Top 75 Brokers

1. Top 75 Brokers November 5, 2016

2. Master the Housing Mosaic • Apartments • Housing Policy • Title Insurance • Banking • Single-Family Rentals • Building Products • Real Estate Services • Demographics • Mortgage Insurance • Homebuilding • Mortgage Credit • Homecenters Zelman Research

3. Key Themes of the Housing Recovery • Take Advantage of Shifting Demographics - 4 • We Believe the American Dream is Alive and Well - 13 • We Believe the Mortgage Market is Open for Business – 25 • How to Succeed in a Tight Inventory Market - 28 • How the Single-Family Rental Market Fits Into the Big Picture – 33 • Capitalize on Acceleration in Entry-Level Demand – 36 • Knowledge and Preparation Equal Success in a Downturn - 40

4. Take Advantage of Shifting Demographics

5. Millennial Cohort a Multi-Year Tailwind For Housing Demand 76 MillionBaby Boomers 75 Million Millennials 66 Million Generation X Source: Census Bureau, Zelman & Associates analysis

6. Millennials Aren’t Going to Live at Home Forever (We Hope!) • Household Formation was Delayed as Millennials were Hit by Recession • Over 3 Million Jobs Lost in 20-34 Year Old Age Cohort • Unemployment Rate Surged to Nearly 13% • Positively, Unemployment has Fallen and Income Growth is Accelerating • Sub-6% Unemployment Rate Driving ~2% Wage Inflation • Zelman Analysis Suggests Pent-Up Demand of ~1.0 Million Households

7. Incremental Housing Demand SignificantlyIntertwined with Young Adults Source: Census Bureau, Zelman & Associates analysis

8. Unwind of Pent-Up Demand Already Evident With Accelerating Household Growth Source: Census Bureau, Zelman & Associates analysis

9. Household Formation Benefits All Types of Shelter ~35% Traditional Rental ~50% Single-Family ~15% “Other” 2-4 Unit Rentals ManufacturedHousing Multi-FamilyCondos

10. Adapting to the Millennial Consumer’s Preferences • Nine Out of Ten MillennialsUse Online Searches • Over 60% of Millennials Will Use Their Smartphone to Search for Housing • But They Still Want Hands-On Interaction and Site Visits at Decision Time • This Generation Values Responsiveness and Trustworthiness Above All Else • Millennials are the Most Open to New Construction • Majority of Millennials will Purchase a Home within a Community with Amenities • See Their Home as Personal Reflection Rather Than a Financial Investment Source: Zillow Group 2016 Report on Consumer Housing Trends, Zelman & Associates analysis

11. Hispanics and Asians are the Fastest GrowingDemographic and Homeowner Groups • From 2000-2010, Number of Caucasian Households Grew 4%.... • ….While Both Asian and Hispanic Households Increased Nearly 50% • Minorities are Expected to Become the Majority of Population by 2050 • Hispanics: 30%, Up from 18% in 2015 • Asians: 8%, Up from Just 5% in 2015 • Caucasians: 46%, Down from 65% in 2015 Source: Census Bureau, Zelman & Associates analysis

12. Leverage This Ethnic Shift to Grow Your Business • Position Yourself to Go After These Fastest Growing Segments • Hire Bilingual Agents and Learn Another Language Yourself • Appreciate Cultural Differences that Affect Housing and Tailor Your Approach • Research Buyers Interest in Multi-Generational Living • Do Grandparents Typically Live with Immediate Families? • Do Extended Families Live Together?

13. We Believe the American Dream is Alive and Well

14. Financial Crisis Responsible for Some of Push to Multi-Family; This Portion will Reverse • Share of Married Adults Living in Multi-Family Units Above Normal Levels • Nearly 14% in 2014, Up from Just 10% in 2000 • Some of Increase Certainly Secular in Nature Given Shifting Preferences

15. Birth Rates Accelerate from Recessionary Lows Source: Center for Disease Control, Zelman & Associates analysis

16. But Children are a Strong Catalyst to Get on the Single-Family Curve, and Likely Stay There for Decades After Source: Census Bureau, Zelman & Associates analysis

17. The American Dream is Alive and Well • Recent Data Shows Recessionary Impact Beginning to Unwind • Single-Family Ownership not Purely a Financial Decision, Lifestyle Driven • Families Require More Space – And a Backyard! • 2-Bedroom Apartment with Kids, NOT Healthy for a Marriage • School-Aged Children are the Typical Catalyst for Moving to the Suburbs

18. Recent Survey Shows Single-Family Home Selection Still Highly Dependent on Traditional Factors Most Important • Within Buyer’s Budget • Move-In Ready • Energy Efficiency • Proximity to Local Transit Least Important Source: Zillow Group 2016 Report on Consumer Housing Trends, Zelman & Associates analysis

19. Apartment Contacts Continue to Cite Increasing Move-Out to Buy Activity Source: Zelman & Associates Apartment Survey

20. Continuously Rising Rents Have Driven Rent-to-Income Levels to Cycle Peak and Above Long-Term Average… Source: Axiometrics, Zelman & Associates analysis

21. …Leaving the Cost of Ownership Versus Rents More Favorable Than History Source: Axiometrics, Zelman & Associates analysis

22. It is a Great Time to Be a Buyer;Affordability is at Record Levels • Monthly Payment as a Percentage of Income • “Today” • “Normal” 32% Rates Would Have to Reach 6% Just to Get Back to Normal 4% 6% Mortgage Rate 42% Source: Census Bureau, CoreLogic, FHA, Freddie Mac, NAR, Zelman & Associates analysis

23. Proprietary Data Shows Underwriting Stringency Has Eased Source: Zelman & Associates Mortgage Origination Survey

24. Although Homeownership Rates have Declined,Single-Family Households Remain Stable Source: Census Bureau, Zelman & Associates analysis

25. We Believe the Mortgage Market is Open for Business

26. Improvement Widespread Across Categories Source: Zelman & Associates Consumer Survey

27. Mortgage Market is Open for Business, Credit Box is Reasonable • Educate Renters: Only 3.0-3.5% Needed for Downpayment • Consumers Need to Know You Can Purchase Despite Low FICO Score • Government Exploring Various Programs to Increase Homeownership Rate • Consideration of Monthly Credit Habits for Borrowers with Limited History • Inclusion of Multiple Residents’ Incomes ...Think Outside the Box! Finally, Lenders are Starting to…

28. How to Succeed in a Tight Inventory Market

29. Lack of Inventory Continues to Challenge Transactions Source: Census Bureau, NAR, Zelman & Associates analysis

30. Baby Boomers Move Less Frequently But Millenials’ High Mobility Supports Expected Improvement in Turnover Source: Census Bureau, Zelman & Associates analysis

31. How Can Brokers Combat a Low-Turnover Environment? • Tailor Message to Married Renters in Traditional Apartments • Become the Broker of Choice for Builders • Be Persistent as It Takes the Average Seller 4 – 6 Months Before Listing • Educate Tenants on the Economics of Renting versus Owning • Walk Them through the Math - 20% More Favorable Nationwide!

32. How the Single-Family Rental Market Fits Into the Big Picture

33. 16 Million Households are Single-Family Renters, Up from Only 10 Million Prior to Recession 2005: 2016: 68 Million SF Owned 67 Million SF Owned 22 Million MFRentals 28 Million MF Rentals 10 Million SFRentals 16 Million SFRentals Source: Census Bureau, Company data, Zelman & Associates analysis

34. The Single-Family Rental Market is Here to Stay • How do Brokers Capitalize on this Part of Shelter Mosaic? • Expand into Property Management • Knock on Doors, Meet Future Buyers • Educate Renters on Rent versus Buy Economics • Reduce Misperceptions of Mortgage Credit Availability • Provide a For-Sale Roadmap • Show Them Where Homes are in Their Price Points that are Available

35. Capitalize on Acceleration in Entry-Level Demand

36. Homebuilders Had Been Reluctant to Invest in Entry-Level Projects Due to Perceived Risk… New Single-Family Homes Less Than 1,800 Square Feet 1990s Average: Now 40% 21% Source: Census Bureau, Zelman & Associates analysis

37. That is Starting to Change asEntry-Level Product Gains Traction • D.R. Horton:Express Homes • Ryan Homes: Simply Ryan • Meritage Homes: Entry-Level Plus • Lennar: Everything’s Included

38. Year-Over-Year Shifts in Months’ Supply Highlights the Tale of Two Markets of Late Source: CoreLogic, CAR, FAR, MIBOR, MRIS, Zelman & Associates analysis

39. More Supply Welcomed as Entry-Level Existing Listings Struggle to Keep Pace While Luxury Inventory Mounting Source: CoreLogic, CAR, FAR, MIBOR, MRIS, Zelman & Associates analysis

40. Knowledge and Preparation Equal Success in a Downturn

41. Transactions Still Occur in a Downturn Source: HMDA, Zelman & Associates analysis

42. Home Prices Remained Positive inNon-Housing Led Downturns Source: Zelman & Associates analysis

43. Significant Amount of “Skin in the Game” for Today’s Owners, Which Mitigates Risk Source: CoreLogic, Zelman & Associates analysis

44. Zelman Forecasts Solid Growth in 2016-18 Transaction Volume Source: Census Bureau, CoreLogic, NAR, Zelman & Associates analysis

45. Ways to Remain Profitable in a Downturn • Remember the Three D’s (Death, Divorce and Default) • Stay in Touch with Your Customers Constantly • Know Your Buyer’s Vacation Spots and Second-Home Locations • Stay on Leading Edge of Tech and Understand What Disruptors are Doing • Zillow, Compass, Redfin • Homesnap, Opendoor • Upstream, Public Broker Portal

46. Master the Housing Mosaic • Apartments • Housing Policy • Title Insurance • Banking • Single-Family Rentals • Building Products • Real Estate Services • Demographics • Mortgage Insurance • Homebuilding • Mortgage Credit • Homecenters Zelman Research

47. Master the Housing Mosaic zelmanassociates.com/trial

48. Appendix

49. Appendix: Macro Housing Forecasts Source: Zelman & Associates analysis

50. Appendix: Macro Housing Forecasts Source: Zelman & Associates analysis