1Barb Bottitta CSR, GRI, ABR, SRS, SRES

Lehigh Valley Real Estate Today

The Numbers That Drive U.S. Real Estate

1. Home Sales

2. Home Prices

3. Inventory

4. Mortgage Rates

5. Affordability

2

In Q3 2010, all 50 states experienced a decrease in sales …

TX

UT

MT

CA

AZ

ID

NV

OR

IA

COKS

WY

NM

MO

MN

NE

OK

SD

WA

AR

ND

LA

IL

FL

GAAL

WI

VAIN

MI

MS

KY

TN

PA

NC

SC

WV

NJ

ME

NY

VT

MD

NH

CT

DE

MARI

AK

HI

Below 10%

Below 20%

Home Sales Direction

(Year-Over-Year Change)

OH

Source: National Association of REALTORS®

Below 30%

Below 40%

3

In Q4 2010, all states except for Virginia experienced an increase in

sales …

TX

UT

MT

CA

AZ

ID

NV

OR

IA

COKS

WY

NM

MO

MN

NE

OK

SD

WA

AR

ND

LA

IL

FL

GAAL

WI

VAIN

MI

MS

KY

TN

PA

NC

SC

WV

NJ

ME

NY

VT

MD

NH

CT

DE

MARI

AK

HI

OH

Source: National Association of REALTORS®

Sales Increased

Sales Decreased

Home Sales Direction

(Year-Over-Year Change)

4

5

Average Lehigh Valley Sale Price (In $100Ks)

Over the last 2 ½ Years, the average sale price peaked at $211,00 in June 2010, but dropped back to $200K or lower

for all of 2011, before it jumped back over that mark to $206,000 this past June.

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50

100

150

200

250Ja

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May Jun Jul

Aug

Sept Oc

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-Jan

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-Mar

11-A

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-May

11-Ju

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-Jul

11-A

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-Sep

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-Nov

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-Jan

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-Mar

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-May

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$206K

Statistics from LVAR

Average Sale Price = Total Price of all properties sold, divided by the number of sales

$200K$211K

Monthly Lehigh Valley Home Sales

6

Units

7

Average Lehigh Valley SalesApril 2010 through June 2012

Statistics from LVAR

8

Lehigh Valley Absorption Rates April 2010 through June 2012

Months

Statistics from LVAR

9

Lehigh Valley Absorption Rates bySchool District, June 2012

Statistics from LVAR

0%

2%

4%

6%

8%

10%

12%

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 11

Mortgage Rates (30-Year Fixed)

Source: Freddie Mac

Mortgage rates averaged 4.69% in 2010, an all-time low since Freddie Mac started tracking in 1971… and they’ve just kept going down, setting record lows for 6 consecutive months.

10.3%

6.0%

5.0%

3.56%

10

Affordability (In Thousands)

Given the historical rate of home appreciation rates, home prices are a huge bargain. Are 2010 homes undervalued by18%?

0

50

100

150

200

250

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Source: National Association of REALTORS®

Historical appreciation rate = 4%$153K

$222K

$173K

$211K

11

Affordability: Let’s put this in perspective …1989 2010 2011

Bread $0.67 $2.49 $2.78

Gas (gal.) $0.97 $2.73 $2.84

New Car $15,350 $28,400 $30,000

Existing Home $94,000 $173,000 $166,100

Mortgage Rate 10% 4.69% 4.45%

Monthly Payment $825 $896 $837

In 1981, home mortgage payments were 36% of family income.

In 1989 – 24% and in 2011 – 13%12Source: Keller Williams

International

Barb’s Top 10 Things You Should Know about Real Estate

10. Distressed Properties: Short Sales and Bank Foreclosures (REOs) are not for everyone:

Hurdles to overcome:• “As is” property condition• Increased paperwork & complexity• Increased chance for multiple offers• Bank REO process is long & arduous• Buyer probably is not getting a “steal”• Buyer must be “patient”

13

#9 - “Aging in Place”

Did you know?

• Half of older women age 75+ live alone.

• Persons reaching age 65 have an average life expectancy of an additional 18.1 years.

• The 85+ population is projected to increase from 4.6 million in 2002 to 9.6 million in 2030.

• Median # of years home owners are staying in their homes has increased from 8 to 10 yrs

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#8 – Today’s Agent must be “tech savvy”Info Sources Used in Home Search

2009 2010

Internet 90% 89%

Real estate agent 87 88

Yard sign 59 57

Open house 46 45

Print newspaper advertisement

40 36

Home book or magazine 26 23

Home builder 18 16

Relocation company 4 3

Television 8 7

Billboard 6 5Every source was used less except one

– the Realtor! 15Source: Keller Williams

International

#7 – Down payments of 5% or less have not disappeared

• Both first-time and repeat buyers are putting less than 20% down, even though a down payment of 20% will typically provide the best financing terms.

• 68% of first-time buyers and 28% of repeat buyers had a down payment of 5% or less in 2011.

16Source: Keller Williams International

#6 – Yes, it’s still the economy

• Employment will remain a challenge over the next few years, which impacts the market by tempering GDP and holding back demand for home buying.

•To get back to 6% unemployment, 13.3 million jobs need to be added over the next

3 years. That’s 400,000 jobs/month

17Source: Keller Williams International

The Four Keys to Housing Recovery

18Source: Keller Williams International

#5 – Condition is the key for serious buyers

• Homes in better condition sold for an average of 96% of list price compared to 92% of list price for homes in poorer condition.

• The most common updates:•Paint 44%•Floorings 25%•Lighting Fixtures 20%

19Source: Keller Williams International

#4 – Staging is well worth the effort

• Staged Homes sell faster.

• Staged homes get higher offers.

• Staged houses look better in the MLS pictures, getting more potential buyers to actually come see the house in the first place.

• Staged houses have an edge over competing properties, and the staging can often sway the final decision.

20Source: HomeStaging.com

#3 – Mortgage Pre-approval is a “must”

• Pre-approval for buyers is the norm in today’s market – 64% of buyers get pre-approved by mortgage brokers or banks

21Source: Keller Williams International

#2 – Price it right the first time!

• For the 48% of sellers who set their listing price according to their agent’s interpretation of the market value of their house:

• Sold faster – 56 days compared to 105 • Sold for 6.7% higher list-to-sell ratio• Experienced fewer price reductions

(4 to 6 weeks between price reductions of between $5,000 and $15,000

22Source: Keller Williams International

Barb’s Top 10

23

1.

2. Price it right the first time!

3. Buyers should be pre-approved.

4. Staging is well worth it.

5. Condition is key for Buyers.

6. Lower unemployment is key to the housing recovery.

7. Down payments of 5% are still feasible.

8. Your Realtor should be “tech savvy”.

9. Aging in Place – the senior market.

10. Short Sales & Foreclosures.

#1 – “The end is in sight” – we have “hit bottom”

• We have been in a Buyer’s Market for the last 6 years because: home prices have been low, Mortgage rates are at an all-time low and Inventory has been high.

•Prices have stabilized (we’ve had our pricing correction), it doesn’t seem likely that interest rates can go any lower & we are reaching an inventory balance.

24Source: Keller Williams International

Thank You! – Questions?

Slides & absorption graphs for all LV School Districts available at www.LVhomeExpert.com/Rotary

Barb@LVhomeExpert.com610-398-8408

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First-Time Home Buyers

26

Info Sources Used in Home Search2009 2010

Internet 90% 89%

Real estate agent 87 88

Yard sign 59 57

Open house 46 45

Print newspaper advertisement

40 36

Home book or magazine 26 23

Home builder 18 16

Relocation company 4 3

Television 8 7

Billboard 6 5

Every source was used less except one – YOU!27

What Buyers Want Most from Agents

Help with the price negotiations

14%

Help buyer negotiate the terms of sale

12%

Help with paperwork

10%

Determine what comparable homes

were selling for6%

Help determining how much home buyer can afford

3%

Help find and arrange

financing2%

Other3%

28

2005 2009 2010

Good financial investment 94% 87% 85%

Better than stocks * 54 47

About as good as stocks * 26 30

Not as good as stocks * 7 9

Not a good financial investment 1 3 4

Don’t know 5 10 11

Buyer’s View of Home as a Financial Investment

29

2011