Economic and Market Watch Report

Economic and Market Watch Report 1st Quarter, 2005 *Click on a County to view economic and real estate information at the county and zip code level 2005 Greater Las Vegas Association of REALTORS and NATIONAL ASSOCIATION OF REALTORS Reproduction, reprinting, or retransmission in any form is prohibited without written permission.

Greater Las Vegas Association of REALTORS Economic and Market Watch Report The Greater Las Vegas Association of REALTORS (GLVAR) operates a computerized real property database, serving more than 9,000 agents, that contains an average of 18,000 properties available for sale or rent. The public may view these properties by visiting www.lasvegasrealtor.com. GLVAR also operates a commercial database available to both REALTORS and non-member commercial agents throughout the community. Commercial properties are available by visiting www.calv.org. GLVAR is the leading provider of business products and services to the real estate community and is The Voice for Real Estate in Southern Nevada. Index Local Report Nevada Clark County... Nye County... Others... 1 4 5 Trends... Chief Economist's Commentary*... Local Forecast... Economic Monitor*... 6 7 8 10 *Reprinted from Real Estate Outlook: Market Trends and Insights. 2005 NATIONAL ASSOCIATION OF REALTORS. Used with permission. Reproduction, reprinting, or retransmission of this article in any form (electronic media included) is prohibited without permission. For subscription information please call 1-800-874-6500.

Local Report Buyer's Market Clark County, NV 1 2 3 4 5 Seller's Market Labor Market : Employment declined by 22,515 jobs in January and February. The job losses brought about an increase in the average monthly unemployment rate from 3.9% in the fourth quarter to 4.1% for the first two months of the first quarter. Despite the job losses, the job situation still remains strong in Clark County. Combined with favorable low mortgage rates, home sales should continue at a strong pace. Average Price # Homes on the Market * # ** # New Homes Built *** Avg # of Days on Market Housing Market : Q4' 04 Q1' 05 Q2' 05 $329,900 $341,400 7,737 11,585 7,902 7,237 3,261 3,904 42 57 (Forecast) * Available as of Mar. 31, 2005. ** May not add to total of zip codes *** During the first two months of 1st quarter. Zip Code Average Price Price Change Data by Zip Codes Total # (Quarter) % Change in # Average Days on Market % of Asking Price (Sold/List Price) 89005 $425,400 26.87% 44-30.16% 84 95.6% 89007 $192,300-4 - 67 98.1% 89011 $1,123,000 34.80% 10-41.18% 123 95.3% 89012 $418,000 17.98% 159-14.97% 61 97.3% 89014 $353,000 19.86% 170-7.10% 59 97.2% 89015 $283,900 29.46% 386 2.12% 53 98.2% 89019 $256,300 162.87% 4 100.00% 64 95.4% 89021 $388,100 27.54% 5-37.50% 63 99.1% 89024 $172,000-1 - 0 100.0% 89025 $300,500 161.30% 1 0.00% 0 92.5% 89027 $351,500 119.69% 5-37.50% 50 95.7% 1

Local Report Clark County, NV Data by Zip Codes Total # % Change in # % of Asking Price (Sold/List Price) Zip Code Average Price Price Change Average Days on Market (Quarter) 89030 $154,100 31.04% 155-12.43% 43 99.6% 89031 $269,800 37.58% 411-15.61% 59 98.8% 89032 $247,500 34.51% 199-33.89% 59 98.7% 89040 $204,700-16.28% 3 50.00% 95 97.8% 89044 $321,000-5 - 82 98.0% 89052 $592,600 27.00% 312-21.21% 81 96.5% 89074 $388,500 23.02% 222-9.76% 57 97.2% 89077 $250,000-1 - 26 94.4% 89081 $287,600 36.95% 56 5500.00% 58 98.6% 89084 $322,300 34.97% 64 20.75% 67 97.7% 89086 $300,200 60.02% 26 2500.00% 74 99.0% 89101 $155,100 34.29% 71-13.41% 37 99.6% 89102 $285,600 31.13% 66-38.32% 83 97.4% 89103 $269,200 34.80% 73-17.05% 44 97.8% 89104 $210,900 38.30% 116-22.67% 38 98.0% 89106 $180,900 48.77% 82-16.33% 46 98.8% 89107 $240,800 44.97% 155-22.11% 42 97.1% 89108 $245,100 41.68% 270-20.59% 47 98.6% 89109 $282,600 40.88% 21-56.25% 63 99.1% 89110 $260,000 44.77% 224-15.79% 46 99.0% 89113 $428,400-12.11% 56 1.82% 49 96.5% 89115 $203,200 49.85% 128-17.42% 39 98.0% 89117 $493,300 19.62% 219-25.76% 64 97.1% 89118 $322,800 6.22% 47-12.96% 52 97.5% 89119 $274,300 26.41% 57-37.36% 54 98.2% 89120 $329,800 26.55% 75-13.79% 54 97.1% 89121 $258,300 32.53% 133-34.48% 40 98.5% 89122 $230,700 34.68% 175 1.74% 48 98.9% 89123 $342,800 26.49% 426-12.35% 58 98.1% 89124 $447,800-10.42% 4-55.56% 375 93.5% 89128 $342,200 31.62% 196-9.68% 54 98.1% 89129 $347,600 26.03% 261-30.21% 57 97.8% 89130 $335,500 38.75% 177-18.06% 58 97.3% 89131 $391,900 29.64% 274 14.64% 66 97.6% 89132 $369,000-1 - 118 98.4% 89134 $420,300 14.37% 163-43.79% 73 96.7% 89135 $545,100 23.72% 141-30.20% 64 97.0% 2

Local Report Clark County, NV Data by Zip Codes Total # % Change in # % of Asking Price (Sold/List Price) Zip Code Average Price Price Change Average Days on Market (Quarter) 89138 $495,100 11.31% 65-12.16% 77 98.0% 89139 $339,400 4.98% 124 67.57% 58 98.2% 89141 $487,400 46.90% 152-17.84% 68 97.1% 89142 $243,300 44.22% 122-11.59% 53 99.1% 89143 $352,000 17.73% 77-11.49% 61 98.2% 89144 $554,200 33.99% 107-40.22% 62 96.5% 89145 $397,600 27.64% 85-29.17% 44 97.4% 89146 $410,700 34.79% 44-22.81% 57 97.3% 89147 $333,800 24.14% 192-18.64% 50 98.4% 89148 $406,400 13.65% 182 6.43% 63 97.2% 89149 $426,200 23.61% 107 28.92% 70 97.7% 89156 $251,300 45.34% 107-7.76% 49 98.9% 89166 $320,600-10 - 58 99.6% 89178 $385,300-6 - 81 94.7% OTHER $327,000 65.82% 3 0.00% 35 101.0% 3

Local Report Buyer's Market Nye County, NV 1 2 3 4 5 Seller's Market Labor Market : Employment declined by 2,242 jobs in January and February. The job losses brought about an increase in the average monthly unemployment rate from 4.4% in the fourth quarter to 5.4% for the first two months of the first quarter. Despite the job losses, the job situation still remains strong in Nye County. Combined with favorable low mortgage rates, home sales should continue at a strong pace. Average Price # Homes on the Market * # ** # New Homes Built *** Avg # of Days on Market Housing Market : Q4' 04 Q1' 05 Q2' 05 $241,600 $269,600 118 174 73 85 0 0 36 71 (Forecast) * Available as of Mar. 31, 2005. ** May not add to total of zip codes *** During the first two months of 1st quarter. Zip Code Average Price Price Change Data by Zip Codes Total # (Quarter) % Change in # Average Days on Market % of Asking Price (Sold/List Price) 89003 $61,400-2 - 151 94.6% 89048 $240,700 36.76% 55-3.51% 69 98.0% 89060 $211,400 12.27% 11 0.00% 73 98.2% 89061 $363,200 124.06% 9 80.00% 54 97.1% OTHER $494,800 219.23% 8 700.00% 81 98.6% 4

Local Report Others Data by Zip Codes Total # % Change in # % of Asking Price (Sold/List Price) Zip Code Average Price Price Change Average Days on Market (Quarter) 89008 $95,600 145.13% 3 200.00% 43 96.3% 89015 $263,500-1 - 17 100.0% 89032 $188,000 27.46% 1 0.00% 3 101.6% 89043 $90,000-2 - 82 92.4% 89086 $399,000-1 - 24 99.8% 89122 $296,400-1 - 76 94.4% 89123 $291,000-1 - 9 101.4% 89130 $665,000-1 - 22 98.5% 89131 $283,000-1 - 68 97.6% 89135 $450,000-1 - 17 94.7% 89148 $265,000-1 - 71 96.4% 89301 $76,300-26.14% 4-42.86% 69 89.7% 89317 $200,000-1 - 346 85.1% 5

Trends Selling While It s Hot By Ken Fears, Economist Home sales continue to leave a scorched path in the first quarter of 2005. Coming off of a record in 2004, sales are enduring at a strong pace. Roughly 7,359 homes were sold in the area serviced by the Greater Las Vegas Association of REALTORS during the first quarter of 2005. That is a decrease of -15% from the first quarter, January, February, and March, of 2004. While the 30-year fixed rate mortgage remained low in January and February, averaging roughly 5.7% according to the Freddie Mac survey, the average jumped up to 5.9% in March. This upward trend is expected to persist through the year. The National Association of Realtors is currently forecasting the 30-year FRM to rise to 6.7% by the fourth quarter of 2005 and to average 6.2% for all of 2005. Price Range Days on the Market 2004 Q1 As interest rates rise, demand for housing is pressing upward as potential buyers seek to lock in low monthly payments. With higher mortgage rates looming on the horizon, a Realtor might choose to seek out homes that move more quickly in order to take advantage of this trend. To this end, the average days on the market by price sector is plotted above. From this breakdown, some conclusions can be drawn: Homes move the fastest in the lower price ranges. The slowest moving homes are in the upper price ranges. Days on the Market 2005 Q1 <$100K 57.4 52.5 $100K-$199K 28.5 41.5 $200K-$299K 15 54 $300K-$399K 25.3 62.3 $400K> 56 69.2 Compared to last spring, the lower price ranges have shown the greatest improvement in days on the market. The average duration of a sale has softened most in the middle price range. Days on the market continues to be a strong indicator of market strength. While most areas are strong, certain ones are clearly better. As mortgage rates rise, one should focus their efforts on areas of fast turnover in order to garner more sales commissions; in short, getting in (on sales) while it s good. To this end, in the area covered by the Greater Las Vegas Association of REALTORS one should focus their sales effort on the lower segment of the price spectrum. However, don t ignore the other sectors! Commissions are good no matter where you get them. Furthermore, a balance must be struck between how fast one moves the home and the size of the commission. The housing sector looks to continue its strength in 2005. While sales are expected to moderate from the remarkable levels attained in 2004, this year is expected to be a historically strong year. Mortgage rates may be on the rise, but so is employment. With employment comes job security and rising wages, both of which will result in additional demand for housing. 6

Chief Economist s Commentary REAL ESTATE DOESN T NEED A BOOM TO ROAR By David Lereah. Chief Economist With the peak of the nation s housing boom most likely behind us, the debate about whether the housing sector lands hard or soft has begun. Many times in this column I have stated a case for a soft landing for housing. Today s housing sector is fundamentally sound with historically low mortgage rates, a lean supply of homes and a boomer-led demand for homebuying. As a result, home sales are expected to fall this year, but not by much. According to our latest forecast, existing home sales are expected to drop by only 2.6 percent this year. New home sales are expected to drop by 5 percent. And with housing inventories remaining lean across the nation, upward pressures on home prices are likely to persist. While we forecast home price appreciation for existing homes to slow from the 9.3 percent pace of last year to a 6.3 percent pace this year, that is hardly a fall-out in home values. So no big concerns there. What does concern me is that the media and many Wall Street analysts are now stating that even if the soft landing scenario plays out, real estate may lose its stronghold as a competitive investment vis-a-vis stocks and bonds. Nothing could be further from the truth. Real estate does not need a boom to roar. Over 36 percent of all home sales last year were second homes purchased either as a vacation property or a rental investment property. It is obvious that households are still comfortable putting some of their funds into tangible real estate rather than holding paper equity shares of companies whose values are subject to the sways of the economy, corporate management capabilities and market competition. Not surprisingly, most households that purchase real estate are not looking or depending on double-digit price returns. Property has built-in benefits that many other income-generating assets lack. First, there are the social benefits of homeownership: the pride of owning a home of one s own, improved relations with family members, reduced crime in the community. Second, real estate is a highly leveraged asset generating high-yielding returns and creating significant wealth through amortization schedules and steady price appreciation on the money homebuyers put down. Third, real estate expands a household s borrowing/buying power, allowing homeowners to borrow against the equity in their property. And finally, real estate brings with it tax benefits and government subsidies that no other income-generating asset can rival. Real estate has played second fiddle to traditional stock and bond investments for far too long. The real estate markets have grown up. The buying and selling of property is no longer a long, awkward and costly process. Property holdings have become more liquid and their financial rewards have become legendary during this past decade. Property ownership has generated substantial wealth and income gains for households across America. And real estate enables property owners to leverage capital and build wealth, it provides tax benefits, and attracts government subsidies all advantages that stock, bonds, and other income-producing assets do not offer. Real estate has earned the right to stand side by side with stocks and bonds in any investment and/or retirement portfolio. Double-digit price increases are not the reason households should be investing in real estate. Moreover, speculative purchasing in real estate is not healthy, but occurs because that is the nature of human greed in any asset market that offers the potential for great income and wealth gains. But let us separate the forest from these few speculative trees. Most home sales whether for a primary residence or a second home are based on solid economic fundamentals and rational purchase behavior. Households recognize real estate for what it is the gift that keeps on giving. 7

Forecast The Forecast By Lawrence Yun, Senior Research Forecaster Historically, home prices have advanced by one and one-half percentage points above consumer price inflation. But in recent years, the real home price gains (that is, home price growth minus the consumer price inflation) have been far stronger. Home price growth outpaced consumer price inflation by 16% cumulatively over the past three years. The only other period in modern history when real home price gains were this strong was in the 1976 to 1979 period when the cumulative gains totaled 15%. That rah-rah period, however, was immediately followed by a period of real home price declines of 10% from 1980 to 1984. Though nominal home prices have not declined at the national level since the Great Depression, real home prices have at times shown negative trends. With the so much discussion of the housing bubble in the current environment, should we also be bracing for at least real home price declines, if not an outright nominal home price declines? Don t Panic That s not likely. For that to happen, home sales would have to fall by half. Mortgage rates would have to double. And the economy would have to go through one of sharpest contractions in U.S. history! Those three nasty things did in fact happened when the real home price declined in the early 1980s. The likelihood of such a similar scenario playing out in the current environment is nil. Home sales momentum is still going strong (NAR pending sales index firmed up a bit in February) and looks to finish the year only a hair shy of last year s record figures. It s true that mortgage rates will rise, but to only 7% by the middle of next year. And the economy? There are no signs of a major economic contraction. In fact, the economy has been expanding nicely with a plenty of job creations. The much more likely scenario is for the modestly rising rates to temper home buying enthusiasm, thereby, slowing the real home price gain back to the historic norm by the end of next year. That means, at the national level a real price gain will slow from 6.6% in 2004 to 3.3% in 2005 to 1.0% in 2006. The Wildcard There is, however, a wildcard that could wreak havoc to our forecast oil prices. An expanding global economy has sharply driven up oil prices and there doesn t appear to be any relief in sight. Our baseline forecast assumes that oil prices will continue to stay near $50 a barrel for the rest of the year. That means GDP will be struggling to grow at the 3.0% mark by the end of this year. That growth rate is barely enough to absorb the anticipated rise in the labor force, and consequently, the unemployment rate may have already bottomed. High oil prices also push up the consumer price index and the unemployment rate. If oil prices reach $75 per barrel, the unemployment rate is expected to rise to 6% rather than falling to 5%. Inflation will also take a hit rising at a 4.5% rate rather than at the 3% pace. If oil prices reach $90, the unemployment rate will rise to 6.5% with inflation rising at a chocking rate of 5.5%. The Local Market The local job market has clearly turned for the better in recent months. Nearly 60,000 net new jobs have been added to the local economy in the past 12 months in the Las Vegas region. The local housing market conditions have been mixed. The first quarter sales were 15% lower than the same quarter a year ago. That is mostly due to affordability conditions deteriorating. The strong underlying demand is still present and continues to push up home prices. The average price of $340,900 is 26.9% higher than what it was just a year ago. The local market outlook calls for continued job creations. Expect about 100,000 net new jobs over the next 24 months. But mortgage rates will be about one full percentage point higher by the year end. That will hold back demand somewhat, particularly in the starter home market. Home sales, as a result, will fall by 6% in 2005. There is still enough momentum to push home prices by also additional 20% in 2005. 8

Forecast U.S. Economic Outlook: May 2005 2004 2005 2006 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2003 2004 2005 2006 U.S. Economy Annual Growth Rate Real GDP 3.3 4.0 3.8 4.7 3.4 3.3 3.0 2.8 3.0 3.3 3.0 4.4 3.8 3.0 Nonfarm Payroll Employment 2.4 1.2 1.7 1.8 2.0 1.6 1.5 1.4 1.4 1.5-0.3 1.1 1.7 1.5 Consumer Prices 4.4 1.6 3.6 2.8 4.0 2.3 2.3 3.0 3.3 3.1 2.3 2.7 3.0 2.9 Real Disposable Income 2.8 2.9 8.3 1.3 2.2 3.6 3.6 4.4 3.3 3.2 2.3 3.5 3.5 3.6 Consumer Confidence 96 100 96 104 101 101 102 102 103 104 80 96 102 103 Percent Unemployment Rate 5.6 5.4 5.4 5.1 5.0 5.1 5.1 5.2 5.3 5.3 6.0 5.5 5.1 5.3 Interest Rates, Percent Fed Funds Rate 1.0 1.4 2.0 2.4 2.9 3.4 3.7 3.9 4.0 4.0 1.1 1.3 3.1 4.0 3-Month T-Bill Rate 1.1 1.5 2.0 2.5 2.9 3.3 3.5 3.7 3.8 3.8 1.0 1.4 3.0 3.8 Prime Rate 4.0 4.4 4.9 5.4 5.9 6.4 6.7 6.9 7.0 7.0 4.1 4.3 6.1 7.0 Corporate Aaa Bond Yield 5.9 5.6 5.5 5.4 5.8 6.1 6.3 6.4 6.5 6.6 5.7 5.6 5.9 6.6 10-Year Government Bond 4.6 4.3 4.2 4.2 4.7 5.1 5.2 5.4 5.5 5.5 4.0 4.3 4.8 5.5 30-Year Government Bond 5.4 5.1 4.9 5.0 5.5 5.8 5.9 6.0 6.1 6.2 5.1 5.1 5.5 6.1 Mortgage Rates, percent 30-Year Fixed Rate 6.1 5.9 5.7 5.8 6.2 6.6 6.8 6.9 7.0 7.1 5.8 5.8 6.3 7.1 1-Year Adjustable 3.9 4.1 4.1 4.2 4.7 5.2 5.4 5.6 5.6 5.7 3.8 3.9 4.9 5.6 National Housing Indicators Thousands Existing Single-Family Sales 6,900 6,797 6,877 6,833 6,743 6,569 6,354 6,291 6,335 6,501 6,183 6,784 6,624 6,443 New Single-Fami ly Sales 1,206 1,155 1,153 1,180 1,170 1,130 1,089 1,063 1,041 1,027 1,086 1,202 1,142 1,032 Housing Starts 1,920 1,969 1,975 2,111 1,996 1,941 1,885 1,842 1,779 1,743 1,848 1,956 1,983 1,776 Single-Family Units 1,596 1,632 1,621 1,715 1,613 1,543 1,483 1,430 1,366 1,322 1,499 1,611 1,588 1,353 Multifamily Units 323 338 355 397 383 399 402 412 413 421 349 345 395 422 Residential Construction* 564 566 571 583 590 578 566 554 542 532 560 561 579 538 Percent Change -- Year Ago Existing Single-Family Sales 16.3 4.7 8.1 8.2-2.3-3.4-7.6-7.9-6.0-1.0 9.6 9.7-2.4-2.7 New Single-Fami ly Sales 9.1-0.2 3.3-1.4-3.0-2.2-5.6-9.9-11.1-9.1 11.9 10.7-5.0-9.6 Housing Starts 10.0 4.6-2.9 8.7 4.0-1.4-4.6-12.7-10.9-10.2 8.4 5.8 1.4-10.4 Single-Family Units 12.4 7.2-2.2 9.2 1.0-5.5-8.5-16.6-15.3-14.3 10.3 7.5-1.4-14.8 Multifamily Units -0.4-6.5-6.1 6.4 18.6 18.0 13.3 3.9 7.7 5.7 0.6-1.1 14.5 6.8 Residential Construction 13.2 8.0 6.5 7.4 4.6 2.2-0.8-4.9-8.0-8.1 8.8 9.7 3.3-7.1 National Home Prices Thousands of Dollars Existing Home Prices 183.5 188.2 187.5 188.2 197.7 202.3 197.5 195.6 204.3 209.9 169.5 185.2 196.9 204.6 New Home Prices 216.6 214.0 228.0 229.0 233.1 229.9 239.7 242.3 245.1 241.7 195.0 220.5 232.8 244.6 Percent Change -- Year Ago Existing Home Prices 8.8 7.5 8.9 10.2 7.7 7.5 5.4 4.0 3.3 3.8 7.5 9.3 6.3 3.9 New Home Prices 13.4 12.1 14.5 7.6 7.6 7.4 5.2 5.8 5.1 5.1 3.9 13.1 5.6 5.1 Local Region Payroll Jobs (in thousands) 807.7 817.7 838.2 843.0 857.0 863.5 882.6 889.4 907.5 916.2 760.2 811.8 861.5 911.8 Home Sales 10570 10049 8013 7359 10063 9818 7741 7263 10234 10142 32201 37286 34980 35586 Home Prices (in thousand $) 310.4 324.1 328.7 340.9 380.9 385.7 381.6 385.9 428.5 425.5 224.3 308.4 374.0 418.5 Percent Change -- Year Ago Jobs 7.2% 7.3% 7.2% 7.6% 6.1% 5.6% 5.3% 5.5% 5.9% 6.1% 4.1% 6.8% 6.1% 5.8% Home Sales 30.4% 5.9% -4.0% -15.0% -4.8% -2.3% -3.4% -1.3% 1.7% 3.3% 30.8% 15.8% -6.2% 1.7% Home Prices 41.8% 41.8% 38.2% 26.9% 22.7% 19.0% 16.1% 13.2% 12.5% 10.3% 14.9% 37.5% 21.3% 11.9% Quarterly figures are seasonally adjusted annual rates. * Billion dollars Source: Forecast produced using Macroeconomic Advisers quarterly model of the U.S. economy. Assumpt ions and simulations by Dr. David Lereah and Dr. Lawrence Yun. 9

This table reflects data available through April 5, 2005. Monthly Indicator Mortgage Rates The 30-year fixed mortgage rose to 5.90% in March the highest in 7 months. The one-year ARM also climbed to 4.21% from 4.16% in the prior month of February. Existing Home Sales Total existing home sales (single-family, condos and co-ops) posted 6.79 million seasonally adjusted annualized units in February. Resales continue to remain near record highs. The inventory of existing homes rose slightly to a 4.2 months supply. New Home Sales rose 9% in February to 1.226 million seasonally adjusted annualized units. The increase is due in part to low interest rate conditions during the month, and warmer and dryer weather than is usual during February. Housing Starts surged to 2.195 million units in February, a 0.5% from January and their highest monthly mark in over 21 years. Single-family units rose to an all-time high of 1.78 million units, while multifamily units posted 420,000. Employment Payroll employment advanced by 110,000 in March, less than anticipated by most forecasters. The latest payroll addition is far below what would be expected of an economy (GDP) that has been growing at 4% or better rate. The unemployment rate declined to 5.2%. Recent Statistics Jan 5.71 Feb 5.63 Mar 5.90 Dec 6,810 Jan 6,820 Feb 6,790 Dec 1,226 Jan 1,121 Feb 1,226 Dec 2,056 Jan 2,183 Feb 2,195 Jan 124 Feb 243 Mar 110 Economic Monitor Forecast ARM holders need be watchful of the next readjustment date To stay near record levels through the first half of 2005 High lumber and material costs becoming a concern Builders are an optimistic bunch Job gains will average over 200,000 per month Purchase Applications The mortgage application index leaped to 458.0 in March a higher level than March of 2004. This indicates strong home sales activities ahead despite rising interest rates. Housing Affordability NAR s index was unchanged in February at 134.1. An increase in the median home price was balanced by an increase in family median income. The ARM (adjustable rate mortgage) affordability index rose slightly from 138.2 to 139.5. Inflation The CPI jumped 0.4% in February and is up 2.9% over the last 12 months. The core index (excluding food and energy) increased 0.3%. Core prices are up 2.2% in the last 12 month period. Look to more steady upward increases in the CPI through the spring. NAR s Pending Home Sales Index (PHSI) a new leading indicator for the housing market stood at 123.2 in February, 2.2% above January s figure and 10.4 percent ahead of the index in February 2004. The index is based on pending sales of all existing homes that is when a contract has been signed but the transaction has not yet closed. An index of 100 is equal to the average level of contract activity during 2001 (the first year to be analyzed and the first of four consecutive record years for existing home sales). Consequently an index of 100 coincides with a historically high level of home sales activity. February s index indicates that housing activity is firming up, with an anticipated modest uptrend in the months ahead. Details on the latest PHSI is available on page 16. For more information about NAR s Pending Home Sales Index, visit www.realtor.org/ Research.nsf/pages/PHSdata By Wannasiri Chompoopet and Hristina Toshkova Real Estate Outlook 10 Jan 430.1 Feb 431.4 Mar 458.0 Dec 130.7 Jan 134.1 Feb 134.1 Dec 0.0% Jan 0.1% Feb 0.4% In neutral gear for purchase apps; reverse gear for refis Rising rates cut into affordability Anticipate highest inflation in five years