Keeping You Current - December 2008

Keeping You Current December 2008 By: Madeleine Romanello

Sales – year over year Category Percent age Existing -1.6 Sales Pending Sales New Construction

Source: WSJ

1.6 -40.1

Mortgage Rates – 30 year fixed Since 9/19/98

Source: Federal Reserve

Prices - year over year Index

Price Change

OFHEO Case Shiller NAR IAS360 Census Bureau

(New

Homes) Source: Macro Markets, IAS, OFHEO, Census Bureau, NAR

-6 -17.4 -11.3 -13.3 -12.2

List Prices “Asking prices for homes across the country fell 1.5 percent in October, bringing the total drop in the last three-month cycle to 2.9 percent. Listed property inventories declined in 23 of 26 markets. Widespread inventory declines have continued for many months but, as demonstrated by declining prices, the pace of supply contraction has not kept up with the falloff in market demand.” Source: Altos Research & Real IQ 11/7/08

Keeping Current Matters “At its most volatile time in US history, the US housing market demands something more from its experienced industry professionals; a closer look.” - Integrated Asset Services, LLC

The Seller

% Appreciation in 5 Year Increments Source: Brookings Papers 9/08

Source: Of Two Minds Blog 10/08

Loan Delinquency Rate

Foreclosures

Where are prices going?

OFHEO

2nd Quarter

3rd Quarter

Pricing in Today’s Market? “When cutting the price, take a big bite, not a bunch of nibbles.”- Washington Post.com 8/24/2008 “If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago.” - Wall Street Journal 7/14/2008 “Set an asking price 10% below what homes like yours have been selling for. If your market is really frozen and you need to drop the price, make one large cut. No baby steps”. - Money Magazine 5/12/2008

Inventory vs. Price Months Supply

Pricing

1-2

Double digit appreciation

3-4

Single digit appreciation

5-6

The Norm

7-8

Single digit depreciation

9+

Double digit depreciation

CalculatedRisk.com “Historically, during housing busts, existing home prices fall for 5 to 7 years so I'd expect to start looking for the bottom in the bubble areas in 2010 to 2012 or so.”

Source: CalculatedRisk.com 8/12/2008

2014 !?! John Burns, who is president of John Burns Real Estate Consulting, estimates that by 2010 the most stable markets will reach equilibrium and by 2011 the national market will move into better balance. Overall, he believes that it will take until 2014 for it to be business as usual.

Source: BusinessWeek 8/18/2008

Assuming a 10% fall in prices… On a $200,000 house, a family loses

$384.61 per week.

100 pencils 3 buyers

Price? 100 pencils 6 buyers

The Buyer

Money Magazine New rules for home buyers Rule 1: You can't time the bottom You could get to thinking about trying to time the bottom. Resist. It's harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.

ource: Money Magazine 5/12/2008

MSN Real Estate “Waiting for the absolute bottom to hit before buying puts you at risk of missing it and getting caught up in a market on the upswing.”

ource: MSN Real Estate 5/13/08

“Reports appear to be pointing to a bottom in the housing problem; in fact, maybe the tiniest beginnings of a recovery. The reality is a possible upturn in the housing trend, and at the very least we are getting a bottom”. -Lawrence Kudlow ,host of CNBC’s Kudlow & Company Source: Kudlow’s Money Politics 7/24/08

This could be the time to buy a house.

“I am now telling you that between now and the next six months you have to buy a house.”

Source: Mad Money Blog 7/23/2008

Point of maximum risk in investment Euphoria Excitement Optimism

Source: Westcourt Funds

Denial Fear

Optimism Panic

Despondency

Hope Depression

Point of maximum opportunity

http://www.homesforworkingfamilies.org/approach/academic/

The PMI Value of Homeownership Study Price Appreciation

Return on Equity

498%

301% 139% 35% 5 Years

Source: PMI October 2007

71% 10 Years

110% 15 Years

Case-Shiller

Good Investment? City Miami Los Angeles San Diego Las Vegas

% off Peak -32 -29 -30 -32

Peak 180.9 173.9 150.3 134.8

Return on Investment

Jan 1, 2000 - Sept 30, 2008

Dow -9.8

S&P

72

Nasdaq Real Estate

-20.6 - 47.8

Madeleine Romanello cell 305.282.2133 office 305.695.6300 fax 305.695.6301 [email protected]

Any questions? Contact us at [email protected] We’ll bend over backwards to try and help!