National Association of Home Builders

2006 Fall Construction Forecast Conference

House Prices: Boom or Bust?

October 25, 2006

David W. BersonVice President & Chief

Economist

New Home SalesDown in 2006, 2007, and 2008

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Millions of Units

Source: Bureau of the Census, Fannie Mae forecast

Existing Home SalesDown in 2006, 2007, and 2008

0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.5

1983 1986 1989 1992 1995 1998 2001 2004 2007

Millions of Units

Source: National Association of Realtors, Fannie Mae forecast

New Home Inventories SoaringSuggests Weakness in Prices

200

250

300

350

400

450

500

550

600

0

1

2

3

4

5

6

7

8

9

10

Months

Source: Bureau of the Census

Thousands

Months’ Supply at Current Rate(right axis)

Homes for Sale at End of Month(left axis)

Home Prices versus Disposable Personal Income Per Capita

0%

5%

10%

15%

20%

25%

30%

35%

House Price Index

Disposable Personal Income per Capita

Source: Bureau of Economic Analysis, Office of Federal Housing Enterprise Oversight, National Association of Realtors

rolling two-year annualized growth rate

The Investor And 2nd Home Shares Of the Prime Conventional Conforming Purchase Market

(# Of Loans Based as of June 2006)

0%

5%

10%

15%

20%

25%

Investor Investor & 2nd Home

Home Price Growth and the Investor Share of PCC Purchase Loans by MSA(Yr/Yr Home Price Growth and Investor Share in Q1:2006)

0%

5%

10%

15%

20%

25%

30%

35%

40%

3% 6% 9% 12% 15% 18% 21% 24%

Investor Share of Prime Conventional Conforming Purchase Loans

Ho

me

Pri

ce G

row

th

Phoenix

Indianapolis

Monterey

Grand Rapids

Home Price Growth and the ARM Share of Conventional Purchase Loans by MSA (Yr/Yr Home Price Growth and ARM Share in Q2:2006)

-5%

0%

5%

10%

15%

20%

25%

30%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Ho

me

Pri

ce G

row

th

ARM share of Prime Conventional Purchase Loans

Orange, CA

San Diego

Miami

Oklahoma City

Monterey

Dayton

Los Angeles

New and ExistingSingle-Family Median Home Price

Year/Year Percent ChangeNot Seasonally Adjusted

-10%

-5%

0%

5%

10%

15%

20%

New

Existing

Source: U.S. Census Bureau, National Association of REALTORS®

August 2006:New: -1.29%Existing: -1.70%

Home Price Gains Still Unsustainably Strong, Should Slow Further

0%

2%

4%

6%

8%

10%

12%

14%

Q1:87 Q1:89 Q1:91 Q1:93 Q1:95 Q1:97 Q1:99 Q1:01 Q1:03 Q1:05

Year-Ago Percent Change

Home Price Index

Purchase Only Home Price Index

Source: OFHEO