EFTA Document EFTA01385284

3 January 2018 HY Corporate Credit HY Multi Sector,Media, Cable & Satellite iFigure 14: Sales Distribution by ASP Existing Home Sates Sales Distribution (Oct 2017) New Home Sales 6750-1M 2% 6600-750K 8% 5250-500K 34% SIM+ 3% $0-100K 11% Sant Dann Bra MinnAnentalRani Figure 15: Affordability Index vs. 30Y Mortgage Rates Affordability Index vs. 30Y Mortgage Rate IlIgIggglWgglgriVai;;;; 9.0 so * 7.0 ^$ JS 6.0 IS- 5.0 4.0 2 3.0 2.0 1.0 0.0 A F-- A3 F-- A 7-- A 7-- iz-• A 7-- F-- Psi 177 A 7-- it A 7-- rz. Affordability index —Freddie -30Y San Nuns an Nien finnan0 Inn natant. Sacnop Ann LP Labor constraints and commodity inflation may impact margins along value chain Similar to what we discussed in our 2017 Outlook, commodity and labor inflation remain a key concern for the building product and homebuilding sectors as we go into 2018. The national unemployment was recently reported at 4.1% in Nov 2017, down from 4.7% at the beginning of the year. According to the Bureau of Labor Statistics (BLS), construction employment was 6.955mn, 10% below the prior cycle peak of 7.725mn in 2006. Availability of labor remains a constraint, and should the Trump administration succeed in pushing through its long-awaited infrastructure initiative(s), this could further sap available labor from the market and push up wages. Turning to commodities, we expect 2018 to be another year of inflationary material pressures. In NAHB's most recent Cost of Constructing a Home survey, land development Deutsche Bank Securities Inc. Page 9 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086568 CONFIDENTIAL SDNY_GM_00232752 EFTA01385284