 $ 2,040 $ 2,094 $ 2,148

4.75 $ 1,878 $ 1,930 $ 1,982 $ 2,034 $ 2,086

4.50 $ 1,824 $ 1,874 $ 1,926 $ 1,976 $ 2,026

$ 360,000 $ 370,000 $ 380,000 $ 390,000 $ 400,000

-10% -7.5% -5% -2.5%

RA

TE

Principal and Interest Payments rounded to the nearest dollar amount.

Buyer’s Purchasing Power

6.00 $ 3,237 $ 3,328 $ 3,417 $ 3,507 $ 3,597

5.75 $ 3,151 $ 3,239 $ 3,326 $ 3,414 $ 3,501

5.50 $ 3,066 $ 3,151 $ 3,236 $ 3,322 $ 3,407

5.25 $ 2,982 $ 3,065 $ 3,148 $ 3,230 $ 3,313

5.00 $ 2,899 $ 2,979 $ 3,060 $ 3,140 $ 3,221

4.75 $ 2,817 $ 2,895 $ 2,973 $ 3,052 $ 3,130

4.50 $ 2,736 $ 2,812 $ 2,888 $ 2,964 $ 3,040

$ 540,000 $ 555,000 $ 570,000 $ 585,000 $ 600,000

-10% -7.5% -5% -2.5%

RA

TE

Principal and Interest Payments rounded to the nearest dollar amount.

Buyer’s Purchasing Power

6.00 $ 4,317 $ 4,437 $ 4,557 $ 4,676 $ 4,796

5.75 $ 4,201 $ 4,318 $ 4,435 $ 4,552 $ 4,669

5.50 $ 4,088 $ 4,202 $ 4,315 $ 4,429 $ 4,542

5.25 $ 3,976 $ 4,086 $ 4,197 $ 4,307 $ 4,418

5.00 $ 3,865 $ 3,972 $ 4,080 $ 4,187 $ 4,295

4.75 $ 3,756 $ 3,860 $ 3,965 $ 4,069 $ 4,173

4.50 $ 3,648 $ 3,749 $ 3,851 $ 3,952 $ 4,053

$ 720,000 $ 740,000 $ 760,000 $ 780,000 $ 800,000

-10% -7.5% -5% -2.5%

RA

TE

Principal and Interest Payments rounded to the nearest dollar amount.

Buyer’s Purchasing Power

6.00 $ 5,396 $ 5,546 $ 5,696 $ 5,846 $ 5,996

5.75 $ 5,252 $ 5,398 $ 5,544 $ 5,690 $ 5,836

5.50 $ 5,110 $ 5,252 $ 5,394 $ 5,536 $ 5,678

5.25 $ 4,970 $ 5,108 $ 5,246 $ 5,384 $ 5,522

5.00 $ 4,831 $ 4,966 $ 5,100 $ 5,234 $ 5,368

4.75 $ 4,695 $ 4,825 $ 4,956 $ 5,086 $ 5,216

4.50 $ 4,560 $ 4,687 $ 4,814 $ 4,940 $ 5,067

$ 900,000 $ 925,000 $ 950,000 $ 975,000 $ 1,000,000

-10% -7.5% -5% -2.5%

RA

TE

Principal and Interest Payments rounded to the nearest dollar amount.

Buyer’s Purchasing Power

Home Prices

12/2013

S&P Case Shiller 12/2013

Year-over-Year Change in Prices

12/2013

Month-Over-Month Price Changes

4.0

4.3

4.5

4.8

5.0

5.3

Jan Feb Mar Apr May Jun Jul August Sept Oct Nov

Months Inventory of Homes for Sale

NAR 12/2013

5-6 Months = Normal Market Inventory

-24%

-20.8%

-16.8%

-14%-13%

-7.6%

-5%-6.2%

1.8% 0.9%

5%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Jan Feb March April May June July Aug Sept Oct Nov

% -24% -20.8% -16.8% -14% -13% -7.6% -5% -6.2% 1.8% 0.9% 5.0%

Year-over-Year Inventory Levels

NAR 12/2013

RETURN ON INVESTMENT

51.5

32.5

6

65.9

Dow S&P NASDAQ Real Estate

January 2000 – December 2013

MSN Money.com, Case Shiller

S&P Case-Shiller Home Price Indices

S&P Case Shiller 12/2013

Months Inventory of Homes for Sale

5-6 Months = Normal Market Inventory

NAR 12/2013

Percentage of Distressed Property SalesPercentage of Distressed Property Sales

35%

14%

NAR 12/2013

Nail Down the Nail Down the

TRUST TRUST FACTORFACTOR

“One of the main ways that companies are establishing authority and gaining trust with consumers is by consistently creating valuable content through a variety of channels.

This typically involves relevant industry information that provides insight to an audience. Doing so allows a company to steadily build rapport with its demographic and develop a loyal following.”

Jayson DeMers in Forbes

Content Marketing Will Be Bigger Than Ever

“As consumers are hit with an increasing number of advertisements, it’s becoming more important to make content easily and quickly digestible. If you look at the social media sites that are on the rise, three of the four have a common characteristic…

Jayson DeMers in ForbesImage-Centric Content Will Rule

they place an emphasis

on images.”

Placester

of businesses use some form of content marketing

60%

of Chief Marketing Officers believe custom content is the future of marketing

78%

Marketing Tech Blog

of consumers prefer getting to know a company via articles

rather than ads

of consumers believe that organizations providing custom

content are interested in building good relationships with them

Content Marketing

as many leads per dollar produced by content marketing

(versus paid search)

78% 70%

3X

$184K

$230K

By FSBO By AGENT

*The ‘typical’ price is actually the average price in the survey. However, studies have shown that people are more likely to FSBO in markets with lower price points.

Typical Sold Price*FSBO vs. Agent

6.00 $ 2,158 $ 2,218 $ 2,278 $ 2,338 $ 2,398

5.75 $ 2,100 $ 2,160 $ 2,218 $ 2,276 $ 2,334

5.50 $ 2,044 $ 2,100 $ 2,158 $ 2,214 $ 2,272

5.25 $ 1,988 $ 2,044 $ 2,098 $ 2,154 $ 2,208

5.00 $ 1,932 $ 1,986 $ 2,040 $ 2,094 $ 2,148

4.75 $ 1,878 $ 1,930 $ 1,982 $ 2,034 $ 2,086

4.50 $ 1,824 $ 1,874 $ 1,926 $ 1,976 $ 2,026

$ 360,000 $ 370,000 $ 380,000 $ 390,000 $ 400,000

-10% -7.5% -5% -2.5%

RA

TE

Principal and Interest Payments rounded to the nearest dollar amount.

Buyer’s Purchasing Power

Financial Reasons to Buy

Joint Center for Housing Studies, Harvard University12/2013

Reason Quote from Harvard Report

Housing is the one leveraged investment

available

“Homeownership allows households to amplify any appreciation on the value of their

homes by a leverage factor.”

You're paying for housing whether you own or rent

“Homeowners pay debt service to pay down their own principal while households that rent

pay down the principal of a landlord.”

Owning is usually a form of “forced savings”

“Having to make a housing payment one way or the other, owning a home can overcome

people’s tendency to defer savings.”

There are substantial tax benefits to owning

“Homeowners are able to deduct mortgage interest and property taxes from income.”

Owning is a hedge against inflation

“Housing costs and rents have tended over most time periods to go up at or higher than

the rate of inflation, making owning an attractive proposition.”

5

ResourcesSlide Slide Title Link

6, 7 November 2013 State Coincident Indexeshttp://www.calculatedriskblog.com/2013/12/philly-fed-state-coincident-indexes.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

8 2014 will be the year of the repeat homebuyer http://info.trulia.com/2014-housing-predictions

9 Impact of Immigration Reform http://bipartisanpolicy.org/library/report/immigration-reform-implications-growth-budgets-and-housing

11 Households in the U.S. 2014-2017 http://www.uli.org/wp-content/uploads/ULI-Documents/Emerging-Trends-in-Real-Estate-Americas-2014.pdf

12 Christopher Herbert Quote http://onpoint.wbur.org/2013/12/16/chris-herbert-explains-why-rents-are-headed-skyward

13 Shaun Donovan Quote http://www.cnbc.com/id/101258649

14, 15 An American Family’s Net Worth http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf

17, 19, 41, 42, 45, 46

Existing Home Sales, Pending Home Sales, Months Inventory, Year-Over-Year Inventory, Months Inventory of Homes, Distressed Property

www.realtor.org/

18 Year Over Year % Changehttp://www.realtor.org/news-releases/2013/12/existing-home-sales-decline-in-november-but-strong-price-gains-continue

23 Bill McBride Quotehttp://www.calculatedriskblog.com/2013/11/will-fed-taper-in-december-inflation-is.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

24 2013 30 Year Fixed Mortgage Rates http://www.freddiemac.com/pmms

25 Mortgage Rate Projections

http://www.mortgagebankers.org/files/Bulletin/InternalResource/84813_.pdf http://www.freddiemac.com/news/finance/docs/Jun_2013_public_outlook.pdf http://www.realtor.org/sites/default/files/reports/2013/embargoes/phs-6-27-hgbfjnv/july-2013-outlook-2013-6-27.pdf http://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_061313.pdf

ResourcesSlide Slide Title Link

26 Dramatic Mortgage Rate Increaseshttp://www.calculatedriskblog.com/2013/07/house-prices-and-mortgage-rates.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

27 Percent of the Country Affordability http://freddiemac.mwnewsroom.com/press-releases/diverging-homebuyer-affordability-otcqb-fmcc-1077388

35 CNN Money & LA Timeshttp://money.cnn.com/2013/12/31/news/economy/home-prices-jump/index.html?hpt=hp_t3 http://www.latimes.com/business/money/la-fi-mo-case-shiller-home-prices-20131231,0,1684377.story#axzz2pkbDZg00

36 Today’s Prices Compared to 2005-07 Peak http://www.corelogic.com/research/hpi/corelogic_hpi_october_2013.pdf

37 Year-Over-Year Change in Prices http://www.housingviews.com/wp-content/uploads/2013/11/CSHomePrice_Release_Sept-Results.pdf

38 Month-Over-Month Price Changeshttp://www.corelogic.com/about-us/researchtrends/home-price-index-report.aspx?WT.mc_id=crlg_131203_UE1r7&elq=1042de5a31114a1baa015fbd2be2235f

39 State Median Price Expectation http://www.realtor.org/reports/realtors-confidence-index

43 Return on Investment http://www.spindices.com/index-family/real-estate/sp-case-shiller

44 S&P Case-Shiller Home Price Indiceshttps://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/19529_cshomeprice-release-0730.pdf?force_download=true

49, 50 Jayson DeMers in Forbes http://www.forbes.com/sites/jaysondemers/2013/09/17/the-top-7-online-marketing-trends-that-will-dominate-2014/

51 Placester Datahttps://placester.com/real-estate-marketing-academy/infographic-real-estate-professionals-guide-online-marketing-in-2014/2014-online-marketing-guide-for-real-estate-infographic-full-4/

52 Marketing Tech Blog http://www.marketingtechblog.com/infographic-content-marketing-real-estate/

53 FSBO vs. Agent http://economistsoutlook.blogs.realtor.org/2013/12/04/2013hbs-twitter-chat-recap/#more-14199

55 5 Financial Reasons to Buy http://www.jchs.harvard.edu/research/publications/dream-lives-future-homeownership-america