anika khan: commercial real estate and construction, turning the corner

Commercial Real Estate and Construction Turning the Corner

Anika R. Khan, Senior EconomistAugust 12, 2014

22

Economic Growth

We are now more than five years into the recovery and economic growth should reach a trend pace of growth by 2015. However, demographic shifts may take a

toll in the long-run

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Real GDP ForecastReal GDP Long-Run Trend

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

50 55 60 65 70 75 80 85 90 95 00 05 10

Real GDPYear-over-Year Percent Change

Real GDP: Q2 @ 2.5%

1950-2008 Average Growth: Q3 @ 3.5%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2000 2002 2004 2006 2008 2010 2012 2014

U.S. Real GDP Bars = CAGR Line = Yr/Yr Percent Change

GDP - CAGR: Q2 @ 4.2%

GDP - Yr/Yr Percent Change: Q2 @ 2.5%

Forecast

33

GDP Components

Businesses still have a considerable amount of cash on the sidelines. We expect some of this money to be redirected into capital spending


Cash on SidelinesBusiness Fixed Investment

-30%

-20%

-10%

0%

10%

20%

30%

-30%

-20%

-10%

0%

10%

20%

30%

2000 2002 2004 2006 2008 2010 2012 2014

Capital Spending by TypeYear-over-Year Percent Change

Intellectual Property: Q2 @ 3.9%Equipment: Q2 @ 7.0%Structures: Q2 @ 9.0%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

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

U.S. Nonfin. Corporate Cash HoldingsTotal Assets Market Value, U.S. Nonfinancial Corporations

Cash Ratio: Q1 @ 4.3%

4-Q Moving Average: Q1 @ 4.4%

4

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

2007 2008 2009 2010 2011 2012 2013 2014

Federal Reserve Balance Sheet vs. S&P 500 Index Trillions, Index

Agencies & MBS: Aug @ $1,725.8B (Left Axis)Treasuries: Aug @ $2,433.6B (Left Axis)Other Securities: Aug @ $216.5B (Left Axis)S&P 500 Index: Sep @ 2,000.8 (Right Axis)

Fed Balance Sheet

The Fed has begun the process of normalizing its

balance sheet and absent a material change in the

economic outlook, tapering is expected to end in

October

Source: Federal Reserve Board and Wells Fargo Securities, LLC

55

Employment Situation

Job growth appears to have ratcheted up a bit in recent months. Wages are now behaving the way they have when the economy began to approach full

employment

Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Unemployment RateNonfarm Employment

-1,000

-800

-600

-400

-200

0

200

400

600

-1,000

-800

-600

-400

-200

0

200

400

600

2007 2008 2009 2010 2011 2012 2013 2014

Nonfarm Employment ChangeChange in Employment, In Thousands

Monthly Change: Aug @ 142K

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%

65 70 75 80 85 90 95 00 05 10

Unemployment and Wage RatesWages for Production & Nonsupervisory Workers, SA

Unemployment Rate: Aug @ 6.1%Hourly Earnings - Yr/Yr % Change: Aug @ 2.5%

Commercial Real Estate

7

0%

4%

8%

12%

16%

20%

24%

0%

4%

8%

12%

16%

20%

24%

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Commercial Real Estate Vacancy RatesPercent

Office Vacancy Rate: Q2 @ 16.8%

Industrial Vacancy Rate: Q2 @ 7.2%

Retail Vacancy Rate: Q2 @ 10.3%

Apartment Vacancy Rate: Q2 @ 4.1%

CRE

Vacancy rates are declining in apartments and industrial

space but remain high elsewhere

Source: Reis, Inc., CoStar Realty Information, Inc. and Wells Fargo Securities, LLC

8

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

CRE Cap Rates vs. 10-Year Treasury YieldsPercent, Yield

Industrial: Q2 @ 7.1%Retail: Q2 @ 6.8%Office: Q2 @ 6.9%Apartment: Q2 @ 6.0%10-Year Yield: Q3 @ 2.5%

CRE

Cap rates remain well above 10-year treasury yields, although the spread has

narrowed

Source:. RCA , IHS Global Insight and Wells Fargo Securities, LLC

9

-75

-50

-25

0

25

50

75

100

2%

3%

4%

5%

6%

7%

8%

9%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Apartment Supply & DemandPercent, Thousands of Units

Apartment Net Completions: Q2 @ 34,431 Units (Right Axis)Apartment Net Absorption: Q2 @ 35,539 Units (Right Axis)Apartment Vacancy Rate: Q2 @ 4.1% (Left Axis)

Apartments- Fundamentals

On a national level, apartments have seen the

strongest recovery in commercial real estate thus

far. However, demand is showing signs of slowing

Source: Reis, Inc. and Wells Fargo Securities, LLC

10

50

75

100

125

150

175

200

225

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

2014 2015 2016 2017 2018

Projected Apartment Supply & DemandPercent, Thousands of Units

Apartment Net Completions: 2015 @ 146,461 Units (Right Axis) Apartment Net Absorption: 2015 @ 113,652 Units (Right Axis) Vacancy Rate: 2015 @ 4.6% (Left Axis)

Apartments- Fundamentals

Based on Reis projections, completions are expected to

peak this year with the vacancy rate trailing higher

in the coming years as demand moderates


1111

Millennial Population & Employment

Millennials are a main driving force for apartment demand. We expect apartment activity to remain robust as there is still pent-up demand as well as increased job

growth for this cohort

Source: U.S. Department of Commerce, U.S. Department of Labor, Moody’s Analytics and Wells Fargo Securities, LLC

Employment GrowthPopulation Growth

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Millennial Population Growth RateAdults Ages 20 to 34 Years Old, Year-over-Year Percent Change

Change in U.S. Population: 2013 @ 1.2%

Forecast

-8%

-6%

-4%

-2%

0%

2%

4%

-8%

-6%

-4%

-2%

0%

2%

4%

00 02 04 06 08 10 12 14

Millennial's Rate of J ob Growth Adults Ages 20-34 Years Old, Year-over-Year Percent Change

Year-over-Year Percent Change: J uly @ 2.2%

12

0

50

100

150

200

250

0

50

100

150

200

250

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Th

ou

san

ds

Apartment CompletionsIn Thousands

Apartment Completions: 2014 @ 191.4

REIS Forecast

National Apartment Supply

On a national level, supply is expected to peak in 2014


13

4.9%

4.1%

4.0%

4.0%

4.0%

3.7%

3.6%

3.3%

3.2%

2.9%

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

District of Columbia

New Haven

Austin

Charlotte

Suburban Virginia

Charleston

Palm Beach

Raleigh-Durham

New York

Orlando

Apartment Completions as a Percent of Stock Top-Ten Markets

As of Q2 2014

Completions as a Percent of Stock

Although most markets are seeing completions as a

percent of stock below the market and long-run

average, there are still concerns in a few markets


14

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Los

Angele

s

Phila

delp

hia

Chic

ago

San D

iego

Fort

Wort

h

Atl

anta

Tam

pa

Colu

mbus

Port

land

Phoenix

Balt

imore

Min

neapolis

Orl

ando

Houst

on

San F

ranci

sco

Mia

mi

Salt

Lake C

ity

Nash

vill

e

Bost

on

Jack

sonvill

e

Dalla

s

Seatt

le

San A

nto

nio

Denver

New

York

San J

ose

D.C

.

Rale

igh-D

urh

am

Charl

ott

e

Aust

in

Completions as a Percent of Stock2014-2016 Projected Cumulative Completions, Top 30 Markets

Individual Market Long-Run Average

2014-2016 Projected Average Completions as a Percent of Stock: 1.2%

Apartment Completions

Looking ahead, Austin, Washington, D.C. and San

Jose could be red flags


15

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Wash

ingto

n D

.C.

Balt

imore

Charl

ott

e

Nash

vill

e

Port

land

Fort

Wort

h

San A

nto

nio

Phila

delp

hia

San D

iego

Aust

in

Orl

ando

Jack

sonvill

e

Denver

Durh

am

San F

ranci

sco

Salt

Lake C

ity

San J

ose

Colu

mbus

Phoenix

Atl

anta

Houst

on

Min

neapolis

Seatt

le

Tam

pa

New

York

Bost

on

Dalla

s

Mia

mi

Chic

ago

Los

Angele

s

Employment to Completions Ratio2014-2016 Projected Cumulative Apartment Completions

Job-to-Completions Ratio

Employment growth is improving for most markets,

but overall moderating apartment demand will be an issue for some markets


1616

CRE – Office

Office fundamentals have been improving for more than three years, but the recovery has been modest

Source: Reis, Inc., U.S. Department of Labor and Wells Fargo Securities, LLC

EmploymentSupply & Demand

-40

-30

-20

-10

0

10

20

30

0%

3%

6%

9%

12%

15%

18%

21%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Office Supply & DemandPercent, Millions of Square Feet

Office Net Completions: Q2 @ 4.3M SF (Right Axis)Office Net Absorption: Q2 @ 3.0M SF (Right Axis)Office Vacancy Rate: Q2 @ 16.8% (Left Axis)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

91 93 95 97 99 01 03 05 07 09 11 13

Office EmploymentSeasonally Adjusted

Year-over-Year Percent Change: J ul @ 2.4%

17

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Office Completions As a Percent of Stock

REIS Forecast

Dashed Line Represents Historical Average of 1.8 percent

Office Completions

A low level of supply has helped to keep office

fundamentals in balance


1818

CRE – Retail

Retail demand has followed the pattern of the real economy as consumer spending has increased only modestly during the recovery

Source: Reis, Inc., U.S. Department of Commerce and Wells Fargo Securities, LLC

Real Personal ConsumptionSupply & Demand

-8

-4

0

4

8

12

16

20

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Retail Supply & DemandPercent, Millions of Square Feet

Retail Net Completions: Q2 @ 1.4M SF (Right Axis)

Retail Net Absorption: Q2 @ 2.5M SF (Right Axis)

Retail Vacancy Rate: Q2 @ 10.3% (Left Axis)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real Personal Consumption ExpendituresBars = CAGR Line = Yr/Yr Percent Change

PCE - CAGR: Q2 @ 2.5%PCE - Yr/Yr Percent Change: Q2 @ 2.3%

Forecast

19

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

94 96 98 00 02 04 06 08 10 12 14

In-Store vs. Non-Store Retail Sales 3-Month Moving Average, Year-over-Year Percent Change

Non-Store Retailers: J ul @ 7.4%

Retail Sales ex. Non-Store Retailers: J un @ 4.2%

E-Commerce Effect

Online sales growth is expected to continue to

outpace brick-and-mortar stores for some time


2020

CRE – Industrial

Fundamentals in the industrial space continued to improve in 2014. Although net absorption remains solid, supply is expected to pick up in the coming quarters

Source: CoStar Realty Information, Inc. and Wells Fargo Securities, LLC

Rent GrowthSupply & Demand

-80

-60

-40

-20

0

20

40

60

80

4%

5%

6%

7%

8%

9%

10%

11%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Supply & DemandPercent, Millions of Square Feet

Industrial Net Completions: Q2 @ 20.2M SF (Right Axis)

Industrial Net Absorption: Q2 @ 30.7M SF (Right Axis)

Industrial Vacancy Rate: Q2 @ 7.2% (Left Axis)-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Asking Rent GrowthQuarter-over-Quarter Percent Change

Industrial Asking Rent Growth: Q2 @ 1.2%

2121

Industrial Demand

Industrial demand is closely correlated to a number of macroeconomic indicators including overall economic activity

Source: CoStar Realty Information, Inc., U.S. Department of Commerce and Wells Fargo Securities, LLC

Demand vs. Nominal GDPDemand vs. Nominal GDP

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

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

Industrial Demand vs. Nominal GDP Year-over-Year Percent Change

Nominal GDP: 2013 @ 3.7%

Industrial Demand: 2013 @ 1.4%

y = 0.4115x + 0.3908R² = 0.6208

-4%

-2%

0%

2%

4%

6%

8%

-4% -2% 0% 2% 4% 6% 8%

Industrial Demand vs. Real GDPYear-over-Year Percent Change

22

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Dalla

s-Ft

. W

ort

h

Inla

nd E

mpir

e

India

napolis

Phoen

ix

Colu

mbu

s O

H

Edis

on

Atl

an

ta

Mem

phis

Seatt

le

Hou

ston

Den

ver

Port

lan

d

Ch

icago

Cin

cin

nati

Sain

t Lo

uis

Balt

imore

Kan

sas

Cit

y

Mia

mi

Ch

arl

ott

e

Min

neapolis

Wash

ingto

n D

.C.

Detr

oit

East

Bay

Phila

delp

hia

N.

New

Jers

ey

Los

Angele

s

Bost

on

Ora

nge C

oun

ty

Cle

vela

nd

New

York

Completions as a Percent of Stock2014-2016 Projected Cumulative Completions, Top 30 Markets

Individual Market Long-Run Average

2014-2016 Projected Average Completions as a Percent of Stock: 1.3%

Long-Run Average: 1.7%

Industrial Completions

Supply has been fairly muted but is expected to

ramp up, especially in markets near large

population centers and intermodal hubs

Source: CoStar Realty Information, Inc. and Wells Fargo Securities, LLC

Residential

2424

Housing Market Metrics

As supply starts to level out, we continue to look for a gradual recovery in homebuilding as multifamily starts are forecasted to remain robust

Source: U.S. Department of Commerce, CoreLogic Case Shiller and Wells Fargo Securities, LLC

Sales ActivityHousing Starts

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Th

ou

san

ds

Housing StartsMillions of Units

Multifamily StartsMultifamily ForecastSingle-family StartsSingle-family Forecast

Forecast

62%

63%

64%

65%

66%

67%

68%

69%

70%

-24%

-18%

-12%

-6%

0%

6%

12%

18%

24%

88 90 92 94 96 98 00 02 04 06 08 10 12 14

S&P Case-Shiller National Home Price Index vs. Homeownership Rate

National Home Price Index: Q1 @ 10.3% (Left Axis)Homeownership Rate: Q2 @ 64.7% (Right Axis)

25

-32%

-24%

-16%

-8%

0%

8%

16%

24%

-32%

-24%

-16%

-8%

0%

8%

16%

24%

04 05 06 07 08 09 10 11 12 13 14

Home PricesYear-over-Year Percentage Change

Median Sale Price: J ul @ $223,900Median Sales Price 3-M Mov. Avg.: J ul @ 4.4%FHFA (OFHEO) Purchase Only Index: J un @ 5.1%S&P Case-Shiller Composite 10: J un @ 8.1%

Home Prices

Most regions are starting to see improvement in home

prices, but the recovery will be slow in areas with significant amounts of distressed transactions

Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp. and Wells Fargo Securities, LLC

26

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

2009 2010 2011 2012 2013 2014

U.S. Distressed Home SalesPercent of Total Sales

Total Distressed: J ul @ 9.0%

Distressed Home Prices

Distressed sales comprise a smaller portion of home sales, which have helped

boost home prices

Source: National Association of Realtors and Wells Fargo Securities, LLC

27

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

04 05 06 07 08 09 10 11 12 13 14

Single-Family Home InventoryMillions of Units

New Homes: J ul @ 0.21MExisting Homes: J ul @ 2.09M

Housing Inventory

The low level of inventories is helping to boost home

prices

Source: NAR, U.S. Department of Commerce and Wells Fargo Securities, LLC

28

61%

62%

63%

64%

65%

66%

67%

68%

69%

70%

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13

Household Formation In Millions, Rate

New Renters: 2013 @ 1.1 Million (Left Axis)

New Owners: 2013 @ 0.3 Million (Left Axis)

H.O. Rate: 2013 @ 65.1% (Right Axis)

Household Formation

Rental demand has surged over the last eight years. In

addition, the household formation rate is at its lowest level in 19 years


29

24%

27%

30%

33%

36%

24%

27%

30%

33%

36%

J an-12 May-12 Sep-12 J an-13 May-13 Sep-13 J an-14 May-14

First-Time Home BuyersShare of Existing Home Sales

Share of Total Existing Home Sales: J un @ 28%

First-Time Home Buyers

The share of first-time home buyers continues to remain

low, as buyers in this segment are choosing to

rent instead of own a home

Source: National Association of Realtors and Wells Fargo Securities, LLC

3030

Homeownership Rate

The homeownership rate has declined across all age groups but the lowest levels are seen in the 35 and below bracket


Homeownership Rate – Under 35Homeownership Rate – All Ages

63%

64%

65%

66%

67%

68%

69%

70%

63%

64%

65%

66%

67%

68%

69%

70%

95 97 99 01 03 05 07 09 11 13

Homeownership RatesTotal, Percent

All Ages: Dec. 2013 @ 65.1%

35%

37%

39%

41%

43%

45%

35%

37%

39%

41%

43%

45%

95 97 99 01 03 05 07 09 11 13

Homeownership RatesAdults Under the Age of 35, Percent

Under 35: Dec. 2013 @ 37.2%

Florida

32

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Florida Gross State Product & U.S. GDPYear-over-Year Percent Change

U.S. GDP: 2013 @ 1.8%Florida GDP: 2013 @ 2.2%

Florida Gross State Product

Growth in Florida saw a great decline during the recession but has now started to outpace the

nation


33

88%

90%

92%

94%

96%

98%

100%

102%

88%

90%

92%

94%

96%

98%

100%

102%

69 73 77 81 85 89 93 97 01 05 09 13

Florida Employment:Percent of Previous Peak Percent

Percent of Previous Peak: J ul @ 96.8%

Florida Employment Picture

After experiencing the largest drop in payrolls in

more than 40 years, employment levels are

steadily rising


34

Florida – Labor Market

Florida’s labor market is still showing signs of improvement

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

90 92 94 96 98 00 02 04 06 08 10 12 14

Florida Nonfarm Employment3-Month Moving Averages

3-Month Annual Rate: J ul @ 1.9%

Nonfarm: Yr/Yr Pct. Change: J ul @ 3.0%

Household: Yr/Yr Pct. Change: J ul @ 3.0%


Unemployment RateEmployment

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%

90 92 94 96 98 00 02 04 06 08 10 12 14

Florida vs. U.S. Unemployment RateSeasonally Adjusted

Florida: J ul @ 6.2%United States: Aug @ 6.1%

35

Employment by Industry


Information

Prof. & Bus. Svcs.

Educ. & Health Svcs.

Leisure and HospitalityFinancial Activities

Trade, Trans. & Utilites

Manufacturing

Government

Construction

Other Services

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12%

3-M

onth

Annualiz

ed P

erc

ent

Change

Year-over-Year Percent Change

Florida Employment Growth by Industry3-Month Moving Averages, J uly 2014

Percent of Total Employees

10% to 25%

5 % to 10%

Less than 5%

Recovering Expanding

Contracting Decelerating

36

Metro-Level Employment

Sebastian

Panama CityOcala

Gainesville

Naples

Tallahassee

Pensacola

Palm Bay

Lakeland

Cape Coral

Sarasota

West Palm Beach

Jacksonville

Fort Lauderdale

Port St. Lucie

Orlando

Miami

Tampa

Deltona

Punta Gorda

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

3-M

onth

Movin

g A

vera

ge P

erc

en

t C

han

ge

Year-over-Year Percent Change

Florida Employment Growth: J uly 2014Year-over-Year Percent Change, 3-Month Moving Average

Population Size

Less than 200,000

200,000-500,000

More than 500,000






3737

Florida – Housing Market

Growth in the housing market is slowly picking up, especially for single-family homes

60

100

140

180

220

260

60

100

140

180

220

260

90 92 94 96 98 00 02 04 06 08 10 12 14

CoreLogic HPI : FL vs. U.S.Index, 2000=100, Not Seasonally Adjusted

United States: J ul @ 175.4

Florida: J ul @ 173.2

Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC

Housing PermitsHome Prices

0

50

100

150

200

250

0

50

100

150

200

250

90 92 94 96 98 00 02 04 06 08 10 12 14

Thou

sand

s

Thou

sand

s

Florida Housing PermitsThousands of Permits, Annual Rate

Single-Family: J ul @ 65,064Single-Family, 12-MMA: J ul @ 55,528Multifamily, 12-MMA: J ul @ 28,591

Single-Family Average (1998-2003): 116,250

38

Recent Special Commentary

Wells Fargo Economics Group Publications

To view any of our past research please visit:

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economicsemail

Date Title Authors

September- 03 New CBO Numbers Suggest Shift in Treasury Issuance Silvia, Vitner & BrownSeptember- 03 The Great Inflation: Once in a Lifetime? Silvia, Iqbal, House & NelsonSeptember- 03 Alabama Economic Outlook: September 2014 Vitner, Wolf & MoehringSeptember- 02 Commercial Real Estate Chartbook: Q2 Vitner & KhanSeptember- 02 Housing Data Wrap- Up: August 2014 Vitner & KhanSeptember- 02 Swiss Economy Stalls Unexpectedly in Q2 Bryson & Griffiths

August- 29 Interest Rates, Credit and Policy Inconsistency in the Post- Great Recession Era: Parte TrêsSilvia

August- 29 Brazil Q2 Growth: As Bad as It Gets Alemán August- 29 Solid Second Quarter GDP Growth in Canada QuinlanAugust- 29 Implications of a House Price Collapse in China BrysonAugust- 29 India GDP Growth Pics Up in Q2 Bryson & GriffithsAugust- 28 Nonresidential Construction Recap: August KhanAugust- 28 Implications of a House Price Collapse in China BrysonAugust- 28 Perspective on Interest Rates: Numbers Not Anecdotes Silvia, Vitner & BrownAugust- 27 Pennsylvania Eocnomic Outlook: August 2014 Vitner & WolfAugust- 26 Rocky Mountain High in Colorado Vitner & WolfAugust- 26 Is the Tide Turning for Small Business Lending? Silvia, House & NelsonAugust- 25 Texas Economic Outlook: August 2014 Vitner, Wolf & MillerAugust- 25 Why is Global Trade Growing So Slowly? Bryson & GriffithsAugust- 21 Mexican Economy Improves in Q2 2014 Alemán August- 20 Treasuries Feel Effects of Tight Supply & Geopolitical Risks Silvia, Vitner & BrownAugust- 18 California Employment Conditions: J uly 2014 Vitner & WolfAugust- 18 Florida Employment Slips in J uly But Trend Remains Up Vitner & WolfAugust- 18 Chile Hit by Weak World Demand Alemán August- 18 Texas Emplyoment: No Signs of Slowing Down Vitner & WolfAugust- 15 When Will the Bank of England Hike Rates? BrysonAugust- 14 Economic Activity in Eurozone Stagnated in Q2 BrysonAugust- 13 What to Watch for at Upcoming Bank of Korea Meeting QuinlanAugust- 13 J apanese Consumption Tax Takes a Bite out of GDP QuinlanAugust- 12 The Changing Face of Retail Sales Alemán, Brown & GriffithsAugust- 11 Russian GDP Growth Remained Lackluster in Q2 BrysonAugust- 08 The Chilean Economy Slows Down Considerably Alemán August- 08 Mexican Economy in H1 2014: Very Little to Show So Far Alemán August- 08 Alternative Measures of Core Inflation Are Looking Up HouseAugust- 08 Did They Separate? Yield Spreads and GDP Silvia, Iqbal, & MillerAugust- 07 Housing Chartbook: J uly 2014 Vitner & KhanAugust- 06 Wells Fargo Small Business Survey :Q3 2014 Vitner

August- 06Interest Rate Weekly: Slower Growth Continues to Weigh on Interest Rates Silvia, Vitner & Brown

August- 06 Inflation: Rising - Yes, Runaway - No Bullard & HouseAugust- 05 Taiwanese Real GDP Growth Strengthened in Q2 BrysonAugust- 05 Slow Growth in Sweden Equals Risk of Deflation BrysonAugust- 01 Hot or Not? Metro Areas Across the U.S. Vitner & WolfAugust- 01 Signs of Firming in Canadian Economy QuinlanAugust- 01 Argentina Elected for Default Again Alemán

J uly- 31 Interest Rate Weekly: Notes on the Fed's Exit Strategy, Part 1 Silvia, Vitner & BrownJ uly- 31 The State of Agriculture VitnerJ uly- 29 Florida Consumer Sentiment Rises Solidly in J uly Vitner & WolfJ uly- 25 British GDP Growth Remained Strong in Q2- 2014 BrysonJ uly- 24 Russian Economic & Financial Leverage on the West BrysonJ uly- 24 Are American Wages About to Accelerate? Bryson & HouseJ uly- 23 Will Credit Help the U.S. Consumer in H2- 2014? Alemán & Griffiths

A Sampling of Our Recent Special, Regional & Industry Commentary

Wells Fargo Securities, LLC Economics Group

39

John E. Silvia … ....................... … [email protected]

Global Head of Research and Economics

Diane Schumaker-Krieg ………………… ………[email protected] Head of Research & Economics

Chief Economist

Mark Vitner, Senior Economist……………....………. . .

[email protected]

Jay H. Bryson, Global Economist …………………....…… …[email protected]

Sam Bullard, Senior Economist [email protected]

Nick Bennenbroek, Currency Strategist……[email protected]

Eugenio J. Alemán, Senior Economist… …………[email protected]

Anika R. Khan, Senior Economist … . [email protected]

Senior Economists

Zachary Griffiths, Economic Analyst [email protected]

Mackenzie Miller, Economic Analyst [email protected]

Erik Nelson, Economic Analyst [email protected]

Alex Moehring, Economic Analyst [email protected]

EconomistsAzhar Iqbal, Econometrician………………… ……………[email protected]

Tim Quinlan, Economist …………………… ……………[email protected]

Eric J. Viloria, Currency Strategist [email protected]

Sarah Watt House, Economist …………… …………[email protected]

Michael A. Brown, Economist ……………… … [email protected]

Michael T. Wolf, Economist ………………… … [email protected]

Economic Analysts

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For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited ("WFSIL"). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. The content of this report has been approved by WFSIL a regulated person under the Act. For purposes of the U.K. Financial Conduct Authority’s rules, this report constitutes impartial investment research. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. This document and any other materials accompanying this document (collectively, the "Materials") are provided for general informational purposes only.

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