THE NEST REPORT

The Nest Report: Volume 1, Mid Year July, 2009

The Nest Report is a quarterly publication of Nest Realty Group, LLC, Charlottesville, VA www.NestRealtyGroup.com

Where We Are: Sales Numbers

It would be a bit of an understatement to say that the real estate market is struggling. Year-over-year mid year detached homesales are down 30.1% in the Charlottesville EMSA from 957 sales in 2008 to 661 sales in 2009. Total sales volume of detached homes is also down from $347,689,720 to $234,652,420, a reduction of 32.5%. The average detached home saleprice in the Charlottesville EMSA has dropped slightly from $363,312 to $354,996 (only 2.2%). So, how can sales be off 30% and the average price down just over 2%? With many of the answers in this wrap-up, you will find that in order tounderstand what has happened, you have to drill down to more specific data.There are two items at play here. Product/Location Mix and Excessive Impact of Farm Sales. When you look at the specificsales driving these numbers, you find a drastic shift in what is called "Product Mix." This refers to the percentage of homesthat are selling of one type or another. In this case, the shift is a significant shift in sales from one county to another. Whilethe overall market may have been down more than 30%, in Louisa County detached home sales were down roughly 56%and Albemarle County detached home sales were only down approximately 22%. Because Louisa's home prices are lower onaverage than Albemarle, the effect of this shift in product mix is to mask some of the actual price drops.The second item holding the average price steady are farms and estates. When the number of transactions in a quarterdecreases, the impact that a single large property sale has can be quite large. In the 2nd quarter of 2009, there was a singlehome whose sale drove the average sales price up by more than $12,500. In years where there are 1200 transactions in the

One of Nest Realty's founding principles is to provide full transparency of real estate information. To that end, we aim to be the definitivesource for real estate data, information and analysis for the Charlottesville/Albemarle region. The Nest Report is a quarterly report thatwill offer data analysis and market forecasts through the eyes of experienced and progressive real estate professionals. The results of anyanalysis are open to interpretation, and this is one of the reasons we will provide the data in addition to our analysis. Looking at the broad market overviews and trends provides a good bellwether for the market, but where the Nest Report differs from other reports is that we look at individual counties, not just the larger market. As you will note, the pricing history of Louisa is very different from Albemarle County. This report intends to dispel some of the myths about the wider market and provide answers to the question,"What's going on in

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my market?" In addition to this Quarterly Nest Report, in coming weeks we will dive into specific neighborhoods andstreets in supplemental Nest Report issues. Here in our quarterly report, we will dig down into the counties throughout the region and focus on the specific trends within these 'sub-markets.' First a quick area clarification: We will refer to numbers in Charlottesville City, Albemarle County, and the Charlottesville Expanded Metropolitan Statistical Area (EMSA) . The EMSA, as we are using it, includesCharlottesville, Albemarle, Fluvanna, Greene, Louisa, and Nelson. (The Government does not include Louisa in the traditional MSA, butwe believe it is critical to our market.)

first six months, a large sale can move the market, but when the number of transactions is half that, the impact is muchlarger. Now let's take a look at detached sales in Albemarle County. The number of sales are down 22.2% (from 334 to 260) andtotal sales volume is down 20.8%, by a tad more than $34,000,000. Inventory of single family homes in Albemarle is now hovering right around 660. Taking into account that there have been only 260 sales of detached homes to date, this signalsover a year's worth of inventory available. As of July 1, 2008, there was actually a larger inventory, 744 detached homes;however, with the substantially larger sales numbers in 2008, there was a shorter supply in terms of time. Within Albemarle County, the median price was down in the 2nd quarter 10.6% from the same period in 2008, from$385,000 to $344,000. The average price was up 0.7% or just less than $4,000. The difference is that single property that wereferenced above. When removed from the 171 sales in Albemarle County in the 2nd Quarter, the average actually goesdown $47,600 to $429,811. The effective move from 2008 to 2009 in average price is a decrease of 9.3%. There are some potential positive signs for Albemarle detached homes. Q2 2008 sales were off by 35.5% from 2007 andmid-year 2008 total sales off 29.1%. The slide has seemingly slowed a bit with Q2 2009 sales down 19% and mid-year totalsales off 22.1%. We'll definitely keep an eye on this to see if this gives us any clues of when the market will turn around.In the City of Charlottesville, sales seem to be decreasing at a faster rate: Single family home mid-year sales numbers are off by 35.3% and total sales volume is down by 38.5%. To date, City home sales and values have been surprisingly resilient.Mid-year sales numbers have hovered consistently between 193 and 227 from 2004 to 2008. However, they've definitely taken a major hit during the first half of 2009 with only 127 sales. If we compare the drop in number and value of transactions from the first half of the year in 2006 to 2009 in the city and Albemarle, we find that the city is down 44% inthe number of transactions and 50% in value of transactions, and the county is down 52% for both number and volume of transactions. Both City and County condominium sales continue to slide as well. There have been a total of 32 condos sold in theCounty so far (off 25.6%) and 25 sold in the City (down 46.8%). However, Charlottesville City condo sales rebounded quite well in the Q2 2009 with 22 total sales, bouncing back from a dismal Q1 which saw only 3 transactions close. There are stillcondo projects in front of the City Planning Department with the potential for near-future development. Whether or notthose projects can obtain funding, and when they will be built is still up in the air. Additionally, we fully expect theabsorption rate (time it will take for new condos to be purchased) to be lengthy compared to years past, as some of theseprojects are approved to include more housing units than have sold across the whole city this year.

The Nest Report, July 2009 Page 2

0100,000,000200,000,000300,000,000400,000,0002003200420052006200720082009

Total Volume

1st Quarter2nd Quarter

250,000287,500325,000362,500400,0002003200420052006200720082009

Average Sales Price - EMSA

1st Quarter2nd Quarter

We maintain records of the historical median prices throughout our area. If we look backward, we have to travel to the firstquarter of 2005 to find a median price equal to our current median in Albemarle County. The city is a tad harder to analyze,as the limited number of sales show a less stable course. However, the median price for the city for the first half of this year was $250,500. This would generally indicate that prices have retreated to late 2004 price points.Condominium prices in both Charlottesville and Albemarle have also suffered. Median prices for Albemarle condos aredown for the third straight time at mid-year, this time by 15.4% since 2008. Charlottesville condo median prices have beenlower for two straight times at the year's mid-point and are off by over 25% from 2008. However, we point caution intoreading too much into this information. There is such a small population of condo sales that a purchasing shift from aproject with lower price points such as 1800 JPA to the pricier Randolph can dramatically demonstrate a change that is notfactual or realistic. One really needs to look at what units are selling and how that compares to last year.Likewise, the surrounding counties have also seen significant price drops. Median price levels from the first half of 2007 tothe first half of 2009 are down in Fluvanna, Greene, Louisa, and Nelson by 20.6%, 14.2%, 17.9%, and 9.1% respectively.Number of transactions appear far more dramatic in their drops of 50%, 36.2%, 65.3%, and 25.4% for the same countiesover the same time. The combination of these two drops culminates in total sales volume being off in Fluvanna, Louisa, andNelson by more than 50%, and Greene being off by 46.5%. To put this in comparison, Charlottesville City Median Pricesand Total Volume are down 16.5% and 46.2% respectively and Albemarle County Median Prices and Total Volume aredown 11.4% and 43.3% respectively. (

See Table Next Page)

The Nest Report, July 2009 Page 3

Where We Are: Pricing

So sales numbers and total transaction volumes are down - we already knew that. Let's dive into prices and see what thenumbers are telling us. As we mentioned above, average prices for single family homes in Albemarle up 0.7% in the secondquarter against the same period last year.Median pricing (though it isn't a perfect prognosticator of values) is a much better gauge for overall prices, so we'll focus onmedian prices. In Albemarle, the median price of single family homes sold in Q2 2009 are 10.6% lower than those sold inQ2 2008 ($344,000 vs. $385,000). Similarly,the median price of single family homes sold in Charlottesville in Q2 2009 are10.7% lower than 2008 ($257,250 vs. $288,000). In fact, this is the second straight year-over-year period in which themedian prices of both Charlottesville and Albemarle single family homes have come down.