Economic Forecast · YOY Improvements Also Favor Outdoors and Small Projects Burns Building Product Category Ratings: August 2019 Rank change vs. prior year Category Ranking 9.6 6.7

B U I L D I N G C O M P O N E N T M A N U F A C T U R E R S C O N F E R E N C E

Handout Sponsor

Economic ForecastTodd Tomalak, John Burns Real Estate Consulting

1

HO

US

ING

IN

DU

ST

RY

OU

TLO

OK

–B

UIL

DIN

GP

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DU

CT

S

Todd

Tom

alak

SVP

–Re

sear

chtt

omal

ak@

rea

esta

teco

nsul

ting.

com

920-

373-

6727

2

JBR

EC

Res

earc

h M

ix

Priv

ate

Build

er14

%

Publ

ic B

uild

er11

%

Deve

lope

r9%

Inve

stm

ent

Fund

13%

Priv

ate

Equi

ty18

%

Build

ing

Prod

ucts

18%

Lend

er6%

Sing

leFa

mily

Ren

tal

3% Oth

er8%

3

87%

of

CF

Os

Exp

ect

a R

eces

sion

in

Nex

t 2

Year

s

4

Our

Eco

nom

ic L

eadi

ng I

ndic

ator

Poi

nts

to 7

5%C

hanc

e of

Rec

essi

on i

n 2

Year

s

5

Hou

sing

and

Bui

ldin

g P

rodu

cts

Hav

e Le

ssD

ebt

Tha

n O

ther

Sec

tors

(Lo

wer

Ris

k)

-2%

12%

12%

28%

3%

24%

23%

23%

15%

31%

33%

33%

57%

-27%

35%43

%50%

38% 51

%

141%15

3%

171%

192%

245%

308%

370%

136%

Build

ing

mat

eria

ls

Rea

l est

ate,

hom

e bu

ildin

g

Con

sum

er g

oods

and

reta

il

Auto

mot

ive

Ener

gy

Serv

ices

Hea

lth c

are

Tech

nolo

gy a

nd e

lect

roni

cs

All c

ompa

nies

Deb

t gro

wth

Nom

inal

GD

P gr

owth

Job

grow

th

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

; Ban

k of

Am

eric

a M

erril

l Lyn

ch; B

EA; B

LS (D

ata:

Dec

-18,

upd

ated

qua

rterly

†)

Publ

icly

Trad

ed C

ompa

ny D

ebt

2009

–201

8

6

Nea

r Te

rm:

Fav

orab

le C

omp

Will

Mak

e Q

4an

d 1H

202

0 N

umbe

rs L

ook

Bet

ter

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

pro

prie

tary

sur

vey,

sam

ple

size

of ~

16-2

0% o

f new

hom

e sa

les

mon

thly

7

We

Exp

ect

Mod

est

‘Hic

cup’

in

New

Con

stru

ctio

nV

olum

e –

Rat

her

than

Maj

or D

ownt

urn

Four

Maj

or D

ownt

urns

Smal

l ‘H

iccu

p’

Smal

l‘H

iccu

JB

RE

C M

AR

KE

T H

OT

NE

SS

IN

DE

X F

OR

50

LA

RG

ES

T M

AR

KE

TS

2%

28%

70%

New

Hom

e Sa

les

and

Pric

ing

Tren

ds V

ary

By

Mar

ket

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

(Pub

: Nov

-18)

Mat

urin

g

Gro

win

gD

eclin

ing

Botto

min

g

Rec

over

ing

Fallin

g

4 M

arke

ts

1 M

arke

t

16 M

arke

ts +

4 W

atch

Lis

ted

2 M

arke

ts

6 M

arke

ts

Cyc

lical

Con

ditio

ns V

ary

by M

arke

t.

10

Hom

e P

rice

App

reci

atio

n M

oder

atin

g

Hom

e Pr

ices

Gre

w w

ith

Inco

me

Unt

il 20

00

Hom

e Pr

ices

Gre

w w

ith

Fast

er T

han

Inco

mes

Sin

ce

2012

, Unt

il Af

ford

abili

ty

‘Lim

it’ R

each

ed in

201

8/19

Slow

dow

n in

HPA

11

Tho

ught

Exp

erim

ent:

Ear

ly R

ead

on M

igra

tion

Thou

ght

Expe

rimen

t:•

Whi

ch m

arke

t has

mor

e ou

tmig

ratio

n?(p

eopl

e m

ovin

gAW

AY)

Regi

onal

Shi

fts t

o Af

ford

able

Mar

kets

Pivo

tto

Affo

rdab

le S

econ

dary

Mar

kets

UH

AU

L R

EN

TAL

PR

ICE

S

SAN

FR

ANC

ISC

O

SEAT

TLE

SAC

RAM

ENTO LA

S VE

GAS

AUST

IN

$2,3

72$7

54

$290

$95

$1,8

77

$153

$3,2

85

$1,0

12

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

Met

ro A

naly

sis

and

Fore

cast

13

Piv

ot t

o S

outh

ern

and

Aff

orda

ble

Mar

kets

Sour

ce: J

BREC

Inde

pend

ent A

nalys

is o

f U-H

aul D

ata

(Pub

: Sep

201

9)

14

Hom

e B

uild

ers

Hav

e R

aise

d P

rice

s fo

r P

ast

Sev

en Y

ears

…W

ell A

bove

Res

ale

Pri

ces

15

Bui

lder

s P

ivot

ing

to E

ntry

Lev

el

Sour

ce: B

uild

ers’

mos

t rec

ent q

uarte

rly e

arni

ngs

calls

LGIH

:IP

O

3Q13

DH

I:Ex

pres

s Hom

es D

ebut

2Q14

NV

R:

Sim

ply

Ryan

De

but

2Q15

MD

C:Se

ason

s by

Rich

mon

d Am

eric

an D

ebut

4Q15

TPH

:Pa

rdee

in L

as V

egas

(R

espo

nsiv

e Ho

me)

Deb

ut

1Q16

MTH

:LI

VE N

ow D

ebut

NW

HM

:An

noun

ced

~

Ent

ry-

Leve

l Pro

duct

3Q16

CCS:

Cent

ury

Com

plet

e De

but

MH

O:

Anno

unce

d En

try-

Leve

l Tar

gete

d Pr

oduc

t

TOL:

Anno

unce

d T

| Se

lect

; ent

ry-le

vel

bran

d

4Q16

TPH

:Re

spon

sive

Hom

es in

mor

e m

arke

ts

MH

O:

Roll-

out o

f Sm

art S

erie

s in

to m

ore

mar

kets

2Q17

This

yea

r, m

ortg

age

rate

s ha

ve p

lum

met

ed.

Sour

ce: F

redd

ie M

ac, u

pdat

ed th

roug

h 10

/3/1

9

3.5

3.6

3.7

3.8

3.9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

5.0

1/18

2/18

3/18

4/18

5/18

6/18

7/18

8/18

9/18

10/18

11/18

12/18

1/19

2/19

3/19

4/19

5/19

6/19

7/19

8/19

9/19

30-y

r Fix

ed R

ate

Mor

tgag

es4.

94

3.65

0.1%1.

0%2.

5%9.

4%24

.1%

22.2

%17

.0%

8.1%

4.8%

3.1%

2.6%

1.4%

1.1%

0.6%

2.0%

0%5%

10%

15%

20%

25%

<22.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

Mor

tgag

e D

istr

ibut

ion

by R

ate

(201

8)

17

Sour

ce: U

S C

ensu

s AH

S, F

redd

ie M

ac, J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

LLC

(Pub

: Apr

201

9)

Octo

ber 2

018

~60

% “l

ocke

d in”

Octo

ber 2

019

Only

~13

% “l

ocke

d in

”

Ope

ned

Up

the

Mov

eup

Mar

ket A

gain

CCOMM. COUNTS

5%5%

4%

1%

4%4%

2%2%

1%

-2%

3%

2%

-3%

-2%

-1%0%1%2%3%4%5%6%

Jan-17

Apr-17

Jul-17

Sep-17

Jan-18

Apr-18

Jul-18

Sep-18

Jan-19

Apr-19

Jul-19

Sep-19

Com

mun

ity C

ount

Gro

wth

But

don

’t ex

pect

a s

urge

in s

tart

s du

e to

lack

of

entit

led

land

in g

ood

loca

tions

.

Sour

ce: J

ohn

Bur

ns R

eal E

stat

e C

onsu

lting

, Oct

ober

201

9

•Citi

esw

ant i

t•

Effic

ient

use

of l

and

•M

ore

taxa

ble

inco

me

with

mor

e re

side

nts/

acre

•Con

sum

ers

wan

t it

•Pr

oxim

ity to

eve

ryth

ing

(exp

erie

nces

/ em

ploy

men

t)•

Bette

r affo

rdab

ility

in a

des

irabl

e lo

catio

n

•Bui

lder

s an

d de

velo

pers

wan

t it

•Le

ss ri

sk in

a d

esira

ble

loca

tion

•M

ore

hom

es/a

cre

mea

ns h

ighe

r rev

enue

/acr

e

The

U.S

.Is

Shift

ing

to M

ore

Hig

h-D

ensi

tyS

rban

™ L

ivin

g

Cent

erho

use

by T

rum

ark

Hom

esDe

signL

ens™

Fea

ture

Fe

brua

ry 2

019

Ont

ario

, CA

•De

signe

d to

be

atta

inab

le a

ndch

arm

ing.

•Sm

alle

r hom

es w

ithsq

uare

foot

age

in a

llth

e rig

ht p

lace

s•

Smal

l yar

ds a

ndco

vere

d de

cks

Youn

g Si

ngle

(N

o K

ids)

956

resp

onse

s

Youn

g Si

ngle

s ar

e bu

ying

mor

e ro

w to

wnh

omes

.

15%

Sour

ce:

Empt

y N

este

r4,

380

resp

onse

s

Villa

s at L

egac

y W

est

by B

ritto

n Ho

mes

Desig

nLen

s™ F

eatu

re

Dece

mbe

r 201

8Pl

ano,

TX

•2

and

3-st

ory

hom

esth

at p

rovi

de a

low

mai

nten

ance

lifes

tyle

, in

a vi

bran

tSu

rban

com

mun

ity•

Dram

atic

cont

empo

rary

elev

atio

ns•

Low

mai

nten

ance

•En

tert

ainm

ent-

cent

ric fl

oor p

lans

Empt

y N

este

rs A

re B

uyin

g M

ore

Low

Mai

nten

ance

H

omes

with

Ent

erta

inm

ent-C

entr

ic F

loor

Pla

ns.

11%

Sour

ce:

Flat

s ov

er th

e ga

rage

Mul

tigen

erat

iona

l Liv

ing

is o

n th

e R

ise

East

on P

ark

Qua

dsAu

stin

, TX

23

Opp

ortu

niti

es t

o F

ocus

On

24

2% G

row

th i

n R

&R

202

0 -

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

(Dat

a: A

ug-1

9, P

ub: S

ep-1

9)

Hot

ness

fact

ors:

80%

indu

stry

fund

amen

tals

and

20%

nea

r-ter

m in

dica

tors

Prod

uct C

ateg

ory

Heal

th V

arie

s Dr

amat

ical

ly

OOutd

oors

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

(Dat

a: A

ug-1

9, P

ub: S

ep-1

9)

Hot

ness

fact

ors:

80%

indu

stry

fund

amen

tals

and

20%

nea

r-ter

m in

dica

tors

Prod

uct C

ateg

ory

Heal

th V

arie

s Dr

amat

ical

ly

SSmal

ler

Proj

ects

Sour

ces:

Joh

n Bu

rns

Rea

l Est

ate

Con

sulti

ng (D

ata:

Aug

-19,

Pub

: Sep

-19)

Bur

ns B

uild

ing

Prod

uct C

ateg

ory

Rat

ings

: Aug

ust 2

019

Ran

k ch

ange

vs.

prio

r yea

r

YOY

Impr

ovem

ents

Also

Fav

or O

utdo

ors

and

Smal

l Pro

ject

s

4.9

7.1

9.6

4.0

6.3

7.6

6.1

Cat

egor

y R

anki

ng

6.4

5.6

4.3

4.4

5.2

6.7

5.7

8.1

-3.1

-2.0

-1.2

-0.9-0

.8

-0.5-0

.3

-0.3-0.3-0

.1

0.00.1

0.4

0.91.

1

-4.0

-3.0

-2.0

-1.0

0.0

1.0

Lum

ber

Roof

ing

Floo

ring

HVAC

Ligh

ting

Kitc

hen

Sidi

ng

Smal

l plu

mbi

ng p

roje

cts

Cabi

nets

Bath

room

Insu

latio

n

Pain

t and

wal

lpap

er

Win

dow

s an

d do

ors

Law

n an

d ga

rden

Deck

ing

28

Exi

stin

g H

ome

Sal

es H

as B

een

Slo

win

g fo

rTw

o Ye

ars

Exis

ting

Hom

e Sa

les

Slow

ing

–Pe

aked

in 2

017

29

Hom

eow

ners

Mov

e F

ar L

ess

Oft

en

10.8

12.0

19.2

19.6

0510152025Impl

ied

Year

s Bet

wee

n Ho

meo

wne

r Mov

es (I

nver

se o

f Mob

ility

Rat

e)

Ow

ner

Mob

ility

Ra

te

9.3% 19

898.

3% 1999

5.2%

2009

5.1%

2018

Sour

ce: U

S C

ensu

s C

PS, J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

(Pub

: Mar

ch 2

019)

30

Exa

mpl

e S

cena

rio:

Dec

k P

urch

ase

Scen

ario

: 10

ftx

20 ft

Deck

31

Scen

ario

: 10

ftx

20 ft

Deck

$350

Woo

d$1

,000

-$2

,100

Com

posit

e3-

6xM

ore

Expe

nsiv

e Th

an W

ood

Exa

mpl

e S

cena

rio:

Dec

k P

urch

ase

32

Ho

use

ho

lds

Wh

o S

tay

Lo

ng

er i

n T

hei

r H

om

e ar

e M

ore

Lik

ely

To

Sp

end

on

Pro

du

cts

wit

h ‘

Lo

ng

Ter

m’

Val

ue

Pro

po

siti

on

“How

Lon

g A

re Y

ou P

lann

ing

on S

tayi

ng in

You

r Hom

e?”

33

Ho

me

Pri

ce ‘

Bo

tto

m’

Las

t C

ycle

Co

inci

ded

wit

hR

amp

Up

in

Sin

gle

Fam

ily

Ren

tal

Inve

sto

rs

Rece

ssio

n

SF R

enta

l In

vest

ors B

egin

Ac

quiri

ng

34

Pub

lic I

nves

tors

Now

in

Sin

gle

Fam

ily R

enta

l

35

Que

stio

n to

Hou

sing

Indu

stry

Inve

stor

s:

The

best

, ris

k-ad

just

ed h

ousi

ng

indu

stry

inve

stm

ent i

s…?

36

SF

Ren

tal

CLE

AR

FO

CU

S A

mon

g H

ousi

ngIn

vest

ors

Sour

ce: J

ohn

Burn

s R

eal E

stat

e C

onsu

lting

, LLC

pol

l of S

umm

it at

tend

ees

2019

37

SF

Ren

ts C

onti

nue

To G

row

Dur

ing

Rec

essi

ons

38

Tech

Mak

ing

it E

asie

r fo

r In

vest

ors

to P

ush

Cap

ital

to

Sin

gle

Fam

ily R

enta

l

39

Sin

gle

Fam

ily

Ren

tal

Inve

sto

rs T

arg

et ‘

Bu

y B

ox’

at

Lo

wer

Pri

cep

oin

ts…

Bo

ost

ing

Ho

me

Pri

ce

Ap

pre

ciat

ion

at

En

try

Lev

el

INVH

$298

k

TAH

$163

kAMH

$266

k

RESI

$124

k

Avg

SFR

Purc

hase

Pric

e

40

Labo

r S

hort

age

is N

ot G

oing

Aw

ay.

Labo

rW

ill G

et M

ore

Sca

rce

41

42

‘Bun

dle’

Inn

ovat

ion

Suc

cess

-To

ilet

43

Cos

tco

‘All-

in-O

ne K

it’ -

Koh

ler

44

Kat

erra

Bat

hroo

m K

it

Show

er S

urro

und

Floo

ring

Vani

ty

Plum

bing

Fix

ture

s

Trim

45

Wha

t is

Not

Off

ered

(Ye

t)?

Goo

d,B

ette

r,B

est.

##1: NN

ew H

ome

MMar

ket i

s on

Solid

Gro

und

•D

eman

d on

ly s

light

ly e

xcee

ds s

uppl

y at

toda

y’s

pric

es/re

nts

•Fe

w e

xces

ses

in c

onst

ruct

ion

or i n

finan

cing

•St

rong

est b

uild

er b

alan

ce s

heet

s ev

er•

1.4-

1.5

milli

on n

ew h

omes

per

yea

r is

wha

t is

need

ed fo

r she

lter

•W

atch

mor

tgag

e ra

tes

and

mor

t gag

epo

licy

clos

ely

##2: 44

New

Hom

e SSh

ifts H

ave

Alre

ady

Happ

ened

1.Sm

alle

r, m

ore

effic

ient

hom

escl

oser

to m

atur

e ne

ighb

orho

ods

2.M

ore

of th

e ho

me

will

be b

uilt

offs

ite, a

nd w

ill co

me

with

bet

ter

cons

umer

tech

3.O

ffsite

fram

ing

is a

lread

y he

re in

high

vol

ume,

exp

ensi

ve la

bor

mar

kets

•O

ppor

tuni

ty #

1: W

atch

mig

ratio

npa

ttern

s fo

r em

ergi

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Notes:

B est practices are shared by industry experts in every educational session.

C onversations with peers lead to ideas that transform individual businesses.

M eetings with suppliers give insight into opportunities for further innovation.

C oming together for one week every October generates ideas and energy that drive the industry forward throughout the year.

B est practices are shared by industry experts in every educational session.

C onversations with peers lead to ideas that transform individual businesses.

M eetings with suppliers give insight into opportunities for further innovation.

C oming together for one week every October generates ideas and energy that drive the industry forward throughout the year.

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