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Real Estate Market OverviewStan Humphries, Chief Economist0Download this presentation at www.zillow.com/research/presentations

Zillow Home Value Index: Down 11.3% from 2007 peak 2Source: Zillow (June 2014 )Peak to troughPeak to currentYear-over-year22%11.3%6.3%Zillow Home Value Index: Annual deceleration, monthly gain3

Source: Zillow (June 2014 )Negative Equity

For-Sale Inventory

Household Formation Rates

Mortgage and Rental Affordability

Mortgage Rate Lock-InFive challenges for the housing market41. Negative Equity5But has declined steadily since 2012 Q16

Source: Zillow (2014 Q1)Negative Equity: Share of underwater homes by value tier 7

Source: Zillow (2014 Q1)2. For-Sale Inventory8

For-sale inventory has increased for the past four months9Peak to troughPeak to currentYear-over-year33.5%23.5%17.7%Source: Zillow (June 2014 )Share of for-sale inventory is lowest in the bottom value tier10Source: Zillow (June 2014 )

3. Household Formation11Household formation still struggling below average12Source: CPS/HVS

Young adults are living at home at higher rates13Source: CensusHousing demand will increase as they strike out on their own

Renter households are forming faster than owner households14Source: Current Population Survey

4. Mortgage and Rental Affordability15Rent affordability is at all time lows, U.S. spends 30% of income16

Source: Zillow (2014 Q1)United States: Mortgage affordability better than average17 Rent affordability worse than average

Source: Zillow (2014 Q1)5. Mortgage Rate Lock-in18What should existing home sales be? Impact on home sales relative to normalLower homeownership rateHigher vacancy rateSlower 5-year growth in home valuesLow 30-yr FRM interest rateMortgage rate lock-in*Lower annual income growthCurrent64.7%1.8%20.3%4.2%-13.7%3.4%Historical65.7%1.5%29.0%8.6%-4.3%3.9%ImpactSource: Zillow*Five-year difference in 30-yr FRM interest rates19Once interest rates exceed 5%, lock-in will be a drag on sales

Source: Zillow20Sales could slow in the coming year

Source: NAR, Zillow21Outlook22Zillow Home Value Forecast for June 2015 positive23Source: Zillow (June 2014)

Summary and OutlookCurrent recovery fueled by:Huge reset in home pricesLow mortgage rates Inventory constraints due to negative equityNormal recoveries usually fueled by:Household formationsRising incomesWe are currently transitioning between these two types of recoveries, but it will be several more years before we get back to normalTailwinds for housing markets Pent-up supply of household formations coming from doubled-up households Increased economic growth/inflation which should filter down to wage growth24About Zillow Real Estate Research- www.zillow.com/researchReal Estate Metrics Zillow Home Value Index Zillow Rent IndexZillow Home Value ForecastNegative equity List pricesSale pricesRental pricesHome sales$ value/square foot$ price/square footSale-to-list price ratio% listings with price cuts $ amount of listing price cuts % homes sold for loss/gain% homes foreclosed% sales that are foreclosure re-sales % homes increasing/decreasing in value% homes sold in the past yearPrice-to-rent ratiosPrice-to-income ratiosAffordability

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