Forecast for the market September 2009

1. Market at a glance
   1. active inventory 1,500
   2. pending home sales 500
   3. distressed home sales (short and reo) 285/57%

1. Rules of supply and demand  (you already feel this but may not know it!)
   1. anything over 7 months supply usually a buyers market
   2. anything between 5-7 months supply usually stable market
   3. anything under 5 months supply usually a seller market

1. Foreclose (reo) market
   1. over 500 bank owned properties listed and sold over last 12 months
   2. average sales price $225,000.00
   3. average list to sales price 98%

1. Short sales (pre-foreclosure listings)
   1. 90 short sales listed and sold over last 12 months
   2. Average sales price $200,000
   3. Average list to sales price 97%

1. Lending
   1. crazy loans are history until they forget what happened!
   2. Majority of purchases are FHA 3.5% down.
   3. Most buyers are asking for seller closing cost up to 6%
   4. Guidelines have changed takes longer, time periods etc.

1. Appraisals
   1. no more direct communication with lender or agents
   2. bid process when ordering an appraisal
   3. most do not factor (well) the condition
   4. must include short sales and reo sales
   5. many appraisals note future market decline.

1. How did we get here?

Forecast for the next 1-4 years

1. Next 12 months expect further price decline. (Could be 5-8% on average)

1. 1. Short sales (the wild west) buyers perceive these to be the market
   2. Reo properties still coming to market at similar pace
   3. False sense of pricing with marketing gimmicks etc.
   4. Strange rumors of sales prices on reo and short sales
   5. Very few move up buyers (see move up chart)

1. Shortage of listing inventory in 2010
   1. reo will still dominate the market (may be 50% of total sales)
   2. Short sales still shooting up the comps all over the west!
   3. Fewer equity sellers.
   4. A few Builders will add new inventory (small scale) build a few / sell a few
   5. Current 500 (50% distressed) homes in escrow out of 2,000 total listings will look more like 700 (60% + distressed) homes in escrow out of possible 1,500 total listings
   6. Same number of sales each month as 2009 for the year 2010 with fewer active listings.
   7. You will hear things like “low inventory” “hard to find good homes” etc.
   8. Supply of homes could be as low as 5 month supply.
   9. Price may begin to stabilize on the lower end ($100-300k) first.
   10. There will be little change in interest rates in 2010

1. Continued shortage of listing inventory in 2011
   1. With reo and short sales still plaguing the market there will be little confidence to break ground on new large scale subdivisions. (for good reason)
   2. several new and smaller subdivisions will appear, and can be successful if within 5%-10% of existing home sale prices (at that time) and if under $300,000.00
   3. Several “hot locations” may see a small bump in sales prices
   4. Fewer short sales and reo by the end of 2011
   5. Slight bump in interest rates (more stimulus money reaching the publics hands)

1. Things beginning to feel better in 2012
   1. even fewer short sales and reo
   2. begin to see higher percentage of move up transactions and transplant buyers
   3. builders will begin to build with more confidence
   4. may see a slight bump in sales price in lower end $100k-350k

1. Real housing shortage 2013
   1. A few strong Builders take back control of market. (we need this) reason to move
   2. Even more move up transaction and relocation buyers
   3. Upper end of market stabilizing. (after compression already takes place)
   4. Lower end of market receiving single digit appreciation.
   5. Supply, Affordability, and interest rates control market again!

Kind of sounds like a Real Estate cycle,,, doesn’t it?

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