KCM Divided into Three Sections

NAR 8/2013

Rea

l Est

ate

Rec

ove

ry SalesStarted Sustained Recovery

September 2011

Prices Started Sustained Recovery

June 2012

Inventory Started Sustained Recovery

January 2013

“The forces pulling the home ownership rate lower are past their apex…House prices are rising, but remain affordable at 21% below peak, even as rents rise. Some who lost homes early in the crisis can now qualify again for mortgage loans.

As housing recovers and consumers again see prices rising steadily, perceptions will swing back to favor home ownership.”

Moody’s Analyitics 8/2013

Celia ChenSenior Director - Moody's Analytics

A Swing Back Toward Ownership

KCM Blog 8/2013

Boomerang Buyers“HUD recently announced that people who lost their home through a foreclosure, short sale or bankruptcy, may be eligible to finance a home again in as little as 12 months. This is a reduction from the previously required minimum of 36 months from the date of the “most recent event.”

Released August 15, HUD provided guidelines under

“Back to Work: Extenuating

Circumstances” meant to ease the path for home ownership for many.”

Joint Center for Housing Studies Harvard University 8/2013

“Even after the dramatic loss of equity and the high foreclosure rates, the early evidence suggests that people seem to believe that, over the long run, owning is still preferable to renting...

Reexamining the Social Benefits of Homeownership after the Housing Crisis

The long term cultural preference for owning seems to have weathered the recent housing crisis.”

Joint Center for Housing Studies Harvard University 8/2013

“The research on home-buying expectations supports the conclusion that very large percentages of Americans still expect to buy a home at some time in the future…

Moreover, the finding that younger renters and owners are more likely than their older counterparts to expect to own bodes well for the future of the housing market.”

Reexamining the Social Benefits of Homeownership after the Housing Crisis

FHFA Regional Home Prices (year-over-year)

FHFA 2013 2Q HPI Report

2012 3Q 2012 4Q

2013 1Q 2013 2Q

FHFA State Home Prices (year-over-year)

FHFA 2013 2Q HPI Report

35% Loss in Price, then 35% Gain

Still 12% off Peak

Months Market Pricing

1 – 5 Sellers Appreciation

5 – 6 Even The Norm

6 + Buyers Depreciation

Months Supply & Impact on Price

4.0

4.3

4.5

4.8

5.0

5.3

Jan Feb Mar Apr May Jun Jul

Months Inventory of Homes for Sale

NAR 8/2013

5-6 Months = Normal Market Inventory

January February March April May June July

% -24% -20.8% -16.8% -14% -13% -7.6% -5%

-24%

-20.8%

-16.8%

-14%-13%

-7.6%

-5%

-25%

-20%

-15%

-10%

-5%

0%

NAR 8/2013

Year-over-Year Inventory Levels

0.6%1.1%

2.0%

3.6%

4.3%

5.5%

6.8%

8.1%

9.3%

10.2%

12.1% 12.2% 12.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

S&P Case Shiller 8/2013

Year-over-Year Change in Prices

Zillow 8/2013

3.2 million homeowners have been freed from negative equity in the last twelve months.

million additional are expected to be freed in

the next twelve months.1.9

Cost vs. Cost vs. PricePrice

Mortgage Rate Projections

Analyst Projected Rate 3Q 2014

Fannie Mae 5.0%

National Assoc. of Realtors 5.1%

Freddie Mac 5.1%

Mortgage Bankers Assoc 4.9%

8/2013

Home Prices Next YearIn the recent Home Price Expectation Survey, over 100 leading housing analysts called for an approximate 5% increase in home values over the next twelve months.

Home Price Expectation Survey 8/2013

Thinking about moving up to the home of your dreams?

Comparison – Next Year Current Home Move-Up Home

Current Price $240,000 $360,000

Future Price (+5%) $252,000 $378,000

Future Gain $12,000 $18,000

Total Gain $6,000

The Move-Up Seller

Price Rate P&I

Today $360,000 4.5% $1,824.07

End of Year $378,000 5%

$2,029.19

Monthly Savings $205.12

The Move-Up Seller

35.4

17.1

-8.9

59.5

-30

0

30

60

Dow S&P NASDAQ Real Estate

January 2000 – August 2013

MSN Money, Case Shiller

Return on Investment

90

95

100

105

110

115

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Pending Home Sales

NAR 8/2013

100 = Historically Healthy Level

80

90

100

110

120

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2012 2011

100 = Historically Healthy Level

Pending Home Sales

NAR 8/2013

Months Inventory of Homes for Sale

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul

NAR 8/2013

5-6 Months = Normal Market Inventory

NAR 8/2013

10%

15%

20%

25%

30%

35%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Percentage of Distressed Property Sales

35%

15%

S&P Case-Shiller Home Price Indices

S&P Case Shiller 8/2013

Reasons to Hire a Real Estate Professional5

They help with all disclosures and paperwork necessary in today’s heavily regulated environment.

They are well educated in and experienced with the

entire sales process.

They act as a ‘buffer’ in negotiations with all parties

throughout the entire transaction.

They help understand today’s real estate values when

setting the price on a listing or on an offer to purchase.

They simply and effectively explain today’s real estate

headlines and decipher what they mean to you.

NAR 8/2013

Found sixty eight percent of those surveyed responded that now is a good time to buy a home

Found over 50% of renters say that eventually owning a home is one of their highest personal priorities

68% 51%

NAR’s 2013

HOUSING PULSE

Survey

Found eight in 10 Americans believe buying a home is a good financial decision

8.1%

9.3%

10.2%

12.1% 12.2% 12.1%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

Jan Feb Mar Apr May Jun

Year-over-Year Change in Prices

S&P Case Shiller 8/2013

30 Year Fixed Rate Mortgage HistoryJanuary 2012 - September 2013

Federal Reserve 9/2013

PriceMoney Down

MortgageInterest

RatePayment

(P&I)

Last Year* $187,800 $37,560 $150,240 3.5% $674.64

This Year* $213,500 $42,700 $170,800 4.5% $865.42

Next Year** $224,175 $44,835 $179,340 5% $962.74

*For the first two examples, we used the NAR’s Existing Home Sales Report to establish median price and Freddie Mac’s Primary Mortgage Market Survey to establish mortgage rate. We also assumed a 20% down payment in all examples.

**To establish next year’s pricing, we depended on the over 100 housing experts surveyed for the Home Price Expectation Survey who called for an approximate appreciation rate of 5% over the next twelve months. For the interest rate, we took the average of the projections from the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae.

The Cost of Waiting

Resources

KEEPINGCURRENTMATTERS.COM

Slide Slide Title Link

4 Real Estate Recovery http://www.realtor.org

5 A Swing Back Toward Ownership PAID: http://www.economy.com/dismal/pro/article.asp?cid=241831

6 Boomerang Buyershttp://www.kcmblog.com/2013/08/22/boomerang-homebuyers-get-a-shorter-ride-home/ http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee

7, 8 Social Benefits of Homeownership http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/hbtl-04.pdf

9, 10, 11

FHFA Regional Home Prices, FHFA State Prices

http://www.fhfa.gov/webfiles/25483/2013Q2HPI82213Final.pdf

14 Months Inventory of Home Sales http://www.realtor.org

17 Negative Equity Graphic http://zillow.mediaroom.com/index.php?s=159&item=373

20 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

21 Home Prices Next Year https://pulsenomics.com/Q2_2013_HPE_Survey.php

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

Resources

Slide Slide Title Link

27, 28, 29, 30

Pending Home Sales, Months Inventory of Homes for Sale, Percentage of Distressed Property Sales

http://www.realtor.org

31 S&P Case-Shiller Home Price Indices https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/19529_cshomeprice-release-0730.pdf

34 Housing Pulse Surveyhttp://www.realtor.org/news-releases/2013/07/renters-thinking-more-about-owning-a-home-say-homeownership-is-a-top-priority

36 30 Year Fixed Rate Mortgage History http://www.freddiemac.com/pmms

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

41 Stephen Phillips Quotehttp://www.businesswire.com/news/home/20130812005934/en/Prudential-Real-Estate-Q2-Outlook-Survey-Millennials

42 Home Affordability Indexhttp://www.realtor.org/topics/housing-affordability-index/data http://www.realtor.org/topics/housing-affordability-index/methodology

43 Family Wealth http://economistsoutlook.blogs.realtor.org/2013/07/30/the-latest-homeownership-rate/

KEEPINGCURRENTMATTERS.COM

“Home buyers are more informed than ever with their Internet searches and ongoing research; however, there’s a critical need to transform that information into analysis and advice that helps consumers make the best home-buying and selling decisions.”

Stephen Phillips Chief Operating Officer for HSF Affiliates LLC

To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.

Home Affordability Index

127.4

172.2

206.5

155.2

NAR 8/2013

“The rise in the renter population with no net increase in the owner population at a time of housing recovery automatically means greater unequal distribution of wealth. Housing wealth is rising because of price increases, but the wealth is going to the fewer and fewer households who happen to be homeowners and those who own more than one home.”

Lawrence Yun, Chief Economist of the National Association of Realtors

NAR 8/2013

Family Wealth