REALTORS CONFIDENCE INDEX SURVEY Report on the December 2015 Survey

REALTORS CONFIDENCE INDEX SURVEY Report on the December 2015 Survey The REALTORS Confidence Index (RCI) report provides monthly information about real estate market conditions and expectations, buyer/seller traffic, price trends, buyers characteristics, and issues affecting real estate based on a monthly survey of REALTORS. The December 2015 report is based on the responses of 3,408 REALTORS about local market conditions experienced in December and the characteristics of their most recent sale for the month. The data collected from a random sample of REALTORS is viewed to be representative of the sales for the month. 1 The online survey was conducted from January 5 13, 2016. All real estate is local: conditions in specific markets may vary from the overall national trends presented in this report. REALTORS may be interested in comparing their markets against the national summary. The RCI report is an output of the Research Division of the NATIONAL ASSOCIATION of REALTORS. 2 For questions or information about this report, please email dhale@realtors.org. Lawrence Yun, Senior Vice President and Chief Economist Danielle Hale, Managing Director, Housing Research Gay Cororaton, Research Economist Meredith Dunn, Research Communications Manager Research Division NATIONAL ASSOCIATION of REALTORS 500 New Jersey Avenue, NW Washington, DC 20001 202.383.1000 1 The survey is sent to 50,000 REALTORS who are selected through simple random sampling. To increase the response rate, the survey is also sent to respondents in the previous three surveys who provided their email addresses. The number of responses to a specific question varies because the question may not be applicable to the respondent or because of non-response. To encourage survey participation, eight REALTORS are randomly selected to receive a gift card. 2 Thanks to Jessica Lautz, Managing Director, Survey Research and Communications, Meredith Dunn, Research Communications Manager, Brandi Snowden, Research Survey Analyst, and Amanda Riggs, Research Survey Analyst, for their input in improving the survey questions and in editing the report. 1

Table of Contents Summary... 3 I. Market Conditions... 4 REALTORS Broadly Reported Unchanged Market Conditions from a Month Ago... 4 REALTORS Still Broadly Optimistic Over the Next Six Months... 5 REALTORS Reported More Buyer Traffic Compared to a Year Ago Amid Tight Supply... 7 REALTORS Expect Prices to Increase Modestly in Next 12 Months... 10 Properties on the Market at 58 Days... 10 II. Buyer and Seller Characteristics... 12 Sales to First-Time Buyers: 32 Percent of Sales... 12 Sales for Investment Purposes: 15 Percent of Sales... 13 Distressed Sales: Eight Percent of Sales... 14 Cash Sales: 24 Percent of Sales... 16 Age, Previous Residence, and Type of Property Purchased... 17 III. Current Issues... 20 Impact of TRID on Contract Settlement... 20 Contract Settlement Issues: Financing, Home Inspection, and Appraisals are Major Issues... 21 2

Summary Market conditions vary across local markets and states, but the REALTORS confidence and traffic indices indicate unchanged market activity in December 2015 compared to November 2015. Compared to December 2014, market activity slightly improved. Sustained job creation and the low interest rate environment appear to be sustaining housing demand, even as the lack of inventory and tight underwriting standards are constraining market activity. However, in oilproducing states, homebuying demand appears to be easing.the TILA/RESPA Integrated Disclosure (TRID) regulations which came into effect on October 3, 2015, also appear to have lengthened the closing period: about 53 percent of respondents reported longer closing times compared to a year ago, up from 37 percent in the October 2015 survey. It typically took 40 days to close a sale, up from 36 days in July 2015 when NAR started collecting this information in the survey. The share of first-time home buyers slightly rose to 32 percent of sales. Purchases for investment purposes accounted for 15 percent of sales, while distressed properties made up eight percent of sales. Cash sales accounted for 24 percent of sales. Properties typically were on the market 58 days nationally compared to 66 days a year ago, an indication that supply remains tight relative to demand. Tight inventories, decreased affordability, and more stringent credit standards continued to be reported as key issues affecting sales, especially of first-time homebuyers. The collapse in oil prices is also a concern among REALTORS in oil-producing states. Still, respondents were broadly strongly confident about the overall outlook for the next six months, especially in the single-family homes market, with the confidence index registering at 72 (50 indicates a moderate outlook). Local conditions differ, but respondents typically expected prices to increase 3.3 percent. December 2015 REALTORS Confidence Index Survey Highlights Dec 2015 Nov 2015 Dec 2014 RCI Current Conditions: Single-Family Sales 57 57 51 RCI Six-Month Outlook: Single-Family Sales 72 68 67 RCI Buyer Traffic Index 51 50 47 RCI Seller Traffic Index 38 38 38 First-Time Home Buyers, as Percent of Sales 3 32 30 29 Sales to Investors, as Percent of Sales 15 16 17 Cash Sales, as Percent of Sales 24 27 26 Distressed Sales, as Percent of Sales 8 9 11 Median Days on Market 58 54 66 Median Expected Price Growth in Next 12 Months (%) 3.3 3.2 3.2 3 NAR s 2015 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 32 percent were first-time home buyers. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS and also captures purchases for investment purposes and vacation/second homes. 3

I. Market Conditions REALTORS Largely Reported Unchanged Market Conditions from a Month Ago Market conditions vary across local markets and states, but the indices on current conditions indicate that market activity in December 2015 was substantially unchanged compared to November 2015. Compared to a year ago, the indices indicate an uptick in market activity. Continued job creation and the low interest rate environment are sustaining housing demand, even as the lack of inventory and tight underwriting standards are constraining market activity. The REALTORS Confidence Index Current Conditions chart below shows that the singlefamily homes index stayed at 57, a level consistent with more respondents citing strong than weak market conditions (57 in November 2015; 51 in December 2014). 4 The indices for townhomes and condominiums were both below 50, which indicate that more respondents viewed their markets as weak rather than strong. REALTORS continued to report on the difficulty of obtaining financing for condominium unit purchases because many condominiums are not FHA or GSE eligible. 5 80 70 60 50 40 30 20 10 0 REALTORS Confidence Index Current Conditions as of December 2015 (50 = "Moderate" Conditions) 200801 200805 200809 200901 200905 200909 201001 201005 201009 201101 201105 201109 201201 201205 201209 201301 201305 201309 201401 201405 201409 201501 201505 201509 Single-family Townhome Condominium 57 42 38 4 This is a diffusion index which measures the direction of and broadness of the respondents market conditions or confidence. An index of 50 indicates a balance of respondents having weak (index=0) and strong (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality effects. 5 FHA and the GSEs have financing eligibility criteria relating to ownership occupancy requirements, delinquent dues, project approval process, and use for commercial space. See the Statement of the National Association of REALTORS Submitted for the Record to the Senate Committee on Banking Housing and Urban Affairs on December 9, 2014 at http://www.ksefocus.com/billdatabase/clientfiles/172/1/2180.pdf 4

REALTORS Still Generally Optimistic Over the Next Six Months Local market conditions vary, but REALTORS remained by and large strongly confident about the outlook over the next six months. 6 The REALTORS Confidence Index Six-Month Outlook for single-family homes registered at 72 (68 in November 2015; 67 in December 2014). The confidence index for townhomes rose to 55 (51 in November 2015; 49 in December 2014), while the index for condominiums registered at 51 after six months of being below 50. An index above 50 indicates more respondents view markets as strong than weak. 80 70 60 50 40 30 20 10 0 REALTORS Confidence Index Six-Month Outlook as of December 2015 (50 = "Moderate" Outlook) 200801 200805 200809 200901 200905 200909 201001 201005 201009 201101 201105 201109 201201 201205 201209 201301 201305 201309 201401 201405 201409 201501 201505 201509 Single-family Townhome Condominium 72 55 51 The following maps show the REALTORS Confidence Index Six-Month Outlook across property types by state over the next six months. Compared to current conditions in the singlefamily homes market, all states, except for New Mexico, Vermont, and Connecticut, were expected to have broadly strong to very strong markets in the next six months, partly because of the seasonal uptick in spring. REALTOR respondents in the oil-producing states of Texas, North Dakota, and Louisiana also had a largely strong outlook over the next six months although the outlook is tempered compared to the same period in 2014. 7 In the townhome and condominium markets, only a handful of states have broadly strong outlooks, such as California, Washington, Oregon, Colorado, Texas, Florida, and the District of Columbia. REALTORS have reported difficulty in accessing condominium unit purchase financing for loans insured by both the Federal Housing Administration (FHA) and government sponsored enterprises Fannie Mae and Freddie Mac (GSEs). Only 20 percent of condominiums are eligible 6 Respondents were asked What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales? 7 The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents rated conditions or expectations as Strong (100), Moderate (50), and Weak (0). The responses are compiled into a diffusion index. Values 25 and lower are considered very weak, values greater than 25 to 49 are considered weak, a value of 50 is considered moderate, values greater than 50 to 75 are considered strong, and values greater than 76 are considered very strong. 5

for FHA condominium unit financing because of strict eligibility criteria such as those pertaining to occupancy requirements and delinquent dues. 8 8 National Association of REALTORS. See http://www.realtor.org/topics/condominiums/condominium-resource-book 6

REALTORS Reported More Buyer Traffic Compared to a Year Ago Amid Tight Supply While local conditions vary, buyer traffic remained mostly unchanged in December 2015 compared to November 2015, but it was slightly better compared to a year ago. The REALTORS Buyer Traffic Index registered at 51 in December 2015 (50 in November 2015; 47 in December 2014). Meanwhile, supply remains tight. The REALTORS Seller Traffic Index registered at 38 (38 in November 2015 and 38 in December 2014). The gap in demand and supply has led to strong price growth against modest gains in income, making a home purchase increasingly less affordable. The construction of new privately owned housing units has been improving, averaging an annual pace of 1.1 million units from January November 2015. However, roughly 35 percent of recent new construction has been multi-family structures which are typically for rental occupancy. Historically, multi-family structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than is historically normal. REALTORS reported low inventory of properties in the lower price range and for those that are move-in ready. 7

80 70 60 50 40 30 20 REALTORS Buyer and Seller Traffic Indexes as of December 2015 (50 = "Moderate" Conditions) 200801 200805 200809 200901 200905 200909 201001 201005 201009 201101 201105 201109 201201 201205 201209 201301 201305 201309 201401 201405 201409 201501 201505 201509 51 38 Buyer Traffic Index Seller Traffic Index Buyer traffic was widely strong in 21states, as measured by the REALTORS Buyer Traffic Index. 9 With the onset of the winter season, buyer traffic was weak in the Northeast region. Buyer traffic continued to be broadly strong in Texas, North Dakota, and Montana amid the job cutbacks in the oil industry, although buyer traffic has eased compared to 2013 and 2014. In the other oil-producing states of New Mexico, Oklahoma, Mississippi, Wyoming, and West Virginia, buyer traffic turned broadly weak. 9 The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents were asked How do you rate the past month's buyer traffic in the neighborhood(s) or area(s) where you make most of your sales? Respondents rated conditions or expectations as Strong (100), Moderate (50), and Weak (0). The responses are compiled into a diffusion index. Values 25 and lower are considered very weak, values greater than 25 to 49 are considered weak, a value of 50 is considered moderate, values greater than 50 to 75 are considered strong, and values greater than 76 are considered very strong. 8

Meanwhile, seller traffic was broadly weak across most states, measured by the REALTORS Seller Traffic Index. 10 Seller traffic was reported to be strong only in North Dakota where much residential construction took place as builders anticipated strong housing demand in the wake of the boom in oil production. There was also very strong selling activity in Puerto Rico, where significant out-migration is taking place, given the economy s financial woes. 10 Respondents were asked How do you rate the past month's seller traffic in the neighborhood(s) or area(s) where you make most of your sales? Respondents rated conditions or expectations as Strong (100), Moderate (50), and Weak (0). The responses are compiled into a diffusion index. Values 25 and lower are considered very weak, values greater than 25 to 49 are considered weak, a value of 50 is considered moderate, values greater than 50 to 75 are considered strong, and values greater than 76 are considered very strong. 9

REALTORS Expect Prices to Increase Modestly in Next 12 Months REALTORS who responded to the December 2015 survey expected prices to increase by 3.3 percent over the next 12 months (3.2 percent in November 2015; 3.2 percent in December 2014). REALTORS expect housing price growth to moderate as rising prices have made homes less affordable for many. NAR median existing home sale prices were up 6.3 percent in November 2015 from a year ago, while median weekly earnings rose by 1.5 percent in Q3 2015 from the same period a year ago. The map shows the median expected price change in the next 12 months for each state based on the October December 2015 RCI surveys. REALTOR respondents from the District of Columbia were the most upbeat, with a median expected price growth of 6 percent. The states of Washington, Colorado, and Florida were also expected to post strong price growth, with the median expected price growth in the range of four to five percent. Meanwhile, the median expected price growth in North Dakota has whittled down to two percent because of concerns about the impact of low oil prices on the state s economy. Properties on the Market for 58 Days Nationally, properties sold in December 2015 were typically on the market 58 days compared to 66 days one year ago, indicating an improved market for sellers (54 days in November 2015; 66 days in December 2014). 11 Fewer days on the market are an indication that inventory remains tight. Short sales were on the market for the longest time at 86 days, while foreclosed properties typically stayed on the market for 68 days. Non-distressed properties were typically on the market for 57 days. 11 Respondents were asked For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer s offer? The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. 10

Median Days on Market of Sales Reported by REALTOR Respondents as of December 2015 200 150 All: 58 Foreclosed: 68 Short sale: 86 Not distressed: 57 100 50 0 201105 201108 201111 201202 201205 201208 201211 201302 201305 201308 201311 201402 201405 201408 201411 201502 201505 201508 201511 All Foreclosed Short sale Not distressed Nationally, approximately 32 percent of properties were on the market for less than a month when sold. About 12 percent were on the market for longer than six months, a decrease from 30 percent in January 2012. 4 35% 25% 15% 1 5% Less than 1 month Percentage Distribution of Time on Market of Sales Reported by REALTOR Respondents as of December 2015 1 to less than 2 months 2 to less than 3 months 3 to less than 4 months 4 to less than 5 months 5 to less than 6 months 6 to less than 9 months 9 to less than 12 months 12 months or more 201412 201511 201512 Properties typically sold within a month in the District of Columbia, Utah, and Colorado. In the oil-producing states of North Dakota, Montana, Kansas, and Louisiana, which are undergoing slower job growth following the collapse of oil prices, properties stayed on the market longer at 60 days. In Wyoming, properties typically sold after 90 days on the market. Texas appears more resilient to the oil price collapse, as properties typically sold after 45 days on the market. Local 11

conditions vary, and the data is provided for REALTORS who may want to compare local markets against the state and national summary. II. Buyer and Seller Characteristics Sales to First-Time Buyers: 32 Percent of Sales The share of first-time home buyers increased slightly to 32 percent of residential sales in December 2015 (30 percent in November 2015; 29 percent in December 2014). 12 Sustained job creation and the low interest rate environment appear to be sustaining housing demand, even as the lack of inventory and tight underwriting standards are constraining market activity. Across many states, the share of sales to first-time homebuyers has essentially remained unchanged since 2012. In California and Washington, first-time homebuyers accounted for a smaller share of the market compared to the rate in 2012, possibly because homes have become less affordable or due to the preference to rent among young workers who tend to be more professionally mobile early in their careers. 12 First-time buyers accounted for about 32 percent of all home buyers based on data from NAR s 2015 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS about their transactions and captures purchases for investment purposes and second homes for existing homes. 12

First-time Buyers as Percent of Residential Market as of December 2015 6 5 4 32% 1 200810 200902 200906 200910 201002 201006 201010 201102 201106 201110 201202 201206 201210 201302 201306 201310 201402 201406 201410 201502 201506 201510 6 Sales to First-time Buyers as Percent of the States' Sales in 2012 and 2015* 5 4 18% 32% 21% 37% 4 38% 32% 28% 4 19% 49% 35% 24% 41% 23% 25% 29% 34% 31% 31% 1 AZ CA CO FL GA IL MA MI NC NJ NV NY OH OR PA SC TN TX UT WA U.S. *Data labels are for 2015. Estimates have a sampling margin of error of four percent or less at 95 percent confidence in 2015. At the national level, the sampling margin of error is 1 percent. Respondents are asked about the characteristics of their most recent sale in the reference month. The current year's data is compared against data in 2012, the breakout year of the housing market recovery. Sales for Investment Purposes: 15 Percent of Sales Approximately 15 percent of REALTORS reported that their last sale was for investment purposes (16 percent in November 2015; 17 percent in December 2014). Purchases for investment purposes have generally been on the decline with fewer distressed sales on the market. At their peak in 2012 2013, investment sales were approximately 20 percent of sales. Purchases for investment purposes have declined across many states, as sales of distressed properties have also fallen. Compared to other states, the share of purchases for investment 13

purposes make up a larger portion of sales in Florida, South Carolina, and California at nearly 20 percent. 25% 15% 1 5% Sales to Investors as Percent of Residential Market as of December 2015 200810 200902 200906 200910 201002 201006 201010 201102 201106 201110 201202 201206 201210 201302 201306 201310 201402 201406 201410 201502 201506 201510 15% 35% 25% 15% 1 5% 14% Sales for Investment Purpose as Percent of States' Sales in 2012 and 2015* 18% 13% 22% 12% 12% 11% 1 13% 14% 17% 1 12% 13% 1 19% 12% 16% 9% 9% AZ CA CO FL GA IL MA MI NC NJ NV NY OH OR PA SC TN TX UT WA U.S. *Data labels are for 2015. Estimates have a sampling margin of error of four percent or less at 95 percent confidence in 2015. At the national level, the sampling margin of error is less than 1 percent. Respondents are asked about the characteristics of their most recent sale in the reference month. The current year's data is compared against data in 2012, the breakout year of the housing market recovery. 14% Distressed Sales: Eight Percent of Sales Distressed sales accounted for eight percent of sales (nine percent in November 2015; 11 percent in December 2014). Foreclosed properties were six percent of sales, while short sales were two percent of sales. 13 With rising home values and fewer foreclosures, the share of sales of 13 The survey asks respondents to report on the characteristics of the most recent sale for the month. 14

distressed properties has generally continued to decline. Distressed sales accounted for about a third to a half of sales until 2012 when they began to fall below this level. The share of distressed sales has declined steeply in many states, particularly in Nevada, Arizona, and California. The share of distressed sales has also fallen in Florida and Illinois, although distressed sales continue to account for a significant portion of sales nearly 15 percent in these states. 6 5 4 1 Distressed Sales as Percent of Residential Market as of December 2015 Foreclosed: 6% Short sale: 2% 200810 200902 200906 200910 201002 201006 201010 201102 201106 201110 201202 201206 201210 201302 201306 201310 201402 201406 201410 201502 201506 201510 Foreclosed Short sale 7 6 5 4 1 Distressed Sales as Percent of States' Sales in 2012 and 2015* 14% 17% 1 8% 9% 9% 12% 11% 6% 6% 4% 5% 6% 6% 8% 9% 8% 9% 5% 4% 3% AZ CA CO FL GA IL MA MI NC NJ NV NY OH OR PA SC TN TX UT WA U.S. *Distressed sales refer to sales of foreclosed properties and short sales. Data labels are for 2015. Estimates have a sampling margin of error of two percent or less at 95 percent confidence in 2015. At the national level, the sampling margin of error is less than 1 percent. Respondents are asked about the characteristics of their most recent sale in the reference month. The current year's data is compared against data in 2012, the breakout year of the housing market recovery. 15

Cash Sales: 24 Percent of Sales Approximately 24 percent of sales were all-cash (27 percent in November 2015; 26 percent in December 2014). Buyers of homes for investment purposes, second homes, and foreign clients are more likely to pay cash than first-time home buyers. As sales to investors and distressed properties have fallen, the share of cash sales has declined as well. The share of cash sales to the market has declined compared to the levels observed in 2010 2014, but the share remains elevated compared to levels before the housing downturn. Compared to 2012 levels, cash sales accounted for a smaller portion of sales in many states in 2015. In spite of the decline, cash sales continue to comprise a substantial portion of sales in Arizona and Florida, accounting for about one third and one half of sales, respectively. 4 35% 25% 15% 1 5% Cash Sales as Percent of Residential Market as of December 2015 200810 200902 200906 200910 201002 201006 201010 201102 201106 201110 201202 201206 201210 201302 201306 201310 201402 201406 201410 201502 201506 201510 24% 16

Percent of All-Cash Sales By Type of Buyer in December 2015 8 75% 7 64% 6 5 48% 47% 4 1 15% 7% International Investor Distressed sale Second home Relocation First-time buyer Cash Sales as Percent of States' Sales in 2012 and 2015* 6 5 46% 4 32% 22% 19% 23% 19% 24% 24% 23% 24% 24% 25% 19% 27% 23% 22% 19% 16% 24% 1 AZ CA CO FL GA IL MA MI NC NJ NV NY OH OR PA SC TN TX UT WA U.S. *Data labels are for 2015. Estimates have a sampling margin of error of four percent or less at 95 percent confidence in 2015. At the national level, the sampling margin of error is less than 1 percent. Respondents are asked about the characteristics of their most recent sale in the reference month. The current year's data is compared against data in 2012, the breakout year of the housing market recovery. Age, Previous Residence, and Type of Property Purchased Buyers 34 years and under accounted for 27 percent of home sales reported by respondents in December 2015. Buyers 35 to 55 years old accounted for nearly half of sales. Buyers 56 and over represented 24 percent of home sales. Older buyers are likely to purchase homes for investment purposes, as second homes, or as a trade-down of a primary residence. 17

Nationally, buyers 34 years and under accounted for 28 percent all buyers in calendar year 2015. These younger buyers are a larger portion of sales relative to the national share in states such as Utah, Pennsylvania, New York, Ohio, Illinois, Georgia, and Colorado. Age Distribution of Buyers for Sales Reported by REALTOR Respondents as of December 2015 6 5 4 1 49% 27% 24% 201307 201309 201311 201404 201407 201408 201409 201410 201411 201412 201501 201502 201503 201504 201505 201506 201507 201508 201509 201510 201511 201512 Age 34 and under Age 35 to 55 Age 56 and over 45% 4 35% 25% 15% 1 5% 19% 23% Sales to Buyers Who are 34 Years and Under as Percent of States' Sales in 2013 and 2015* 33% 15% 32% 36% 31% 32% 24% 16% 36% 35% 18% 38% 25% 27% 27% 39% 28% 28% AZ CA CO FL GA IL MA MI NC NJ NV NY OH OR PA SC TN TX UT WA U.S. *Data labels are for 2015. Estimates have a sampling margin of error of four percent or less at 95 percent confidence in 2015. At the national level, the sampling margin of error is less than 1 percent. Respondents are asked about the characteristics of their most recent sale in the reference month. The current year's data is compared against data in 2013 when NAR started collecting this information from the RCI survey. Slightly more than half of all reported buyers lived in homes they owned immediately prior to their recent home purchase. These buyers include trade-up or trade-down buyers and those who are purchasing a second home or one for investment purpose. Home buyers, who were renting immediately prior to their recent home purchase, accounted for 38 percent of sales, essentially unchanged compared to past months. 18

6 5 4 1 Living Status of Home Buyers at Time of Home Purchase as of December 2015 201408 201409 201410 201411 201412 201501 201502 201503 201504 201505 201506 201507 201508 201509 201510 201511 201512 Rents an apartment or house Lives in own home Lives with parents, relatives, or friends 53% 38% 9% Among buyers 34 years and under, 86 percent purchased single-family homes compared to the 77 percent rate for buyers 56 years and older. Buyers aged 56 and over are about twice as likely to purchase a condominium as other buyers. REALTORS have also reported a demand for 55 and older community housing as the large baby boomer population continues to move into retirement. Type of Residential Property Purchased by Age Group in January December 2015 10 8 6 7% 8% 7% 6% 16% 9% 6% 7% 4 86% 87% 77% 84% Age 34 and under Age 35 to 55 Age 56 and over All Single-family Townhome Condominium 19

III. Current Issues Impact of TRID Regulations on Contract Settlement The Know Before You Owe /TRID regulations that took effect on October 3, 2015, were intended to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. However, REALTORS reported that the new regulations have led to longer closing periods. In the December 2015 survey, 53 percent of respondents reported that they are experiencing a longer time to close compared to a year ago, up from 37 percent in the October 2015 survey when NAR first gathered this information. Percent of Respondents Who Reported a Longer Closing Period Compared to a Year Ago 37% 47% 53% 201510 201511 201512 The median or typical respondent took 40 days to close in December 2015, up from 36 days in July 2015 when NAR first started collecting this information from the RCI survey. The average time to close rose to 44 days in December 2015, up from 41 days in July 2015. Median and Average Days to Close a Contract 41 42 41 40 42 43 44 40 40 36 35 35 201507 201508 201509 201510 201511 201512 Median Average 20

Contract Settlement Issues: Financing, Home Inspection, and Appraisals are Major Issues In reporting on their last contract that went into settlement or was terminated over the period October December 2015, REALTORS reported that 33 percent of contracts had delayed settlement. The share of delayed contracts appears to be on the rise. 10 8 6 4 How Sales Contracts Were Settled in October December 2015* 9% 1 9% 7% 6% 7% 6% 7% 6% 7% 26% 26% 28% 29% 29% 29% 29% 32% 33% 65% 64% 63% 63% 65% 65% 64% 64% 62% 6 Contract was terminated Contract was delayed but eventually went into settlement Contract was settled on time * Based on the respondent's most recent contract that went into settlement or was terminated during this period. Among contracts that had a delayed settlement (33 percent), 45 percent had financing issues, an increase compared to the share of about 40 percent in the first half of 2015. TRID issues are likely to manifest here as financing related issues. Problems Encountered for Contracts That Were Delayed But Eventually Went Into Settlement in October December 2015* (Delayed Contracts Represent 33 Percent of Closed or Terminated Contracts) Issues related to obtaining financing Appraisal issues Home inspection/environmental issues Titling/deed issues Contingencies stated in the contract Issues in buy/sell distressed property No problems encountered Home/hazard/flood insurance issues Buyer lost job Other 18% 13% 9% 8% 7% 3% 2% 1% *Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, etc. 25% 45% 21

Among contracts that were terminated (seven percent), 29 percent had financing issues and 29 percent had home inspection issues. Problems Encountered for Contracts That Were Terminated in October December 2015* (Terminated Contracts Represent Seven Percent of Closed or Terminated Contracts) Issues related to obtaining financing Home inspection/environmental issues Appraisal issues Contingencies stated in the contract Buyer lost job Issues in buy/sell distressed property No problems encountered Titling/deed issues Home/hazard/flood insurance issues Other 6% 6% 5% 2% 1% 13% 11% 22% 29% 29% *Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, etc. 22

The NATIONAL ASSOCIATION of REALTORS, The Voice for Real Estate, is America s largest trade association, representing over 1 million members, including NAR s institutes, societies, and councils, involved in all aspects of the real estate industry. NAR membership includes brokers, salespeople, property managers, appraisers, counselors and others engaged in both residential and commercial real estate. The term REALTOR is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS and subscribes to its strict Code of Ethics. Working for America's property owners, the National Association provides a facility for professional development, research, and exchange of information among its members, and to the public and government for the purpose of preserving the free enterprise system and the right to own real property. The Mission of the NATIONAL ASSOCIATION of REALTORS Research Division is to collect and disseminate timely, accurate, and comprehensive real estate data and to conduct economic analysis in order to inform and engage members, consumers, policy makers, and the media in a professional and accessible manner. To find out about other products from NAR s Research Division, visit www.realtor.org/research-and-statistics Also follow NAR Research on https://twitter.com/nar_research https://www.facebook.com/narresearchgroup https://www.pinterest.com/narresearch/ https://instagram.com/narresearch/ NATIONAL ASSOCIATION of REALTORS Research Division 500 New Jersey Avenue, NW Washington, DC 20001 202.383.1000 23