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FEATURE ANALYTICS sparsely populated areas also suffer from poor walkability. The group labels the long-term outlook for these areas "most uncertain." • Recovery Pace: Will be the last to recover; home prices will not achieve the national aver- age until 2017. • Examples: Outer suburbs of Chicago; smaller suburbs of Tampa and Orlando, Florida; smaller suburbs of Tucson and Phoenix, Arizona; cities in Nevada outside of the Las Vegas and Reno metropolitan areas Turning the Corner A Neighborhoods Go Polar to grow due to income-related Exhibit 2 s the polarization of neighborhoods continues segregation, the Demand Institute predicts that such dividing lines will remain long-term trends. Referencing the general drop in the proportion of families living in middle-class neighborhoods—a decline that began around 1970—the organization forecasts housing distribution that reflects the expansion of income inequality. "Housing stock within neighborhoods will become more homogenous, and there will be a growing number of modest homes and a smaller number of neighborhoods with finer homes," noted the Demand Institute. Home Sizes to Shrink U.S. Consumer Confidence Rebounding P U.S. Consumer Confidence Rebounding U.S. Confidence Index U.S. Consumer Confidence Index 26% 120 106 100 26% 26% AspA at r nal 80 68 60 45 40 Within next 20 Within next 2 years2 years 16% 16% 12% 12% 26% 26% Practical (Family Related) 10% '05 '06 '07 '08 Source: The Demand Institute; The Conference Board '09 '10 '11 '12 (Q1) 18–18 34–35 49 49 6 4–35–50–504–66 10% 45+65+ Source: The Demand Institute; The Conference Board Source: The Demand Institute; The Conference Board (consumer survey conducted December 2011; N=2,632) Source: The Demand Institute; The Conference Board (consumer survey conducted December 2011; N=2,632) THE M REPORT | 67 Practical (Family Related) 35% 35% Change in family size Establish own household Be closer to family Cheaper housing Change in family size Establish own household Be closer to family Cheaper housing In 3+ Years In 3+ Years 29% 29% 48% 48% Practical (Job 27%27% Related) Practical (Job Related) 23% 23% Job related (general) Better commute Retirement Job related (general) Better commute Retirement irspioational 30% Do not plan to move Do not plan to move 26% 45% 45% 57% 57% 78% 78% 12% OtherOther 12% redicting an overall decline in the size of homes purchased during the next six years, the Demand Institute cited two leading influences: retiring baby boomers and growing income inequality, as previously referenced. Of the baby boomer population, the group stated, "When they do eventually retire, many will not move. But those who do are likely to downsize." Elaborating on the ultimate impact of income segregation, the institute went on to add, "The number of middle-class households and their share of total income earned is shrinking. A minority of households has become richer, but most find themselves poorer and many, therefore, will want smaller homes." In concluding the company's consumer research, the Demand A Remodeled American Housing Dream A Remodeled American Housing Dream Exhibit 9 Ma an mericican la a i Moving Plans by Age Cohort of Household Head Moving Plans by Age Cohort of Household Head Institute provided additional context for the importance of the country's real estate recovery. Emphasizing the economic ramifications of a strong housing sector, the group referenced the powerful impact of "the wealth effect and the transaction effect." Inherent in both effects is the establishment of financial stability through the development and expansion of home equity, and when consumers experience the wealth or transaction effects, spending elevates. And while the institute's findings indicate that the mortgage industry will have to maintain a patient stance as the nation continues its post-crisis climb, the anticipated economic benefits of a healthy borrower pool are indisputable. Exhibit 9 Mny Ay Amerans Ps Plnnnng a Mo e Wit iihin 6 Yes ing a Mvove Whtn 6 Yearars Moving Plans by Age Cohort of Household Head Primary Reasons for Moving (Next 2 Years) Primary Reasons for Moving(Next 2 years) Primary Reasons for Moving(Next 2 years) 30% Want better home Want to own (not rent) Want better neighborhood Want better home Want to own (not rent) Want better neighborhood ORIGINATION SERVICING ANALYTICS SECONDARY MARKET