Market Matters

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August 2008

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“For the first time in nearly three years, housing unit sales are at the beginning stages of finding a floor and perhaps even heading up.” Source: Real Trends Monthly Newsletter 7/08 - Steve Murray RealTrends

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Bottom's Up: This Real-Estate Rout May Be Short-Lived • Prices rose slightly in April in eight of the 20 markets covered by Case Shiller index • Sales activity seems to be picking up. NAR reports sales rose 2% in May from April's levels, the second month in the past 10 to have seen an increase. • The ratio of sale prices to per-capita income in various locales -- already has improved affordability. Source: Barron’s 7/14 cover • $300 billion congressional bailout is coming for troubled subprime mortgages • A government takeover of loss-ridden Fannie and Freddie is possible • Several analysts expect home prices to be steady by years end • The U.S. housing market typically begins to improve after housing starts have fallen by a million units (which has now happened)

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7/08

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“That makes four months now of about flat new home sales and, like the ten month stretch of relatively flat existing home sales, it's possible that sales volume has gone about as low as it's going to go.” Source: Seeking Alpha 7/27/08 A Bottom May Be Forming in Home Sales - Tim Iacono, Seeking Alpha

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“The rate of decline in existing homes sales has slowed substantially from the dramatic fall from mid-2005 through mid-2007, with a decline of only 4.9% in the past nine months. We see this as evidence that the pace of home sales is very close to a bottom.” – Brian S. Wesbury, Chief Economist First Trust Source: First Trust 7/24/08

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“If this rebound in homeownership rates continues to reverse the four-year downward trend, it could provide further evidence that we are finally experiencing a bottom to the housing market problems.” - Mark J. Perry, Ph.D. Source: Seeking Alpha 7/27/08

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Lawrence Kudlow ,host of CNBC’s Kudlow & Company Source: Kudlow’s Money Politics 7/24/08

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“A key part of the Case-Shiller report is that seven out of the twenty cities sampled showed month to month price increases. Denver, Atlanta, Boston, Minneapolis, Charlotte, Portland, and Dallas showed modest improvements. … Wall Street Strategies Source: Wstreet.com 7/30/08 The movement in some of the healthier areas of the country suggests that the buying interest is returning, and prices are back on an uptrend.”

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“Lennar Corp., KB Home, Hovnanian Enterprises Inc, Meritage Homes Corp. are buying and developing land JP Morgan analyst Mike Rehaut: Lennar spent $162 million on new land in Q2 and will spend at least $200M more by the end of Q4... Source: Reuters 7/10/08 Home Builders Back To Buying Land KB expects to spend $300M on land and $400M on land development this year. Hovnanian is working on a land development joint venture... And Meritage is "beginning to shift from defense to offense," looking to buy land in H2’08, wrote Wachovia analyst Carl Reichardt.”

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"I think we are bottoming out," said Stephen ‘Buzz’ Mackintosh of Mackintosh Inc. Realtors in Frederick, Virginia. "We are seeing a lot of first-time buyers jumping into the market." http://www.machomes.com/ Source: Frederick News 7/25/08 In the news…

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The Buyer

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A good investment unless you lived in the city of Detroit!

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Stocks vs. Real Estate

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Source: Westcourt Funds

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http://www.homesforworkingfamilies.org/approach/academic/

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Mortgage Rates – 30 year fixed May 22 July 24 Source: Federal Reserve Up 2/3 of a point in two months

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The Seller

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Don't try to sit out the market. That's what hundreds of other timid sellers are doing, each of them hoping -- somehow, some way -- that hanging on the sidelines will improve prices and, ultimately improve his or her chances for selling success. It won't. Not if you expect to sell anytime soon. Set a realistic, salable price on day one. Don't let the house hang around on the market as you gradually lower the price… If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago. Get the best, most aggressive selling (listing) agent you can find. When everything was selling before it even hit the market, of course, you didn't need the best. You just needed the cheapest. But not these days. How to Sell a House, When You Have to Sell It Now Wall Street Journal Source: WSJ 7/14/08

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“Well, this may turn out to be a bottom for homebuilders, and real estate agents may even see things pick up a little bit, but as far as home prices go, don't count on any rebound anytime soon. There's that little problem of inventory to deal with and, as noted here many times before, until the months of supply statistic comes down from its current freakishly high levels, don't look for any rebound in home prices.” Source: Seeking Alpha 7/08/08 - Tim Iacono, Seeking Alpha What about prices?

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As for the housing market, Chief Executive Ken Lewis said Bank of America's latest forecast called for a further 15% decline in home prices nationwide, with the decline going into at least the first quarter of next year. Source: Los Angeles 7/10/08 Bank of America

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“Prices shouldn't hit bottom for another year at the earliest, since the housing market is glutted with unsold new homes and foreclosed properties.” Source: Associated Press 7/09/08 - Mark Vitner, senior economist with Wachovia,

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“Borrowers may face another significant problem when option ARM loans, which allowed them to make less than full payments, face increases, said John Taylor, president of the National Community Reinvestment Coalition. Those are not classified as subprime loans, but the borrowers will begin to see their payments spike in the next few years as they are forced to start paying the principal of their loans as well as the interest, he said. ‘There is this second wave behind’ subprime loans, Taylor said, ‘that is going to complete the tsunami." Source: Washington Post 7/01/08 Wave of ARM resets

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“Don’t expect a rebound in home prices before the spring of 2010.” - Mark Zandi, chief economist, Moody's Corp. Economy.com Source: Wall Street Journal 7/29/08

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“As far as timing goes, it looks to us that at least one-half of the peak-to-trough price decline has already occurred and that we should see an outright bottom either late next year or in the first part of 2010.”

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On a $200,000 house, a family loses $384.61 per week. Assuming a 10% fall in prices…

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Wall Street Journal 7/14/08 Set a realistic, salable price on day one. Don't let the house hang around on the market as you gradually lower the price… If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago. Money Magazine 5/12/2008 Get real about price. Set an asking price 10% below what homes like yours have been selling for. If your market is really frozen and you need to drop the price, make one large cut. No baby steps. Pricing in Today’s Market?

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‘The Turn’ There are only two speeds Win or Lose

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631-834-7000 steve@steveharney.com www.steveharney.com

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Any questions? Contact us at info@KeepingCurrentMatters.com We’ll bend over backwards to try and help!