HOUSING MARKET UPDATE Jonathan Smoke Chief Economist November 17, 2016

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NATIONAL TRENDS © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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FIRST-TIME BUYERS POWER INCREASE Sales pace increased 3.2% in September after 2 months of decline Existing Home Sales and Prices EHS SAAR

Med Exist Home Price

8,000,000

$300,000

7,000,000 $250,000 6,000,000 $200,000 5,000,000 4,000,000

$150,000

3,000,000 $100,000 2,000,000

$50,000 1,000,000 $0

2000.01 2000.06 2000.11 2001.04 2001.09 2002.02 2002.07 2002.12 2003.05 2003.10 2004.03 2004.08 2005.01 2005.06 2005.11 2006.04 2006.09 2007.02 2007.07 2007.12 2008.05 2008.10 2009.03 2009.08 2010.01 2010.06 2010.11 2011.04 2011.09 2012.02 2012.07 2012.12 2013.05 2013.10 2014.03 2014.08 2015.01 2015.06 2015.11 2016.04 2016.09

0

Source: National Association of REALTORS® Existing Home Sales Report

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SALES STRONG IN SEPTEMBER Seasonally adjusted pace of sales +2% y/y for pending, +30% new Home Sales (New Contracts) SAAR Pending Home Sales (Existing)

New Home Sales

140.0

1,600,000

120.0

1,400,000 1,200,000

100.0 1,000,000 80.0 800,000 60.0 600,000 40.0 400,000 20.0

200,000 0

2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 2009.01 2009.05 2009.09 2010.01 2010.05 2010.09 2011.01 2011.05 2011.09 2012.01 2012.05 2012.09 2013.01 2013.05 2013.09 2014.01 2014.05 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05 2016.09

0.0

Source: National Association of REALTORS®, Commerce Department

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STARTS STALL BUT PERMITS PICK UP Starts down 12% y/y in September (SF +5%) but permits up 5% Residential Construction Single-Family Starts

Multi-Family Starts

2,500

Thousands

2,000

1,500

1,000

500

0

Source: Commerce Department

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2013.02 2013.03 2013.04 2013.05 2013.06 2013.07 2013.08 2013.09 2013.10 2013.11 2013.12 2014.01 2014.02 2014.03 2014.04 2014.05 2014.06 2014.07 2014.08 2014.09 2014.10 2014.11 2014.12 2015.01 2015.02 2015.03 2015.04 2015.05 2015.06 2015.07 2015.08 2015.09 2015.10 2015.11 2015.12 2016.01 2016.02 2016.03 2016.04 2016.05 2016.06 2016.07 2016.08 2016.09 2016.10

INVENTORY CONTINUES TO BE LOWER

Inventory down 11% in October y/y while median age down 2% Listings and Median Age of Inventory Listings Median Age of Inventory

2,500,000 120

2,000,000 100

80

1,500,000 60

1,000,000 40

500,000 20

0

Source: Realtor.com®

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AFFORDABLE ERA ISN’T QUITE OVER Rates are now still low by historical standards but moving up Affordability and Mortgage Rates Housing Affordability Index Composite (Left Axis)

Average 30-Year Conforming Rate (Right Axis)

250.00

20

18 200.00

Aug 164

16 14

150.00

12 10

100.00

8

Jun 3.57

0.00

4

Dec 2012 Jul 3.44 3.34 Aug 3.44 2 Sep 3.46 Oct 3.47 0

Jan-71 Feb-72 Mar-73 Apr-74 May-75 Jun-76 Jul-77 Aug-78 Sep-79 Oct-80 Nov-81 Dec-82 Jan-84 Feb-85 Mar-86 Apr-87 May-88 Jun-89 Jul-90 Aug-91 Sep-92 Oct-93 Nov-94 Dec-95 Jan-97 Feb-98 Mar-99 Apr-00 May-01 Jun-02 Jul-03 Aug-04 Sep-05 Oct-06 Nov-07 Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14 Jun-15 Jul-16

50.00

6

Source: Moody’s Analytics, Freddie Mac, and National Association of REALTORS® © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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DEMOGRAPHICS SET THE TABLE When viewed by age, importance of Millennials becomes clearer US Population by Age, End of 2015 5,000

61 million

84 million

61 million

79 million

Z

Millennial

X

Boomer

36 million

4,500 4,000 3,500

Thousands

3,000 2,500 2,000 1,500 1,000 500 0 0

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

80

84

88

92

96

Source: Realtor.com® Analysis of US Census Bureau Population Estimates (2015)

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BOOMERS KEEP DISTURBING Boomer wave is causing a major population shift Population by Age (US) Under 25

25-34

35-54

55-64

65+

400,000,000

350,000,000

300,000,000

250,000,000

200,000,000

Over the next 5 years:

15%

65+ grows 18%

26%

55-64 grows 5%

13%

35-54 is flat

13% 25% 13%

25-34 grows 1%

100,000,000

50,000,000

Population grows 4%

13%

150,000,000

17%

33%

Under 25 grows 1%

32%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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LIFE DRIVES HOUSING DEMAND Everyone’s tired of waiting and Millennials are building families Top 10 Buying Triggers all

25-34

tired of current home favorable home prices

30%

change of family circumstance/composition getting married/moving in with partner looking for a safer neighhorhood increase in family size

26%

25%

13%

13%

33%

32%

relocated to a new city planning an increase to family size desire to live closer to good schools increase in income change of job/job location

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Source: realtor.com Active Home Shopper Survey, September 2016 © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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MARKET COMPOSITION IS SHIFTING The market is shifting as first-time buyers re-emerge Buyer Composition, First Time Status and When Started First Time

< 3 Months

4-6 Months

7-12 Months

More than 1 year

60% 52% 50%

51%

47%

40% 33% 30%

18%

20% 15%

14% 10%

11%

10%

10%

0%

September 2015

September 2016 Source: Realtor.com Survey of Buyer Traffic, September 2015 and September 2016

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IMPEDIMENTS TO PURCHASE Inventory is losing its dominance; financial impediments growing What's Getting in the Way of Making a Home Purchase? Repeat

First-Time

All Buyers

Just starting to explore Have not yet found a house that meets my needs

30%

Lack enough funds for down payment Need to improve credit score Cannot find a good house in my budget range

25%

26%

Haven't decided on a specific neighborhood/town Having difficulty qualifying for a mortgage

13%

13%

Currently on a lease

Can't sell current home

33%

32%

Always overbid by other buyers I owe more on my current home than it is worth

0.00%

5.00%

10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00% Source: Realtor.com Survey of Buyer Traffic, October 2016 © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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LOCATION LOCATION LOCATION © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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MEDIAN SALES PRICES $260K, up 3% year-on-year New England region (Aug 2016)

Source: Realtor.com © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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Jan-90 Aug-90 Mar-91 Oct-91 May-92 Dec-92 Jul-93 Feb-94 Sep-94 Apr-95 Nov-95 Jun-96 Jan-97 Aug-97 Mar-98 Oct-98 May-99 Dec-99 Jul-00 Feb-01 Sep-01 Apr-02 Nov-02 Jun-03 Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16

NEW CONSTRUCTION STALLED

Like US, starts now down year-over-year (September) New Construction Starts in New England

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

Source: Commerce Department, Moody’s Analytics

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LIST PRICES RETAIN MOMENTUM Asking prices up most (12%) Y/Y in Massachusetts (Aug 2016)

Source: Realtor.com © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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LIST PRICES RETAIN MOMENTUM Asking prices up Y/Y in October the most in NH and MA

Source: Realtor.com

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LIST PRICES BY COUNTY List price growth year-over-year (Oct 2016)

Source: Realtor.com © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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INVENTORY GETTING TIGHTER Active listings down Y/Y in all six states (Oct 2016)

Source: Realtor.com

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INVENTORY Single Family and Condo Active Listings (Oct 2016)

Source: Realtor.com

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AGE OF INVENTORY VARIES Inventory moving faster Y/Y in RI and MA (Oct 2016)

Source: Realtor.com

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HOTTEST COUNTIES Massachusetts has 4 of 5 hottest counties in region

Source: Realtor.com Q2 2016 Market Hotness Report

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HOTTEST ZIPS Middlesex (MA) County has 7 of 10 hottest zips in region

Source: Realtor.com Q2 2016 Market Hotness Report

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FLIPPING UP IN MOST STATES Activity in region is rarely as frequent as in the US (thru Aug 2016)

Source: Realtor.com® Analysis of Recorded Deeds © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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BIG DATA IN NEW ENGLAND Top age group by zip code (H1 2016)

Source: Realtor.com Generational Propensity Report H1 2016. © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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INTEREST IN HOTTEST ZIPS Interest by age group (H1 2016)

Source: Realtor.com Generational Propensity Report First Half 2016. © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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RENT VS BUY Relative to income, cheaper to rent in 59/67 counties

Source: Realtor.com® Analysis of Nielsen Pop-Facts Demographics, HUD Median Rents and Realtor.com Data © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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RENTS RISING Rents up 9%+ in 10 counties

Source: Realtor.com® Analysis of HUD Median Rents © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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AFFORDABILITY VARIES GREATLY 16% of zip codes priced out of range of median household

United States

15.8% "Bad Zips” are those where at least half of the households in the zip cannot afford to buy a home. Source: Realtor.com® Analysis of Nielsen Pop-Facts Demographics and Realtor.com Data © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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AFFORDABILITY VARIES IN REGION Percentage of zips out of reach of median household

"Bad Zips” are those where at least half of the households in the zip cannot afford to buy a home.

Source: Realtor.com® Analysis of Nielsen Pop-Facts Demographics and Realtor.com Data © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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AFFORDABILITY EQUALITY CURVE Analyzing affordability based on income and price distributions

Source: Realtor.com® Analysis of Nielsen Pop-Facts Demographics and Realtor.com Data © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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HOME OWNERSHIP VARIES Overall rate highest in ME (71%) and lowest in RI (61%)

Source: Nielsen Demographics Pop-Facts 2016 © 2016 Move, Inc. All rights reserved. Do not copy or distribute.

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MILLENNIAL OWNERSHIP 25-34 rate highest in ME (47%); lowest in MA (34%)

Source: Nielsen Demographics Pop-Facts 2016

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HOUSEHOLD GROWTH 2016-2021 Massachusetts expected to see highest growth

Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE ALL OF THE GROWTH Growth in only ages above 55 Population by Age (Connecticut) Under 25

25-34

35-54

55-64

65+

700,000

600,000

16%

Over the next 5 years:

14%

Population grows 1%

500,000

18%

15%

65+ grows 15%

400,000

27%

55-64 grows 6%

300,000

25%

35-54 declines 7% 200,000

100,000

12% 31%

25-34 is flat Under 25 declines 2%

12% 30%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE MOST OF GROWTH Growth is in 55+ and 25-34 only Population by Age (Massachusetts) Under 25

25-34

35-54

55-64

65+

700,000

600,000

500,000

16%

18%

Population grows 3%

14% 400,000

300,000

Over the next 5 years:

27%

65+ grows 18% 55-64 grows 8%

14% 25%

35-54 declines 2% 200,000

100,000

13%

25-34 grows 1%

13%

Under 25 is flat

31%

30%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE ONLY GROWTH Growth in 55+ but declines in all younger ages Population by Age (Maine) Under 25

25-34

35-54

55-64

65+

1,600,000

1,400,000

Over the next 5 years: 1,200,000

1,000,000

19% 16%

800,000

600,000

400,000

Population is flat 65+ grows 14%

21% 17%

55-64 grows 4%

26% 11%

35-54 declines 8%

24%

25-34 declines 1%

11%

Under 25 declines 2% 200,000

28%

27%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE MOST OF GROWTH Growth in 55+ is significant but 25-34 growing too Population by Age (New Hampshire) Under 25

25-34

35-54

55-64

65+

1,600,000

1,400,000

Over the next 5 years: 1,200,000

1,000,000

16%

15%

800,000

27%

65+ grows 17%

11%

19% 16%

55-64 grows 8% 35-54 declines 9%

600,000

400,000

Population grows 1%

25-34 grows 3%

24% 12%

Under 25 declines 3% 200,000

30%

29%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE ALL OF GROWTH Growth in 55+ with declines in all younger ages Population by Age (Rhode Island) Under 25

25-34

35-54

55-64

65+

700,000

600,000

16% 500,000

14% 26%

19%

Population grows 1% 65+ grows 14%

400,000

300,000

Over the next 5 years:

55-64 grows 5%

15% 25%

35-54 declines 5% 200,000

100,000

13%

25-34 declines 1%

13%

Under 25 declines 4%

31%

29%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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BOOMERS ARE MOST OF GROWTH Growth in 55+ and 25-34 Population by Age (Vermont) Under 25

25-34

35-54

55-64

65+

700,000

600,000

18% 500,000

16% 25%

20%

Population is flat 65+ grows 15%

400,000

300,000

Over the next 5 years:

55-64 grows 3%

16% 23%

35-54 declines 8% 200,000

100,000

11% 30%

25-34 grows 2%

12%

Under 25 declines 4%

29%

0 2016

2021 Source: Nielsen Demographics Pop-Facts 2016

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Jonathan Smoke Chief Economist realtor.com® [email protected] @SmokeonHousing Access market data, research, and presentations at research.realtor.com

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