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The Metro Phoenix Housing Market EncouragingFacts&Figures

Economic Alphabet Soup WhatWillBeTheShapeOfOurRecovery?

M E T R O P H O E N I X

Eight National Economic Forecasts

A TRUSTED ADVISOR IN REAL ESTATE

I am pleased to present this valuable synopsis of our Valley’s economic and housing sectors. In a softened market such as the one we’re experiencing right now, it’s crucial to stay apprised of the latest market data and market trends, and to have an understanding of how to effectively navigate the sale or purchase of real estate. My team and I conduct market research on a daily basis and are at your service as your trusted advisor. Through our extensive research, we know what homes in any given neighborhood are selling for and where to price your home so that it SELLS. Additionally, our vast knowledge of inventory and sales data allows us to find and negotiate an excellent purchase for our numerous buyer clients. Let’s discuss how I may help you. Use my industry experience and expertise to guide you in the right direction. Call me today!

ThelastcoupleofyearshavebeenaroughrideformanyAmericans.Caughtinthethroesofadebilitatingrecession,householdsacrossthenationhavebeenstrugglingwithjoblosses,lowerincomesandformany,thelossoftheirfamilyhometoforeclosure. 2010bringsnotonlyanewyear,butanewdecade.It’sawelcomeharbingerofchangeinwhichmanyAmericansresttheirhopesforafreshstartandabettereconomicenvironment.Indeed,theeconomyappearstobeimproving.

WELCOME SIGNS OF A RECOVERY Mostmeasuresofeconomicactivityhavemovedupward.Pendinghomesalessawyear-over-yeargainsineveryregionoftheUS.Grossdomesticproducthasturnedpositiveafterfourquartersofdecline.Con-sumerspendingisrising.Industrialproductionandmanufacturingactivityarepostinggains.Constructionexpenditureisfinallyincreasing.Thelabormarketshowssignsofstabilizationandthestockmarkethasmadesignificantstridesoverthepastseveralmonths.

Housing Salesofexistinghomeshaveshownencouraginggrowththroughoutmostof2009andinto2010.Lowinterestratescoupledwithhighaffordabilityhaveaidedthesurgeinhomebuying.Thegovernment’sFirst-TimeHomeBuyerTaxCredithasplayedalargeroleinthehousingmarket’ssuccess.Neartheendof2009,theupto$8,000taxcreditforfirst-timebuyerswasextendedinto2010andanupto$6,500provi-sionformove-upbuyerswasadded.HomebuyershavejumpedattheopportunityandsomepoliticalinsiderssuggestthattheObamaadministrationwillextendthetaxcreditsonceagaininmid-2010.

Labor Market Theeconomyhaslost7.3millionjobssincetherecessionbeganinDecember2007.Withanunemploymentrateover10%,thereisnodoubtthattheendoftherecessionhingesuponthiscriticalindicator.Whileunemploymentfiguresaren’texpectedtodecreasedramatically,thenumberofjobslostandplannedlayoffshavebeguntostabilize.StevenWood,chiefeconomistatInsightEconomicssaid,“Themagnitudeofjoblosseshasprogressivelydiminishedoverthepasteightmonths.Ifthistrendweretocontinue,thejoblosseswouldendsometimeearlyin2010.”

Stock Market Sincethecrashandpanicoflate2008andearly2009,thestockmarkethasshownencouraginggrowth.WhiletheDowJonesgainedanimpressive20%in2009(thebestannualgainsince2003),thebiggernewsisthe60%increasesinceitsMarch2009bear-marketlow.Americanshavebreathedacollectivesighofreliefasretirementfundsandinvestmentportfolioshaverecoveredsomeofthoseseverelosses.

REASONS FOR CAUTION Whilewe’reseeinghealthysignsoflifeinoureconomy,therearestillmanyfactorsatplaythatbearcaution.Attheheartofitallliesemployment.Whiletheamountofjoblosseshasslowed,westillcannotexpecttohavea“normal”economywhensomanyAmericansareoutofwork. Whiletheresidentialhousingmarkethasshownvastimprovements,thecommercialsectorisexperiencingcontinuedtrouble.Vacanciesarewellabovehistoricalaverages,demandforcommercialpropertiesisdown,creditconditionsaretightandtheamountofdistressedpropertiescontinuestogrow. Thelowmortgageinterestrateswe’veseenmaysooncometoanend.Rateshavebeenhelddownduetothepurchaseofmortgage-backedsecuritiesbytheFederalReserve.ButthescheduledendoftheFed’sinterventioninearly2010willlikelypushratesupcloserto6%bytheendoftheyear.Giventhattheprojectedlevelof6%isstillanextremelyattractiverate,itdoesn’tappearthatpotentialhomebuyerswillbedissuadedinmakingapropertypurchase. A“shadowinventory”ofhomesonthevergeofforeclosurehassomeeconomistsworriedthatourhousingmarketmaylosemanyofthegainsit’sseeninrecentmonths.AccordingtoFirstAmericanCoreLogic,arealestateresearchfirm,approximately1.7millionhomesarecurrentlydistressedandcouldholddownrealestatevaluesforthenextseveralyears.Thegoodnewsisthatmanyhomeownersarenowavoidingforeclosurethroughloanmodificationsandshortsales.Further,FirstAmericanCoreLogicestimatesthatnearly30%ofthose1.7milliondistressedhomesareactuallyalreadyonthemarket. Sowhileitappearsthatthereareseveralfactorsthatcouldimpedeacompleteeconomicrecoveryin2010,thefactisthattheUSisinabetterpositiontodaythanin2008or2009.We’lltakeit!

Whathas2010broughtusintheGreaterPhoenixlocalhousingmarket?Goodnews!Whileunemploymentanddistressedpropertiesmaystillplagueourarea,theresidentialhousingmarkethasbeenpickingupsteamandisgoingstrong!

A BANNER YEAR FOR SALES 2009turnedouttobethethirdbestyearonrecordforoverallsales.Approximately93,000propertiesclosedescrow.Thatdegreeofvolumeonlylagsbehindour“boomyears”of2004and2005.Itwasahugeincreaseover2008–about55%higherthanthe60,000+propertiesthatsoldthatyear. Inventorylevelshavedroppedsignificantlyoverthelastyear.Attheendof2009,theoverallsupplyofhomeswasabout3.5months,comparedto8.75monthsattheendof2008. Theoverwhelmingmajorityofthosesaleshavebeeninthelowerpricepoints,namely$400,000andunderwheretherearemultipleoffers,biddingwarsandfinalsalespricesoftencominginhigherthanlistprice. (See chart: Sales by Price Range.)

HOME VALUES STABILIZING Theincreaseinsalesvolumehascreateda

stabilizationandimprovementinpricing.Homevalueshitabottom-lowinAprilof2009buthaveralliedstronglywithayear-end14.8%increase.(Seechart:2009 Sales Statistics.)AccordingtoTheCromfordReport,alocalrealestateresearchfirm,lender-ownedsaleshittheirpricebottominlateApril2009andhavebeenrisingsince;non-distressed“normal”saleshittheirpricebottominmid-November2009;andshortsalepricesareexpectedtohavehitbottominlate2009orearly2010. Annualappreciationhasrisento-6%fromarecordlowof-44.5%inApril2009.TheCromfordReportestimatesthatifpricingstaysatitscurrentlevelorbetter,theannualappreciationwillturnpositiveinthefirstquarterof2010.

DISTRESSED PROPERTIES Homesfallentoforeclosureandpre-foreclosureshortsaleshavebeenasizeableportionofourlocalhousinglandscape.Whiletheselender-ownedanddistressedsaleshavedraggeddownhomevalues,thegoodnewsisthattheyarebeingsnatchedupbyahungryhome-buyingpublic.Infact,lender-ownedhomesmadeupthemajorityofsalesin2009.(Seecharts:Sales by Property Type.)Byyearend,short

saleshadincreased2.5timesfromyearend2008andbecausebanksaremakingtheshortsaleprocesseveneasier,wecanexpecttoseemanymoresuccessfulshortsalesin2010.Thatbodeswellonhomevaluesasthepricepersquarefootforforeclosuresalestendtobelowerthanforashortsale. THE LUXURY MARKET Whiletheoverallhousingmarketisrecoveringnicely,theluxurymarketislagging.Oneofthebiggestimpedimentstorecoveryisthelackofjumboloanfinancing.Bankshavebeenverylimitedinloanofferingsatthispricerangeandit’scontinuingtoaffectpricestability.It’sestimatedthattheluxuryhousingmarketwillstillseesomepricedeclinesinearly2010withapossiblestabilizationmymid-year.Alreadytheenvironmentishealthier.TheScottsdale$1M+marketnowshowsabouta24-monthsupply,downfroma60-monthsupplyatthebeginningof2009.ParadiseValleyhasimprovedfroma28-monthsupplytojustundera13-monthsupplyinthatsametimeframe.

A BUYER’S PARADISE Thecurrentcombinationofaffordableprices,

lowmortgageratesandthegovernmenthome-buyertaxcreditshascreatedanexceptionallyattractiveenvironmentforbuyers.FannieMae’s2010forecastsuggeststhatsalesofexistinghomesshouldjumpbyanother10%withsalesofnewhomesincreasingby26%.Dr.LawrenceYun,chiefeconomistfortheNationalAssociationofRealtorssaysthatsometimeinthefirsthalfof2010,thehousingmarketshouldreacha“self-sustaining”pointwherepricesaremovingupmoderately,andthatbuyerdemandwillremainstrong. AccordingtoaBarclaysglobalsurvey,investorsareplanningtoputmoreintorealestatethanwhattheyplantoinvestinstocksandbonds.Twiceasmanypeoplewithatleast$800,000toinvestplantoincreasetheirpurchasingofrealestatethanthosethatplantoreduceit.Barclays’surveypredictsthatrealestateinvestmentwillrisetoanaverageof30%oftheseinvestors’portfolios. Andwhynot?Investorsareseeingbetterratesofreturnonpurchasesin2009and2010thananyyearsincepriorto2000.Further,realestatehasoutperformedtheDOW,S&P500andNASDAQsince1990,evenafterthepriceadjustmentswe’veexperienced.Bottomline?Buynow!

R E S I D E N T I A L R E A L E S TAT E

G E N E R A L E C O N O M I C S N A P S H OT

GDPAbout 3% growth in ‘10

TRADE DEFICIT Expanding to

$530 billion in ‘10

INTEREST RATES Prime at 3.25% to mid-’10

10-Year T-notes rising to 4%

ENERGY Crude averaging

$75 a barrel in ‘10

INFLATION About 2% in ‘10 after 2.5% in ‘09

HOUSING SALES 2009 was the bottom

of the market

UNEMPLOYMENT Peaking around 10.5%

in early ‘10Net yearly gain of

1 million jobs in ‘10

RETAIL SALES A tepid 3% increase in ‘10

Source: kiplingerbiz.com

National Economic Forecasts

RECOVERY BY THE LETTER

The worst of The Great Recession

appears to be behind us. The question

now is what type of recovery can we

expect? Often, economic recoveries

mimic the shape of letters. Here are

four possible scenarios we may see:

U: The U-shape illustrates a bottoming out and a recovery that bumps along the floor for a while

before the economy starts its upward climb again: A slow but steady recovery.

V: Here we see the lowest point followed by an immediate, robust recovery. Perhaps

already unlikely given the indicators showing continuing economic troubles.

W: The W-shape would show a sharp decline followed by an immediate, strong recovery only to have the economy falter once again before finally normalizing. Many fear this

“double-dip” recession scenario should there be a stock-market crash or a terrorist event.

L: This shape shows a flat economy after the bottoming out, never really recovering

to the previous levels.

Source: ARMLS. Information is deemed reliable but not guaranteed. Data maintained by ARMLS may not reflect all real estate activity in the market.

$400K - $1M • 5.3%$1M - $2M • .7%$2M+ • .2%

Under $400K • 93.7%

“Normal” Non-Distressed • 28%Short Sales • 15%Lender-Owned • 57%

SALES BY PRICE RANGE2009 Maricopa County

2009 SALES STATISTICSSingle-Family Homes | Metro Phoenix

Median Sales Price Number of SalesJanuary ..................................$130,000 ............................... 4,234February .................................$127,780 ............................... 4,848March .....................................$120,000 ............................... 6,832April .......................................$117,500 ............................... 7,604May ........................................$121,500 ............................... 8,172June .......................................$130,000 ............................... 8,178July ........................................$130,000 ............................... 7,887August ...................................$130,000 ............................... 6,943September .............................$135,527 ............................... 6,790October ..................................$134,900 ............................... 6,936November ..............................$136,000 ............................... 6,439December...............................$134,900 ............................... 5,971

Source: The Cromford Report. All residential single-family dwelling types recognized by ARMLS are included. For-sale-by-owner, auctions and other non-MLS transactions are not included. Land, commercial units and multiple dwelling units are also excluded.

$400K - $1M • 5.3%$1M - $2M • .7%$2M+ • .2%

Under $400K • 93.7%

2007SALES BY PROPERTY

TYPESingle-Family

Homes_______ Metro Phoenix