Hide Notes 

Slide 1: This Month in Real Estate January 2009 Commentary……………………………. The Numbers that Drive Real Estate… Snapshot of the Economy……………… Recent Government Action……………. Consumer Research……………………. 2 3 9 13 15 KW Research 1
Slide 2: Commentary While the overall economic picture looks cloudy, there is a silver lining. Consumers continue to enjoy gains from cheaper energy prices and continuing to tighten their belts by spending less, giving them more available buying power when conditions improve. And there’s also some positive developments in the housing market. Qualified buyers are looking for and finding good deals due to decreased competition in the market and significantly lower home prices. Mortgage rates remain at historic lows, creating an unprecedented window of opportunity for qualified home buyers and homeowners seeking to refinance. According to a survey conducted by a national brokerage company, the number one concern for first-time homebuyers is housing affordability. Improvement in affordability conditions across the country should help allay this concern, as long as credit scores meet lender standards. Additionally, the barrier to entry for homeownership for first-time home buyers is lessened as only a 3.5 percent down payment (gift funds included) is required for an FHA mortgage. KW Research 2
Slide 3: The Numbers that Drive Real Estate KW Research 3
Slide 4: Home Sales In Millions The pace of home sales fell by 11% from November 2007. One reason may be that wary buyers remain on the sidelines, hoping for lower mortgage rates and waiting for signs of economic recovery. States with a high proportion of distressed properties such as California, Arizona, Nevada, and Florida have experienced significant markdowns in home prices and as a result have started to see an up-tick in sales. 10 5 0 5.09 5.35 5.24 5.73 6.23 6.96 7.02 6.25 5.02 4.49 1999 Source: NAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note: Pace of Sales as of November every year (in Millions) KW Research 4
Slide 5: Median Home Price In Thousands According to the National Association of Realtors (NAR), home prices declined 13% in November from a year ago, the largest decline on record. There could be a large downward distortion in prices tracked by NAR due to large numbers of distressed sales in the market. The Federal Housing Finance Agency that tracks mostly prime loans showed a much smaller decrease in home prices (7.5% decrease in October). 250 200 150 100 50 0 $138 $144 $152 $168 $179 $199 $225 $217 $209 $181 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Median Home Price as of November every year Source: NAR KW Research 5
Slide 6: Inventory - Months Supply Number of months it would take to sell all the homes on the market at the current rate of sales While inventory for existing home sales increased to 11 months worth of supply in November, inventory for new homes is expected to decrease significantly in the near future. According to High Frequency Economics, there will be much less inventory for new homes due to sizable declines in home-building activities. As a result, buyers who wait might not have as many choices or the negotiating power they would like to have when trying to purchase new homes. 12 10 8 6 4 2 0 4.5 4.2 5.0 4.9 4.8 4.4 5.0 7.3 10.1 11.2 1999 Source: NAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 Inventory as of November every year KW Research 6
Slide 7: Mortgage Rates 30-Year Fixed Mortgage rates for the month of December averaged around 5.3%. Mortgage rates fell for the 9th consecutive week to 5.1% for the last week of December, an all-time low since Freddie Mac started its mortgage survey in 1971. "Since the end of October of this year, these rates have declined by about 1-1/3 percentage points, or payment savings of approximately $173 a month for a $200,000 loan.” Frank Nothaft, Chief Economist – Freddie Mac 10% 5% 0% 7.9% 7.4% 7.1% 6.1% 5.9% 5.8% 6.3% 6.1% 6.1% 5.3% 1999 Source: Freddie Mac 2000 2001 2002 2003 2004 2005 2006 2007 2008 Mortgage Rates as of December every year KW Research 7
Slide 8: Affordability - % of Income The percentage of a median family’s income required to make mortgage payments on a median priced home Low mortgage rates and decreasing home prices continue to improve affordability conditions. The median mortgage payment (principal and interest) now consumes about 18% of family income in comparison to 24% of income just 3 years ago. 30% 25% 20% 15% 10% 5% 0% 19% 20% 19% 19% 19% 20% 24% 23% 21% 18% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Affordability as of November every year. Calculations assume a 20% down payment. Source: NAR KW Research 8
Slide 9: Snapshot of the Economy KW Research 9
Slide 10: Gross Domestic Product The U.S. economy contracted 0.5% in the third quarter of 2008. Recent economic reports show the U.S. economy is falling deeper into recession and that the conditions will continue through the first half of 2009. Households continue to tighten their belts while the government looks to provide a much-needed second fiscal stimulus plan that will be directed toward households, state finances, and infrastructure spending. 6% 4% 2% 0% -2% 3% 3% 4% 1% 5% 3% 1% 2% 0.1% 5% 5% -0.2% 1% 3% -0.5% Source: Bureau of Economic Analysis 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 KW Research 10 2008Q2 2008Q3
Slide 11: Unemployment The unemployment rate rose to 7.2% in December. Industries experiencing positive gains in employment were in the education, health, and government sectors. Areas that experienced sizable losses were in the manufacturing, construction and retail sectors – mainly due to decreasing consumer demand. 8% 6% 4% 2% 0% 4.0% 3.9% 5.7% 6.0% 5.7% 5.4% 4.8% 4.4% 4.9% 7.2% Unemployment as of December every year Source: Bureau of Labor Statistics 1999 2000 2001 2002 2003 2004 2005 2006 2007 KW Research 11 2008
Slide 12: Inflation Consumer prices rose 1.1% on a year-over-year basis in November, a sizable decline from the peak of 5.6% in July. There are signs of potential deflation (a downward spiral of prices, earnings, and economic activity) in the economy. The economic stimulus package that many expect from President-elect Barack Obama could help intercept prospective deflation. 6% 4% 2% 2.6% 3.4% 1.9% 2.2% 1.8% 3.5% 3.5% 2.0% 4.3% 1.1% 0% Inflation as of November every year Source: Bureau of Labor Statistics – Consumer Price Index 1999 2000 2001 2002 2003 2004 2005 2006 2007 KW Research 12 2008
Slide 13: Recent Government Action KW Research 13
Slide 14: December 16 Federal Reserve cuts lending rate to historic lows to a range of zero to 0.25%  Goal: - To resume economic growth and promote price stability by lowering the short-term interest rate for inter-bank and depository institution lending  History: - The financial markets remain stressed and lending conditions continue to be tight - Declining labor market conditions, consumer spending, business investment and industrial production continue to significantly hamper economic growth - The Federal Reserve acknowledges the risk of deflation within the economy and lowers the federal funds rate to keep short-term interest rates down. - Deflation is harmful for the economy because as prices fall, businesses and consumers will start to postpone spending as they wait for lower prices. This postponement of spending can fuel further price cuts which ultimately can lead to a self-reinforcing downward spiral of prices, earnings, and overall economic activity. KW Research 14
Slide 15: Consumer Research KW Research 15
Slide 16: 30 Most Undervalued Markets Most Undervalued Markets 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 11 12 13 14 15 Houma, LA Houston, TX Vero Beach, FL Killeen, TX Lafayette, LA Dallas, TX Fort Worth, TX Midland, TX Cape Coral-Fort Meyers, FL Stockton, CA Shreveport, LA Tulsa, OK Wichita Falls, TX Vallejo, CA Jackson, MS Most Undervalued Markets 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 College Station-Bryan, TX Modesto, CA Oklahoma City, OK Salinas, CA Corpus Christi, TX Little Rock, AR Merced, CA West Palm Beach, FL Alexandria, LA Port St Lucie – Fort Pierce, FL Fayetteville, NC McAllen, TX Cheyenne, WY Monroe, LA Ames, IA 213 out of 330 markets in the U.S. were undervalued in the 3rd quarter last year Obtain more information on housing valuation here: https://www.nationalcity.com/main/m icro-site/economics/commentaryanalysis/pages/housing-valuationanalysis.asp Source: IHS Global Insight/National City Corporation House Prices Valuations: 3 Quarter, 2008 rd KW Research 16
Slide 17: Forbes Magazine – Top 10 Most Affordable Cities Calculation Based on Budget as Percent of Income City Median Annual Family Income Average Annual Family Budget Budget as Percent of Income San Jose, CA Austin, TX Kansas City, MO Salt Lake City, UT Baltimore, MD Detroit, MI San Francisco, CA Seattle, WA St. Louis, MO Chicago, IL $100,027 $66,064 $65,219 $64,436 $78,097 $64,908 $89,175 $74,927 $63,390 $68,013 $54,685 $42,220 $43,861 $43,499 $52,812 $43,993 $60,826 $52,507 $45,058 $48,800 55% 64% 67% 68% 68% 68% 68% 70% 71% 72% KW Research 17 Source: Forbes – 12.02.2008 / Income and Budget Data: 2007 American Community Survey & Economic Policy Institute's Basic Family Budget Calculator
Slide 18: Top 10 Remodeling Projects that Provide Strong Returns Project list 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 Upscale fiber cement siding Midrange wood deck Midrange vinyl siding Upscale foam-backed vinyl Midrange minor kitchen remodel Upscale vinyl window replacement Midrange wood window replacement Midrange vinyl window replacement Upscale wood window replacement Midrange major kitchen remodel Cost Recouped 87% 82% 81% 80% 80% 79% 78% 77% 77% 76% Cost versus Value Report Key Findings  Average recoupment on investment: 67%  Remodeling projects that enhance curb appeal provide the best returns  Kitchen remodels trump all other interior remodeling projects Get more facts and figures from this joint report by Remodeling and Realtor Magazine here: - Realtor version: http://www.realtor.org/rmohome_and_design/artic - Remodeling version: http://www.remodeling.hw.net/remodeling-market KW Research 18
Slide 19: Article Alert: Mortgages: What You Need to Know in 2009 As mortgage rates fall to historic lows, you probably are wondering whether you should borrow now or wait for mortgage rates to fall even more. Follow this link to understand some important things you need to know about the mortgage market today. http://www.businessweek.com/lifestyle/content/dec2008/bw20081230_361031.htm ?chan=top+news_top+news+index+-+temp_top+story KW Research 19
Slide 20: Contact Me Stephanie Zellous, Realtor® (512) 971-4875 stephanie@southaustinhouses.com http://SouthAustinHouses.com/blog http://SouthAustinHouses.com Keller Williams Realty 1801 S MoPac Expy, Ste 100, Austin, TX 78746 (O) (512) 448-4111 (F) (512) 448-4822 KW Research 20