October 2007

™ Keeping Current Matters

Supply
Months supply of inventory on the market
Source: NAR

9 8 7 6 5 4 3 2 1
December 2003 August 2005 July 2007

Inventory vs Sales - Aug

36,309

3,119
Inventory Sales

Demand
7.5
Houses sold in millions
Actual Sales 2007 NAR Projections (month to month)

7 6.5 6 5.5 5
Source: NAR
2004 2005 2006 Jan Feb March April May June July Aug

Actual sales August 2006 vs. August 2007 were off 12.8%

Demand

9/29/2007

Value
9/28/2007 Nationally, Moody's is projecting an average price decline of 7.7 percent. That's a jump from the 6.6 percent total price drop that the company was forecasting in June and more than twice that of last October's forecast of a 3.6 percent price decrease. "The housing market is in a free fall," said Mark Zandi, chief economist with Moody's Economy.com

Value
9/10/2007 Since 1994, Kenneth Heebner, has managed the $1.7 billion CGM Realty Fund. It has the best 10-year record of all realestate-focused mutual funds, up an average 19.7% a year during the past decade, according to Morningstar Inc. Fall 2006: “I see about a 50% decline in the inflated coastal markets.” September 2007: “I think the decline in housing prices will be broader and deeper than I originally thought.” - as quoted in the Wall Street Journal

Value
"In markets where home prices almost doubled in four years, you could easily see price cuts of 20% to 30%," said Thomas Lawler, a housing economist based in Vienna, Va.

9/22/2007

Value
9/2007 "This recession in housing is more severe than the 1990 and 1991 downturn…and it will be longer in duration." Ms. Zelman President Zelman & Associates a housing related research firm

Value

9/16/2007

Alan Greenspan, the former chairman of the Federal Reserve, told the Financial Times that US house prices are likely to fall significantly from their present levels and the decline "is going to be larger than most people expect."

Value

9/9/2007

Goldman Sachs noted that it is bearish on the housing market seeing home prices 13% to 14% over-valued. Goldman is of the opinion that it could take "several" years for home prices to reach fair value.

I could have just used my imagination !

“It is the Law that any difficulties that can come to you at any time, no matter what they are, must be exactly what you need most at the moment, to enable you to take the next step forward by overcoming them. The only real misfortune, the only real tragedy, comes when we suffer without learning that lesson."
- Emmet Fox

Challenge is good for the soul!

Value

Value
9/29/2007

Rates
8.5 8 7.5 7 6.5 6 5.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source for historical rates: Freddie Mac

Rates

Source: HSH

The Fed Cut
U.S. Mergers and Acquisitions in 2007

The Fed Cut

9/19/2007

The Fed Cut
“With unusual flair, the Federal Reserve slashed shortterm interest rates by a more-than-expected 1/2 point. The average 30-year fixed-rate mortgage responded by rising, closing the nation's leading survey of mortgage prices at an average 6.80%.”

9/21/2007

Mortgage Crisis

Mortgage Crisis

The benefits of a better FICO score are dramatic for mortgages. Raising a score from a range of 580-619 to 660-699 could save someone with a 30year, $300,000 fixed mortgage $5,148 in one year, according to Fair Isaac's Web site.

Foreclosures Up 115% from last August!
“The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity” RealtyTrac Chief Executive James J. Saccacio said.

Foreclosures
First American Corp.’s Christopher Cagan has done research which investigates the correlation between foreclosures as a percentage of total sales and the size of the discount buyers typically receive when purchasing foreclosure properties. For example, in areas where foreclosure sales accounted for 0.5 percent of total sales, the median discount was 3.8 percent; whereas in areas where foreclosures made up 8.9 percent of sales, the median discount was 20.0 percent.

Vacancy Rate
“As of June 30, the non-owner occupied (loans to buyers who do not plan to live in the house) share of defaulted loans (90 days of more past due or in foreclosure) was 32 percent in Nevada, 25 percent in Florida, 26 percent in Arizona and 21 percent in California, compared with 13 percent in the rest of the nation. These investors are much more likely to default on their mortgages if they see the value of their investments falling due to falling home prices.”

9/6/2007

Vacancy Rate
FOR ACCIDENTAL LANDLORDS
Here's some advice for novices from property managers, agents and other experts:

9/21/2007

• Talk to the neighbors: Make sure they know you'll be renting and encourage them to tell you about any issues that come up. Then check back in from time to time to make sure everything's working out. • Know the laws: State and local governments regulate everything from how many smoke detectors must be installed in a house to how long landlords have to return tenants' security deposits. Failing to know the rules can lead to lawsuits, civil penalties or worse. • Keep up with maintenance: Many owners assume that since a property is a rental, they don't need to worry about routine maintenance. Not so, say experts. Keeping up with repairs will help draw better tenants and will prevent bigger maintenance bills down the line. • Study the market: Rental agents say many landlords set their rents based on their expenses, rather than on what the market will bear. Then they wonder why their units don't rent. • Vet prospective tenants: Credit scores alone aren't enough. Dig into credit reports, verify income and make sure to call references. But make sure not to run afoul of discrimination laws, which bar landlords from rejecting tenants based on age, marital status and other factors. --Ben Casselman

The Good News
40
The graph shows the amount of subprime adjustable-rate mortgages hitting resets (in billions of dollars)

30 20 10 0
Source: First American

2007

2008

The Good News
Countrywide Financial Corp, the largest U.S. mortgage lender, said on Monday it expects to modify terms on nearly 25,000 home loans this year to help people avoid foreclosures. The company said it has already modified more than 17,000 home loans this year, and provided assistance on about 35,000 mortgages, including through repayment plans, postponements of payments and refinancings.

9/24/2007

The Good News
“It proves there is a pent up demand. There are home buyers out there who are willing to buy a home if they think they are getting an attractive price.”
– Larry Sorsby, CFO

After selling 2,100 homes in three days
(10 times greater than their weekly average) during a 30% off sale.