Ted C. Jones, PhD Chief Economist

Stewart Title Guaranty Company

No Place But Up Interest Rates Rents, Prices Real Estate

and the Economy

But Not Oil

Mega Themes • More Jobs Than Ever in History • Retail Boom Just Starting • Residential Renting vs. Owning • Entry Level Homebuyers Returning • Inflation Potential • Overweight in Real Estate • Terrorism is Here to Stay

129

131

133

135

137

139

141

143

'07 '08 '09 '10 '11 '12 '13 '14 '15

U.S. Jobs Jobs (Millions) Seasonally Adjusted

+1.97% Prior 12 Months 142,000 Net New Jobs in September

2.725 Million in Past 12-Months

U.S. Leisure & Hospitality Jobs

0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

11.5

12

12.5

13

13.5

14

14.5

15

15.5Recession

Millions of Jobs Seasonally-Adjusted

+2.90% 12 Months

State Percent State Percent State Percent

Utah 3.73% Kentucky 1.76% Ohio 0.92%

South Carolina 3.25% Delaware 1.73% Missouri 0.79%

Washington 3.06% Maryland 1.70% New Mexico 0.78%

Idaho 3.05% Colorado 1.67% Pennsylvania 0.65%

Florida 2.99% Tennessee 1.65% Vermont 0.64%

California 2.82% Connecticut 1.62% Rhode Island 0.63%

Nevada 2.82% South Dakota 1.58% Kansas 0.62%

Oregon 2.80% Alabama 1.58% New Hampshire 0.60%

North Carolina 2.59% Iowa 1.53% Montana 0.60%

Indiana 2.21% New York 1.39% Nebraska 0.56%

Arizona 2.17% Dist of Columbia 1.36% Illinois 0.46%

Georgia 2.01% Minnesota 1.32% Oklahoma 0.18%

Michigan 2.01% Hawaii 1.26% Louisiana 0.13%

Massachusetts 1.96% Mississippi 1.06% Alaska -0.06%

Texas 1.93% New Jersey 1.00% Wyoming -0.89%

Arkansas 1.89% Virginia 0.97% West Virginia -1.49%

Wisconsin 1.88% Maine 0.96% North Dakota -1.57%

State Job Growth - 12 Months Ending September 2015

$150

$160

$170

$180

$190

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

U.S. Real Retail & Food Service Sales $ Billions – Seasonally Adjusted

Household Debt Service as a Percent of Household Disposable Income

9

10

11

12

13

14

'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

Percent

FED Board of Governors, BEA

0

4

8

12

16

20

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Light Weight Vehicle Sales Millions – Seasonally Adjusted Annual Rate

Bureau of Economic Analysis

U.S. Residential Building Permits

0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15f

Single Family Multi

Number of Dwelling Units

1,052,992 Permits is the past 12 months, 2.725 Million New Jobs 2.59 New Jobs Per New Dwelling Unit

12-Month

Property Return

All 12.38%

Hotel 13.30%

Apartment 11.13%

Retail 12.93%

Industrial 14.04%

Office 12.28%

Source: NCREIF

U.S. Property Returns

Q2 2015 - TTM

• Tax-Exempt Investments • All Cash Purchase • Cash Flow + Value Change • Only Pay Property Taxes • $443 Billion of Properties • 6,971 Properties

http://www.ncreif.org/property-index-returns.aspx?region=N

S&P 500 5.70 Percent

$0

$100

$200

$300

$400

$500

$600

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

U.S. Commercial Real Estate Sales Volume $ Billions – Trailing 12 Months

+25.1% Property and Portfolio Sales $2.5 Million and Up

15.6% Below 2007 Peak

-88.1%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

U.S. Commercial Real Estate Sales Volume Number of Transactions – Trailing 12 Months

+12.9%

Property and Portfolio Sales $2.5 Million and Up

Oil Prices & Unemployment Rates

$0

$20

$40

$60

$80

$100

$120

$140

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

2

3

4

5

6

7

8

9

10

11

WTI Crude Unemployment

Rates

US

Texas

$0

$5

$10

$15

$20

$25

$30

'88 '91 '94 '97 '00 '03 '06 '09 '12 '15

$0

$20

$40

$60

$80

$100

$120

Natural Gas Price Delivered to Commercial Customers vs. WTI Crude Oil -- Gas Per 1,000 Cubic Feet, Oil Per Barrel

Oil Natural Gas

U.S. Dollars - Millions

Month Exports Imports Balance

Jan-15 9,552.0 38,158.4 -28,606.4

Feb-15 8,699.8 31,240.1 -22,540.3

Mar-15 9,887.2 41,121.9 -31,234.7

Apr-15 9,316.8 35,795.1 -26,478.3

May-15 8,758.8 39,211.2 -30,452.4

Jun-15 9,687.8 41,145.1 -31,457.3

TOTAL 2015 55,902.5 226,671.8 -170,769.3

Annualized 111,805$ 453,344$ (341,539)$

Source: U.S. Census Bureau

U.S. China Trade

U.S. 2015 GDP $17.84 Trillion (Q2 2015 Annualized Rate) Purchases by China of U.S. Goods $111.8 Billion (2015 est) Impact = 6/10ths of 1 Percent of U.S. GPD

China Impact on U.S. Economy

10-Year Treasury Rate

Closing Bell

NYSE

September 3, 2015

It is What it Is Ted C. Jones, PhD Chief Economist

Stewart Title Guaranty Company

Telling It Like It Is Ted Twitter – DrTCJ blog.stewart.com/ted