san diego uli young leaders
TRANSCRIPT
www.sullivangroupadvisors.comPhone 858.523.1443
Prospects for a Housing Market Bottom in 2009?
For: ULI San Diego Young LeadersJune 2, 2009
SULLIVAN GROUP REAL ESTATE ADVISORSPeter Dennehy, Sr. Vice President
(858) 523-1443 [email protected]
www.sullivangroupadvisors.comPhone 858.523.1443
AgendaI. The Big PictureII. The San Diego MarketIII. Discussion
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I. THE BIG PICTURE
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Is the Current Economy A New Phenomena?
Debt Threatens Democracy.Harper’s, 1940
Is the Country Swamped with Debt?Business Week, 1949
Never Have So Many Owed So Much.U.S. News & World Report, 1959
Time for a New Frugality.Time Magazine, 1973
Over the Ears in Debt.Time Magazine, 1987
Source: Time Magazine
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‘90-’91 Recession
‘81-’82 Recession
‘01 Recession
GDP Growth is Declining12/07-? R
ecession
-8%-6%-4%-2%0%2%4%6%8%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
1Q 2009 = -5.7%1Q 2009 = -5.7%
2009* using 1st qtr. dataSource: Bureau of Economic Analysis, released May 29, 2009; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.144381-82 R
ecession
90-91 Recession
2001 Recession
So Unemployment is Increasing
2009* – AprilSource: Bureau of Labor Statistics; Sullivan Group
12/07-? Recession
3%4%5%6%7%8%9%
10%11%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Avg. 1980 to 2008 = 6.1% April 2009 = 8.9%
Avg. 1980 to 2008 = 6.1% April 2009 = 8.9%
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90-91 Recession
2001 Recession
12/07-? Recession
81-82 Recession
4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2009* as of May 28Source: Freddie Mac; Sullivan Group
May 2009* = 4.91%
30-Year Fixed Rate Mortgages areHistorically Low
www.sullivangroupadvisors.comPhone 858.523.1443
0
20
40
60
80
100
120
140
160
88-2
89-2
90-2
91-2
92-2
93-2
94-2
95-2
96-2
97-2
98-2
99-2
00-2
01-2
02-2
03-2
04-2
05-2
06-2
07-2
08-2
09-2
U.S. Consumer Confidence is Low, But Improving
2Q09* = 54.92Q09* = 54.9
*2nd Qtr 2009 as of MaySource: The Conference Board, released May 26, 2009; Sullivan Group
3-Year rough patch
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U.S. Existing Home Sales: Stabilizing at Low Level
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2009P seasonally adjusted rate using data through MarchSource: National Assn of Realtors; Economy.com; Sullivan Group
2005 = 6,171,667 Peak2009*= 4,123,3342005 = 6,171,667 Peak2009*= 4,123,334
www.sullivangroupadvisors.comPhone 858.523.1443
0500,000
1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000
Mar
-99
Sep-
99M
ar-0
0Se
p-00
Mar
-01
Sep-
01M
ar-0
2Se
p-02
Mar
-03
Sep-
03M
ar-0
4Se
p-04
Mar
-05
Sep-
05M
ar-0
6Se
p-06
Mar
-07
Sep-
07M
ar-0
8Se
p-08
Mar
-09
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Listings Months of Inventory
Source: National Assn. of Realtors; Sullivan Group
Months of supply was 10.7 months in April ‘08, but dropped to 9.6 months in April ‘09.
Resale Supply Has Leveled Recently.Can We Work Off More Supply in 2009?
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New Home Sales Continue to Fall:Lowest in Two Generations
0
200
400
600
800
1,000
1,200
1,400
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Note: 2009 as of April Source: Census Bureau, released May 28, 2009; Sullivan Group
2005 = 1,283,000 Peak2008 = 485,0002009*= 352,000
2005 = 1,283,000 Peak2008 = 485,0002009*= 352,000
Stole demand from future
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New Home Supply “Overhang”:Absolute Numbers Are Declining
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Avg. Months of SupplySource: Census Bureau; Sullivan Group
April ‘09 = 10.1 MonthsApril ‘09 = 10.1 Months April 09 = 296,000 UnitsAug 06 Peak = 570,000 Units
April 09 = 296,000 UnitsAug 06 Peak = 570,000 Units
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Starts Below 1991 and 1981 Levels
0250,000500,000750,000
1,000,0001,250,0001,500,0001,750,0002,000,0002,250,0002,500,000
1980
M1
1982
M1
1984
M1
1986
M1
1988
M1
1990
M1
1992
M1
1994
M1
1996
M1
1998
M1
2000
M1
2002
M1
2004
M1
2006
M1
2008
M1
Source: U.S. Census Bureau, SA annual rate, released May 27, 2009; Sullivan Group
April 2009 = 498,000
Peak Sep 2005 = 2,263,000
“v” “u”
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U.S. Housing Rebound: Can It Start After 2009?
0.81.01.21.41.61.82.02.22.419
7019
7219
7419
7619
7819
8019
8219
8419
8619
8819
9019
9219
9419
9619
9820
0020
0220
0420
0620
0820
1020
12
SF a
nd M
F H
ousi
ng S
tart
s
Million
Average 1970-2008
Source: U.S. Census Bureau; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
National Foreclosures Still High
437,498488,489
642,149
681,337
783,991
345,554
342,038
803,489850,460
0100,000200,000300,000400,000500,000600,000700,000800,000900,000
1,000,0001,100,000
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep-
08O
ct-0
8N
ov-0
8D
ec-0
8Ja
n-09
Feb-
09M
ar-0
9A
pr-0
9
Source: RealtyTrac, released May 13, 2009; Sullivan Group
Quarterly Data Monthly Data
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III. THE SAN DIEGO MARKET
www.sullivangroupadvisors.comPhone 858.523.1443
0
20
40
60
80
100
120
140
160
Jun-
97D
ec-9
7Ju
n-98
Dec
-98
Jun-
99D
ec-9
9Ju
n-00
Dec
-00
Jun-
01D
ec-0
1Ju
n-02
Dec
-02
Jun-
03D
ec-0
3Ju
n-04
Dec
-04
Jun-
05D
ec-0
5Ju
n-06
Dec
-06
Jun-
07D
ec-0
7Ju
n-08
Dec
-08
Inde
x of
Eco
nom
ic In
dica
tors
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
% C
hang
e in
Inde
x Fr
om P
rior Y
ear
Index of Economic Indicators% Change From Prior Year
April ’09 = 100.9Up 0.2 since last month
Index of Leading Economic IndicatorsSan Diego County
Source: University of San Diego; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Data is year over year change; 2009ytd is the average of January through April.Source: California Employment Development Department; Sullivan Group
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000A
pr-8
6A
pr-8
7A
pr-8
8A
pr-8
9A
pr-9
0A
pr-9
1A
pr-9
2A
pr-9
3A
pr-9
4A
pr-9
5A
pr-9
6A
pr-9
7A
pr-9
8A
pr-9
9A
pr-0
0A
pr-0
1A
pr-0
2A
pr-0
3A
pr-0
4A
pr-0
5A
pr-0
6A
pr-0
7A
pr-0
8A
pr-0
9
2005 - 21,8002006 - 19,500 2007 - 7,2002008 - -9,6002009ytd- -8,150
2005 - 21,8002006 - 19,500 2007 - 7,2002008 - -9,6002009ytd- -8,150
Y-T-Y PERCENT CHANGE
San Diego Job Growth Negative
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Job Losses Starting in Mid 2008
-50,000-45,000-40,000-35,000-30,000-25,000-20,000-15,000-10,000
-5,0000
5,00010,00015,00020,00025,000
Jan-
06M
ar-0
6M
ay-0
6Ju
l-06
Sep-
06N
ov-0
6Ja
n-07
Mar
-07
May
-07
Jul-0
7Se
p-07
Nov
-07
Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep-
08N
ov-0
8Ja
n-09
Mar
-09
Y-T-Y PERCENT CHANGE
2006 - 19,500 2007 - 7,2002008 - -9,6002009ytd- -8,150
2006 - 19,500 2007 - 7,2002008 - -9,6002009ytd- -8,150
Data is year over year change; 2009ytd is the average of January through April.Source: California Employment Development Department; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Job Gain/Loss ComparisonMarch 2009 vs. March 2008
0.40%
-0.60%
-1.30%
-2.60%
-3.40% -3.50% -3.70% -3.90% -3.90% -4.00% -4.20%-4.80% -4.80%
-5.10% -5.20%
-6.60%-7.10%
-8.00%-7.00%-6.00%-5.00%-4.00%-3.00%-2.00%-1.00%0.00%1.00%2.00%3.00%4.00%
Austin
Housto
nDalla
sSalt L
ake C
itySan
Dieg
oSea
ttleDenve
rLos A
ngeles
SF/Oak
land
San Jose
Portlan
dOran
ge County
Tucson
Sacramento
Las Veg
asInlan
d EmpirePhoenix
Source: BLS; Sullivan Group
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Note: US data as of Apr 2009 and San Diego as of Mar 2009Source: Bureau of Labor Statistics; Sullivan Group
0.01.02.03.04.05.06.07.08.09.0
10.0
Dec
-90
Dec
-91
Dec
-92
Dec
-93
Dec
-94
Dec
-95
Dec
-96
Dec
-97
Dec
-98
Dec
-99
Dec
-00
Dec
-01
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Dec
-06
Dec
-07
Dec
-08
United States San Diego
United States 8.9%San Diego 9.3%United States 8.9%San Diego 9.3%
Unemployment LevelUnited States vs. San Diego
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San Diego’s Residential Permits are at the Lowest Level Since the 1940s
05,000
10,00015,00020,00025,00030,00035,00040,00045,00050,000
1948
1954
1960
1966
1972
1978
1984
1990
1996
2002
2008
Bui
ldin
g Pe
rmits
2004 15,5872005 14,306 -8%2006 9,194 -36%2007 7,461 -19% 2008 5,242 -30%2009P 3,000 -43%
2004 15,5872005 14,306 -8%2006 9,194 -36%2007 7,461 -19% 2008 5,242 -30%2009P 3,000 -43%
Note: 2009 is a projection using data through April Source: SOCDS; Sullivan Group
Long-term average - 17,000/yr
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0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
Jan-
05 Mar
May Ju
lSe
p
Nov
Jan-
06 Mar
May Ju
l
Sep
Nov
Jan-
07 Mar
May Ju
lSe
pN
ov
Jan-
08 Mar
May Ju
lSe
p
Nov
Jan-
09 Mar
Attached Detached
2009ytdAttached 554Detached 501
2009ytdAttached 554Detached 501
San Diego Residential Permits: 2005-2009ytd
Source: Bureau of Labor Statistics; Sullivan Group
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+/-34,000 Homes Sales in ’09: Good/Bad = Bad/Good?
2009P-Dataquick (resales) annualized data through April; Hanley Wood (new) annualized data through March.Source: Dataquick; Hanley Wood; Sullivan Group
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
P
New Existing
2005 58,953 -14%2006 42,253 -28%2007 32,872 -23% 2008 33,113 1%2009P 33,900 2%
2005 58,953 -14%2006 42,253 -28%2007 32,872 -23% 2008 33,113 1%2009P 33,900 2%
8 year Total Home Sales Average
51,734
8 year New Home Sales Average
9,873
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San Diego County New Home Sales
02,0004,0006,0008,000
10,00012,00014,00016,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2009
Detached Attached2009P annualized using data from January through March.Source: Hanley Wood; Sullivan Group
2009P = ±2,0002009P = ±2,000
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Case-Shiller: Prices Down 42% Since 2005
050
100150200250300
Jan-
87Ja
n-88
Jan-
89Ja
n-90
Jan-
91Ja
n-92
Jan-
93Ja
n-94
Jan-
95Ja
n-96
Jan-
97Ja
n-98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09
San Diego Composite of 10
March 2009San Diego 144.56Composite of 10 151.41
Composite of 10 includes Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington DCSource: S&P/Case-Shiller; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Median New Home Detached Price Also LowerSFD: -27%; ATT: 0% Vs. Peak
$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000
$1,000,0004Q
884Q
894Q
904Q
914Q
924Q
934Q
944Q
954Q
964Q
974Q
984Q
994Q
004Q
014Q
024Q
034Q
044Q
054Q
064Q
074Q
08
Attached Detached
1st Qtr 2009Detached $640,000Attached $399,900
1st Qtr 2009Detached $640,000Attached $399,900
Source: Hanley Wood; Sullivan Group
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Affordability Back to Late 1990s Level
0
10
20
30
40
50
60
70
1Q97
3Q97
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
1st Qtr 2009 = 58.81st Qtr 2009 = 58.8
Note: 2Q02 through 3Q03 data not availableSource: NAHB Housing Opportunity Index, released May 18, 2009; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Number of Active Home Projects is DecliningSan Diego: - 44% from Nov 2006
Source: Hanley Wood; Sullivan Group
050
100150200250300350400
Jan-
05
Apr
-05
Jul-0
5
Oct
-05
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Act
ive
Proj
ects
02505007501,0001,2501,5001,7502,000
Tota
l Sal
es
Active Projects Sales
March 2009Active Projects – 194
Total Sales - 150
March 2009Active Projects – 194
Total Sales - 150
Active Projects348 in Nov 06194 in Mar 09
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New Detached Inventory is Generally LowMarch 2009
0
100
200
300
400
500
600
San DiegoCounty
Central CoastalNorth
East InlandNorth
South Bay
Stan
ding
/Und
er C
onst
ruct
ion
Inve
ntor
y
0
2
4
6
8
10
12
Mon
ths
of In
vent
ory
Standing/Under Construction Inventory Months of InventorySource: Hanley Wood; Sullivan Group
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Most New Attached Inventory in Central SubmarketMarch 2009
0
500
1,000
1,500
2,000
San DiegoCounty
Central CoastalNorth
East InlandNorth
South Bay
Stan
ding
/Und
er C
onst
ruct
ion
Inve
ntor
y
0
10
20
30
40
Mon
ths
of In
vent
ory
Standing/Under Construction Inventory Months of Inventory
85% of Attached Inventoryin Central Submarket
Source: Hanley Wood; Sullivan Group Real Estate Advisors
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Improvement in Existing Sales Levels in ’09Lower Prices and REOS Stimulating Sales Activity
01,0002,0003,0004,0005,0006,000
Apr
-88
Apr
-89
Apr
-90
Apr
-91
Apr
-92
Apr
-93
Apr
-94
Apr
-95
Apr
-96
Apr
-97
Apr
-98
Apr
-99
Apr
-00
Apr
-01
Apr
-02
Apr
-03
Apr
-04
Apr
-05
Apr
-06
Apr
-07
Apr
-08
Apr
-09
Total Sales 12 per. Mov. Avg. (Total Sales)
Source: Dataquick; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
Jan-
05M
ar-0
5M
ay-0
5Ju
l-05
Sep-
05N
ov-0
5Ja
n-06
Mar
-06
May
-06
Jul-0
6Se
p-06
Nov
-06
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep-
07N
ov-0
7Ja
n-08
Mar
-08
May
-08
Jul-0
8Se
p-08
Nov
-08
Jan-
09M
ar-0
9
Total Existing Sales Volume Improved in 2008
MLS ‘08 vs. ‘072007 26,4032008 30,471% Change +15%
MLS ‘08 vs. ‘072007 26,4032008 30,471% Change +15%
Source: Dataquick; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Active Resale Listings Have Declined Steadily
02,5005,0007,500
10,00012,50015,00017,50020,00022,500
2/13
/07
4/13
/07
6/13
/07
8/13
/07
10/1
3/07
12/1
3/07
2/13
/08
4/13
/08
6/13
/08
8/13
/08
10/1
3/08
12/1
3/08
2/13
/09
4/13
/09
SFD Listings Attached Listings Total Listings
May 28, 2009Attached 3,474Detached 6,093Total 9,567
May 28, 2009Attached 3,474Detached 6,093Total 9,567
Source: Zip Realty; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
There is a 3.9 Month Supply of Resale Units
02,5005,0007,500
10,00012,50015,00017,50020,00022,50025,000
Jan-
06M
ar-0
6M
ay-0
6Ju
l-06
Sep
-06
Nov
-06
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep
-07
Nov
-07
Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep
-08
Nov
-08
Jan-
09M
ar-0
9
List
ings
05001,0001,5002,0002,5003,0003,5004,0004,5005,000
Tota
l Exi
stin
g Sa
les
Listings Total Existing SalesSource: Zip Realty; Dataquick; Sullivan Group
April 2009Listings 12,511Sales 3,194
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Foreclosures Still at Record Levels in San Diego County
01,0002,0003,0004,0005,0006,0007,000
Q4/
89Q
4/90
Q4/
91Q
4/92
Q4/
93Q
4/94
Q4/
95Q
4/96
Q4/
97Q
4/98
Q4/
99Q
4/00
Q4/
01Q
4/02
Q4/
03Q
4/04
Q4/
05Q
4/06
Q4/
07Q
4/08
Peak 3Q08 = 6,4634Q08 = 3,837
Source: Real Estate Research Council; CAR; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
NOD’s Jumped Again in December ‘08
Source: InnoVest Resource Mgmt; Sullivan Group
0500
1,0001,5002,0002,5003,0003,5004,0004,500
Oct
-07
Nov
-07
Dec
-07
Jan-
08Fe
b-08
Mar
-08
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep-
08O
ct-0
8N
ov-0
8D
ec-0
8Ja
n-09
Feb-
09M
ar-0
9A
pr-0
9
www.sullivangroupadvisors.comPhone 858.523.1443
Foreclosures at Record Level of Transactions (April 2009 = 9.2%)
0
5,000
10,000
15,000
20,000
25,000
Jan-
91Ja
n-92
Jan-
93Ja
n-94
Jan-
95Ja
n-96
Jan-
97Ja
n-98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09
0%
5%
10%
15%
20%
25%
Trus
tee
Dee
ds a
s %
of A
ll D
eeds
All Deeds Notices of Default Trustee's Deed TD % of all Deeds
Source: InnoVest Resource Mgmt; Sullivan Group
Data reflects new state requirement which requires
lenders to contact homeowners 30 days prior to filing.
www.sullivangroupadvisors.comPhone 858.523.1443
III. DISCUSSION
www.sullivangroupadvisors.comPhone 858.523.1443
Prospects for a Housing Market Bottom in 2009?
For: ULI San Diego Young LeadersJune 2, 2009
SULLIVAN GROUP REAL ESTATE ADVISORSPeter Dennehy, Sr. Vice President
(858) 523-1443 [email protected]