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1. The Numbers that Drive Real Estate 2 The Numbers That Drive U.S. Real Estate 1.Home Sales 2.Home Prices 3.Inventory 4.Mortgage Rates 5.Affordability.

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Presentation on theme: "1. The Numbers that Drive Real Estate 2 The Numbers That Drive U.S. Real Estate 1.Home Sales 2.Home Prices 3.Inventory 4.Mortgage Rates 5.Affordability."— Presentation transcript:

1 1

2 The Numbers that Drive Real Estate 2

3 The Numbers That Drive U.S. Real Estate 1.Home Sales 2.Home Prices 3.Inventory 4.Mortgage Rates 5.Affordability 3

4 1. Home Sales (In Millions) Sales decreased 4.8% in 2010, mainly due to softer demand in the second half of the year. 5.18 7.08 5.16 4.91 Source: National Association of REALTORS® 4.96 4

5 In Q3 2010, all 50 states experienced a decrease in sales … AK HI Below 10% Below 20% Home Sales Direction (Year-Over-Year Change) OH Source: National Association of REALTORS® Below 30% Below 40% 5

6 In Q4 2010, all states except for Virginia experienced an increase in sales … AK HI OH Source: National Association of REALTORS® Sales Increased Sales Decreased Home Sales Direction (Year-Over-Year Change) 6

7 2. Home Prices (Annual Appreciation) Source: National Association of REALTORS® If home prices actually grew by 4% every year from 1989, the median home price would be $211,082, which is approximately 18% above where we are today. 7

8 2. Home Prices (In Thousands) The median home price increased slightly by 0.3% in 2010, the first annual price gain since 2006. Source: National Association of REALTORS® Historical appreciation rate = 4% $153K $222K $173K $211K 8

9 3. Inventory (Months Supply) Number of months it would take to sell all the homes on the market at the current rate of sales Source: National Association of REALTORS® Softer demand in the second half of the year kept inventory of existing homes at a relatively high level of 9.4 months at the end of 2010. However, months of inventory has declined substantially from its peak of 12.5 months reached in July. 9

10 4. Mortgage Rates (30-Year Fixed) Source: Freddie Mac Mortgage rates averaged 4.69% in 2010, an all-time low since Freddie Mac started tracking in 1971. Mortgage rates ranged from 4.23% to 5.1% in 2010. At the end of December, rates stood at 4.71%. 10.3% 6.0% 5.0% 4.7% 5.05% 10

11 Lets put this in perspective … 198920102011 Bread $0.67$2.49 Gas (gal.) $0.97$2.73 New Car $15,350$28,400 Existing Home $94,000$173,000 Mortgage Rate 10%4.69%5.05% Monthly Payment $825$896$934 And you still wouldnt get a mortgage as cheap as you could in 2010. 11

12 5. Housing Affordability (% of Income) % of mean familys income required to make mortgage payments on a median-priced home Source: National Association of REALTORS® 15% 14% 40-year average = 21.9% Housing affordability was the most favorable on record in 2010. 12

13 The Numbers That Drive Canadian Real Estate 1.Home Sales 2.Home Prices 3.Inventory 4.Mortgage Rates 5.Affordability 13

14 1. Home Sales (In Thousands) Sales activity has cooled, closing the year at 3.9% below 2009, but remained the sixth highest annual activity level on record. 521K 465K 447K Sources: Conference Board/The Canadian Real Estate Association 431K 14

15 2. Home Prices (In Thousands) Historical appreciation rate = 4.1% Sources: Conference Board/The Canadian Real Estate Association $189K $305K $320K $339K The national average home price was up 5.8% in 2010 to a new record $339,030. 15

16 2. Home Prices (Appreciation Rates by Decade) 1980s1990s2000s Average: 9.12% Average: 1.20% Average: 7.73% Sources: Conference Board/The Canadian Real Estate Association 16

17 Northwest Territories Saskatchewan Manitoba Newfoundland & Labrador Nova Scotia New Brunswick Prince Edward Island Prices Increased Prices Decreased Home Price (Year-Over-Year Change) Northwest Territories Yukon British Columbia Alberta Ontario Quebec Nunavut Sources: Conference Board/The Canadian Real Estate Association All 12 markets saw an increase in prices in 2010 … 17

18 2. Home Prices (Annual Appreciation) Sources: Conference Board/The Canadian Real Estate Association 18

19 3. Inventory (Sales-to-New Listings Ratio) Sources: Conference Board/The Canadian Real Estate Association 52% Sellers Market Buyers Market Balanced Market Canadian housing market remained balanced throughout 2010. 19

20 4. Mortgage Rates (5-Year Fixed) Mortgage rates hit a new record low, remaining under 6% in 2010. In December, rates stood at 5.19%. Source: Bank of Canada 5.61% 5.63% 8.4% 6.9% 13.4% 5.44% 20

21 5. Housing Affordability (% of Income) Proportion of median pre-tax household income required to service the cost of mortgage payments (principal, interest, property taxes, and utilities) Property Type Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Avg. Since 85 Q3/Q3 % Ch Detached bungalow 40.1%40.6%41.1%42.9%40.4%39.0%+0.3% Standard two-story 46.0%46.7%46.8%48.9%46.3%43.3%+0.3% Standard condo 27.7%28%28.2%29.3%27.8%26.8%+0.1% Avg. Q3/Q3 Change: +0.23% Dropping mortgage rates and softer prices pushed housing affordability higher in the third quarter, bucking its rising trend since the middle of 2009. This reversed almost two-thirds of the cumulative deterioration in the preceding four quarters and returned the measures to their levels seen at the end of 2009. However, these measures continue to stand slightly above long-term averages. All provinces saw improvements in affordability, especially British Columbia. Source: The Royal Bank of Canada 21

22 Economic Snapshot 22

23 U.S. Economic Snapshot 1.Gross Domestic Product 2.Inflation 3.Unemployment 23

24 1. Gross Domestic Product (Year-Over-Year Growth) Source: Bureau of Economic Analysis Consumer spending and strong exports contributed the most to economic expansion in 2010. 24

25 1. Gross Domestic Product (Year-Over-Year Growth) Source: Bureau of Economic Analysis 25

26 2. Inflation Source: Bureau of Labor Statistics 1.6% In 2010, inflation averaged around 1.6%. In the near term, inflation pressures are expected to remain subdued, allowing the Fed to stay the course of its loose monetary policies. Unofficial Rate Target 26

27 3. Unemployment Source: Bureau of Labor Statistics 9.6% Unemployment is making slow progress, dropping from 9.9% in 2009 to 9.4% in the final month of 2010. Long-term average: 5.6% 27

28 Canadian Economic Snapshot Canadas economy continues to build momentum, thanks to: 1.Policy response 2.Increased consumer confidence 3.Improving lending conditions 4.Exceptionally stimulative financial conditions Indicators% 1.Real GDP (2010 estimate) 3.5% 2. Inflation Rate (2010 average) 1.6% 3. Unemployment Rate (December) 7.6% 28

29 The Events That Drove The Numbers 29

30 The Six Events That Drove the U.S. Numbers 1.The available sides per agent remained on par with 2009. 2.The extended home buyer tax credit boosted demand and stabilized home prices in the first half of 2010. 3.Concerns about proper foreclosure procedure delayed the influx of distressed properties into the market. 4.Monetary stimulus aid continued to lend support. 5.Credit conditions remain tight. 6.Uncertainty about economic outlook acted as restraint on business and consumer spending. 30

31 1. The available sides per agent remained on par with 2009 Source: National Association of REALTORS® In 2010, another 45,987 Realtors left the industry, leaving those remaining in the market with a steady share of business despite softer sales. 31

32 National Association of Realtors Membership vs. Existing Home Sales NAR Membership: 1.07 Million Existing Home Sales: 4.91 Million Source: National Association of REALTORS® 1977 1982 1990 1998 2008 2010 14 77 7.9 13.8 8.2 9.2 Sides per Agent 32

33 Housing Economic Recovery Act of 2008 $7,500 temporary FTHB tax credit Extended and Expanded $8,000 FTHB Tax Credit Must sign contract by April 30 Must close by June 30 Closing Deadline Extended to September 30 Gradual Recovery without Tax Credit American Recovery & Reinvestment Act of 2009 $8,000 FTHB tax credit 2. Extended home buyer tax credit increased buyer traffic in the first six months of 2010 Source: National Association of REALTORS® Jan 09 Jun 09 Oct 09 Nov 09 Apr 10 Jun 10 Sep 10 Dec 10 33

34 Recession Began December 2007 Housing Economic Recovery Act of 2008 $7,500 temporary FTHB tax credit American Recovery & Reinvestment Act of 2009 $8,000 FTHB tax credit Extended and Expanded $8,000 FTHB Tax Credit Must sign contract by April 30 Must close by June 30 Closing Deadline Extended to September 30 Gradual Recovery without Tax Credit Source: National Association of REALTORS® HOME SALES In Millions 2. Extended home buyer tax credit boosted demand & stabilized home sales in the first half of 2010 34

35 Recession Began December 2007 Housing Economic Recovery Act of 2008 $7,500 temporary FTHB tax credit American Recovery & Reinvestment Act of 2009 $8,000 FTHB tax credit Extended and Expanded $8,000 FTHB Tax Credit Must sign contract by April 30 Must close by June 30 Closing Deadline Extended to September 30 Gradual Recovery without Tax Credit Source: National Association of REALTORS® HOME PRICES In Thousands 2. Extended home buyer tax credit boosted demand & stabilized home prices 35

36 3. Concerns about foreclosure procedure delayed the influx of distressed properties into the market Source: RealtyTrac The number of foreclosure notices and bank repossessions plunged in November and December, as banks halted tens of thousands of foreclosures in the face of the robo-signing scandal. 36

37 3. Concerns about foreclosure procedure limited foreclosure sales and steadied prices Source: National Association of REALTORS® Distressed Sales % of Total Sales In 2010, distressed properties accounted for 34% of all sales, down from 36% in 2009 and 37% in 2008. 37

38 Rising foreclosure rates (% of U.S. Homes) remain a trouble spot for the housing market Source: RealtyTrac In 2010, foreclosure filings were reported on a record 2.9 million (2,871,891) U.S. properties despite a thirty-month low reached in December due to foreclosure freezes. 38

39 4. Monetary stimulus aid continued to lend support Source: Mortgage Bankers Association Historically low rates fueled a surge in refinancing activity earlier in 2010, helping homeowners save billions of dollars. 39

40 5. Credit conditions remain tight Source: Federal Reserve Board Credit Growth Bank Credit (In Billions of Dollars) 20062007200820092010 All Bank Credit8,1138,9159,3168,9929,174 Commercial & Industrial Loans 1,1901,4361,5651,2841,224 Real Estate Loans* 3.3943,6083,8053,7763,606 Consumer Loans 7307918578251,111 *Includes revolving home equity loans, closed-end residential loans, commercial real estate loans Residential Real Estate Loans Bank lending is still down. However, the freeze in bank credit is beginning to thaw after two years, signaling more support for the U.S. recovery in general, and the housing market in particular. 40

41 Supply and Demand for Residential Mortgage Loans Source: Federal Reserve Board – the Senior Loan Officer Opinion Survey Net Percentage of Respondents Tightening Standards for Mortgage Loans Net Percentage of Respondents Reporting Stronger Demand for Mortgage Loans Lending conditions have eased somewhat with fewer and fewer banks reporting tightened standards for mortgage loans. SUPPLY DEMAND 41

42 6. Uncertainty about economic outlook acted as restraint on business and consumer spending Source: Bureau of Economic Analysis Heightened level of unemployment persists and remains the biggest risk to the recovery. Any meaningful improvement in consumer confidence and their purchase decisions is contingent on a significant pickup in job growth. Consumer Spending and Unemployment 42

43 The Five Events That Drove the Canadian Numbers 1.The available sides per agent slipped as home sales softened and number of agents rose. 2.Implementation of new, tighter mortgage rules in April and Harmonized Sales Tax in Ontario and British Columbia in July brought forward resale activity and fueled prices in first half of 2010. 3.Canadas accommodative monetary policy continued to drive the market. 4.Credit market saw some improvements. 5.Strong currency has hurt Canadian trade. 43

44 1. The available sides per agent slipped as home sales softened and number of agents rose Sources: Conference Board/The Canadian Real Estate Association Softer home sales and a steady rise in CREA membership pushed the number of sides available per agent down 7% from the previous year. 44

45 The Canadian Real Estate Association Membership vs. Existing Home Sales CREA Membership: 101,606 Existing Home Sales: 447,010 1985 1990 2002 2007 2010 Sources: Conference Board/The Canadian Real Estate Association 8.3 5.3 6.9 9.2 12.6 11.1 8.8 Sides per Agent 45

46 2. Tighter mortgage rules and Harmonized Sales Tax brought forward home sales in first half of 2010 Sources: Conference Board/The Canadian Real Estate Association Mortgage Rules Modifications Effective April 19 Ontario and BC HST Effective July 1 2010 Avg Pace of Sales 37,250 HOME SALES In Thousands 46

47 2. Tighter mortgage rules and Harmonized Sales Tax fueled pickup in prices in the first half of 2010 Sources: Conference Board/The Canadian Real Estate Association Mortgage Rules Modifications Effective April 19 Ontario and BC HST Effective July 1 2010 Avg Home Prices $338,336 HOME PRICES In Thousands 47

48 3. Canadas monetary stimulus continued to boon the market DateTarget Rate% Change January 20111.00%-- December 20101.00%-- October 20101.00%-- September 20101.00%+ 0.25 July 20100.75%+ 0.25 June 20100.50%+ 0.25 April 20100.25%-- March 20100.25%-- January 20100.25%-- Source: Bank of Canada Canadians continue to benefit from record-low interest rates thanks to continuing supportive monetary policy. However, some of the policy stimulus is expected to be trimmed back as the economy strengthens. Long-term average = 9.93% Changes in Bank of Canadas Target Overnight Rate influence other interest rates, including those for consumer loans and mortgages. 48

49 4. The credit market saw some improvements Overall, total credit growth in Canada was steady in 2010 and remained stronger than in the United States. Improved financial market conditions have enabled Canadian businesses to continue to tap capital markets. The governments measures to support access to financing during the financial crisis helped lift market uncertainty and supported a significant reduction in interest rates. Credit Growth Household and Business Loans Outstanding (In Billions of Dollars) 2007200820092010 Total Household Credit 1,1931,3061,4021,498 Consumer Loans379409446468 Residential Mortgages 8148979561,030 Total Business Credit 1,1531,2041,1951,235 Source: Bank of Canada 49

50 5. Strong currency has hurt Canadian trade As commodity prices elevated, appetite for Canadian currency strengthened, leading to Canadas rising exchange rate against its major counterparts. Exports were dampened by gains in the Canadian dollar. Canada's economy slowed in mid-2010 when imports increased (subtracting from growth) and exports decreased. Bank of Canada noted that about two-thirds of the widening of Canadas trade deficit in recent years is due to a stronger Canadian dollar. 2009:1 CAD0.88 USD 2010:1 CAD0.97 USD Source: Bank of Canada 50

51 What the Governments Are Doing 51

52 1.Extended Bush-era income tax cuts 2.Extended conforming loan limits 3.Started second round of Feds monetary stimulus 4.Halted new mortgage disclosure rules under the Truth in Lending Act What the U.S. Government Is Doing 52

53 What:President Obama signed an $858 billion tax bill into law on December 17, keeping income tax rates from increasing before the new year. Why:To put more money in the pockets of families most likely to spend it, help businesses to grow and as a result, spark demand, spur job creation, and strengthen the economy in 2011. How: 1.Extends the Bush-era income tax cuts on income, capital gains, and dividends for two years 2.Reduces Social Security payroll tax rates by 2% for one year on income up to $106,800 3.Extends jobless benefits for 13 months beyond the current 99 weeks 4.Allows businesses to write off 100% of capital investments between September 9, 2010 and December 31, 2011 5.Extends dozens of expired and expiring tax breaks, including a research and development tax credit and a college tuition tax credit that was created in last years economic stimulus law 6.Sets the estate tax rate at 35% for two years and would apply it only to estates worth more than $5 million. Under current law, the estate tax has lapsed for 2010 and is set to jump next year to 55% Implications:Many economists predict the tax package could increase the economic expansion rate by a substantial 1% next year. 1. Extended Bush-era income tax cuts 53

54 What:In July 2008, the housing recovery bill raised the limit on conforming loans in high-cost areas to a maximum of 125% of local median home price, up to an overall cap of $729,750 from $417,000 everywhere. Why:To increase credit available in higher-priced markets. When:These limits were set to expire in December 2010 and have now been extended through September of 2011. 2. Extended conforming loan limits 54

55 What:Fed announced the second round of quantitative easing program, known as QE2, in early November 2010 to jump-start the slowing recovery. Why: The program aims at spurring business and consumer spending by keeping interest rates low. How: Fed plans to purchase $600 billion in long-term treasuries over the next eight months. The Fed also announced it will reinvest an additional $250 billion to $300 billion in treasuries with the proceeds of its earlier investment. When:The bond purchases aimed at stimulating the economy will total up to $900 billion and will be completed by the end of the third quarter of 2011. 3. Started second round of monetary stimulus 55

56 4. Halted new mortgage disclosure rules under the Truth in Lending Act Fed held off on finalizing pending rule changes under Regulation Z of the Truth in Lending Act that were proposed in August 2009 and September 2010 that would have mandated new consumer disclosure requirements for: Closed-end mortgage loans (2009) Home equity lines of credit or HELOCs (2009) Reverse mortgages (2010) The proposed new rules were initiated in response to claims that homeowners were signing up for unsustainable and unsuitable mortgages without understanding the terms of the loans during the boom years, which fueled unsound lending practices and led to the mortgage market meltdown in 2007. The newly created Consumer Financial Protection Bureau (CFPB) will assume general rulemaking authority for TILA, RESPA (which were previously overseen and enforced by Fed and HUD, respectively) and federal jurisdiction over consumer protections in July. The agency is required by the Dodd-Frank Reform Act to combine the mortgage disclosures required by both TILA and RESPA in a single form within eighteen months after the designated transfer date. The delayed implementation of any new disclosures adopted by the Fed will mitigate compliance difficulties which may arise with the issuance of multiple rules with different implementation periods. 56

57 1.Competition Bureau and CREA reached agreement 2.Department of Finance Canada announced third round of tightening mortgage rules What the Canadian Government Is Doing 57

58 What: After more than three years of debate and negotiation, in October 2010, delegates from Canadas 101 local real estate boards cast their votes for the settlement to resolve anti-competition charges with the Competition Bureau. The ratification inaugurated a ten-year, legally binding agreement through which CREA has agreed that it will neither create nor enforce any rules that would penalize or discriminate against brokers who want to offer nontraditional services to consumers while using the MLS system. CREA must also monitor member behavior to ensure compliance with the agreement. Implications: Homeowners who wish to sell their homes using the MLS system will be able to choose from a variety of services that brokers may offer at different prices. While sellers are still not permitted to list on the MLS by themselves, they will now be able to pay a licensed broker a fee to have their property listed on the MLS system and then sell the property themselves. While brokers are not obliged to accept mere postings, they are now permitted to do so, and may also offer a range of unbundled services and fee-for-service arrangements, all while using the MLS system. It is also possible, as happened in the United States after an anti-trust lawsuit against the American equivalent of CREA, that the settlement agreement may accelerate the creation of discount or internet based agents, or other alternatives to the full service brokerages we are familiar with, since the MLS system will be accessible to CREA members who want to operate under those new models. 1. CREA ratified deal with Competition Bureau 58

59 What:Canada announced another round of modifications to mortgage insurance rules following changes implemented in October 2008 and April 2010. Why: Tightening mortgage rules are aimed at reining in elevated household debt levels by: Lowering consumer debt by reducing the total interest payments for homeowners Promoting home equity building Keeping financial institutions from allowing homeowners to roll consumer purchases into CMHC-insured mortgages How:Three main changes: Lower the maximum amortization period for a government-insured mortgage to 30 years from 35 years (Effective March 18, 2011) Lower the upper limit that Canadians can borrow against their home equity to 85% from 90% (Effective March 18, 2011) Remove government insurance backing on home equity lines of credit (HELOCs) (Effective April 18, 2011) Implications: Changes are likely to spark a rush of home buyers before March and pull more sales forward in the first part of the year. 2. Third round of tightening mortgage rules was announced by Department of Finance Canada 59

60 Luxury Real Estate 60

61 The strong rebound in the wealthy is a positive signal for the luxury market. End of Year Average Net Worth of Billionaires Number of Billionaires 2007$3.9 billion1,125 2008$3 billion793 2009$3.5 billion1,011 Source: Forbes 17% increase 27% increase 61

62 Source: Spectrum Group Percent Change in Number Affluent, by Net Worth 62

63 Sellers Market 18 54% Decrease 40 63

64 180 120 60 64

65 65

66 100% 95% 90% 85% 80% 66

67 67

68 Greater Supply + Longer DOM + Greater Discount = Opportunity for: 1.Investors in luxury market for both flippers and holders of undervalued properties. 2.Move-Up buyers who were previously priced out of luxury market. 68

69 Commercial Real Estate 69

70 Sector United StatesCanada 2009201020092010 Office15.7%17.4%9.9%9.4% Industrial13.2%14.5%8.1%7.4% Retail12.0%12.7%5.5%4.2% Multifamily7.4%6.1%2.8%2.6% Sources: NAR, CBRE, CMHC 70

71 Source: US CMBS Delinquency Rates, Trepp LLC. Graph scaled based on actual data for trend purposes only. 71

72 Moodys/REAL Commercial Property Price Index (CPPI) National - All Property Types 2.0 1.6 1.2 0.8 Index, December 2000 =1 Source: Moodys/REAL Commercial Property Price Index 72

73 2009-2011 Extend and Pretend to 2012 and forward Extend and Amend 63% Extend with Modification 16% Foreclose 14% Sell 7% Extend without Modification Maturing Loans: Preferred Strategy for Lenders by Mid-2011 All Commercial Property Types Source: Emerging Trends in Real Estate 2011 Survey 73

74 Flat Market 1.No new development means demand has time to catch up with supply 2.Economy needs time to improve which will strengthen demand New Commercial Loans (in billions) Source: Commercial Mortgage Alert 74

75 Slow Growth 1.New development tempered by sluggish U.S. economy. 2.Lack of overdevelopment will allow for faster growth with an improved outlook in the U.S. New Commercial Building Permits (in billions) Source: Statistics Canada 20 15 10 5 0 75

76 1.Distressed Assets (U.S.) 2.Quality Yield Properties 3.Tenant Representation 4.Owner Occupants 76

77 Worldwide Real Estate 77

78 1.Mission: To connect the real estate world into one successful community, and To expand our Profit Share opportunities for real estate agents worldwide 2.Goal: To add 75,000 agents outside of North America in the next 10 years. 3. The Global Opportunity: This is as challenging as it is exciting. 78

79 4. Strategy: To expand by following our core philosophy that everything rises and falls on leadership. Where and when we go will be dictated by finding the right partners. We will use the Master Franchise Model for opening countries/regions. The right partners will help us create the right models for their country. 79

80 5. What the World Wants: The overwhelming feedback is that agents around the globe want what we do best... training and education. Our opportunity will be to deliver our training and education around the world. This will require an International Faculty that can share our courses and culture. The other U.S. franchises have not succeeded because they have not been able to deliver anything other than a brand and some weak models. 80

81 How Do We Recover? 81

82 The Four Keys to Housing Recovery 82

83 What Can NAR Tell Us About 2010? 83

84 First-Time Home Buyers 84

85 Primary Reason for Purchasing a Home All BuyersFirst-time BuyersRepeat Buyers 2005 200920102009201020092010 Desire to own a home39%35%31%62%53%11%10% Desire for larger home2099221615 Change in family situation*988710 Home buyer tax credit*3861313 Job-related relocation or move1197221612 Affordability of homes*8610864 Desire to be closer to family/friends/relatives 84511710 Desire for a home in a better area * 451277 Desire to be closer to job/school/transit *331255 Desire for smaller home633**55 Retirement3331*45 Establish household*222411 85

86 Tenure in Previous Home 20092010 1 year or less4%3% 2 to 3 years188 4 to 5 years2116 6 to 7 years1218 8 to 10 years1517 11 to 15 years1217 16 to 20 years88 21 years or more1113 Median78 21% 38% 55% 86

87 Buyers Expected Length of Tenure 20092010 1 year or less1% 2 to 3 years33 4 to 5 years12 6 to 7 years33 8 to 10 years1413 11 to 15 years55 16 to 20 years22 Dont Know3942 Median10 22% 27% 40% 87

88 First Step in Home Buying Process All BuyersFirst-time BuyersRepeat Buyers 200920102009201020092010 Looked online for properties for sale36% 31%32%40%41% Contacted a real estate agent181914162122 Looked online for information about the home buying process 11 161578 Contacted a bank or mortgage lender88111066 Drove by homes/neighborhoods8766109 Talked with a friend or relative about home buying process 7711 33 Visited open houses442355 Looked in newspapers, magazines, or home buying guides 322232 Attended a home buying seminar1233** Contacted builder/visited builder models211122 88

89 Number of Weeks in Home Search 20017 20038 20048 20058 20068 20078 200810 200912 201012 89

90 Info Sources Used in Home Search 20092010 Internet90%89% Real estate agent8788 Yard sign5957 Open house4645 Print newspaper advertisement4036 Home book or magazine2623 Home builder1816 Relocation company43 Television87 Billboard65 Every source was used less except one – YOU! 90

91 200120032004200520062007200820092010 Real estate agent48%41%38%36% 34% 36%38% Internet8111524 29323637 Yard sign/open house sign1516 15 14151211 Friend, relative or neighbor877788766 Home builder or their agent377788754 Directly from sellers/knew the sellers445333222 Print newspaper advertisement775553322 Home book or magazine2121111** Other364****** Where Buyers Found the Home They Purchased 91

92 Value of Website Features Very Useful Somewhat Useful Not Useful Did Not Use / Not Avail Photos85%14%1% Detailed information about properties for sale831611 Virtual tours612756 Real estate agent contact information453510 Interactive maps43351012 Neighborhood information404398 Pending sales/contract status333516 Detailed information about recently sold properties30391615 Information about upcoming open houses21342223 92

93 Websites Used in Home Search 200520092010 Multiple Listing Service (MLS) website50%60%59% REALTOR.com544645 Real estate company website384643 Real estate agent website314542 Other website with real estate listings113041 For-sale-by-owner website*1715 Newspaper website1598 Real estate magazine website644 Social networking websites (e.g. Facebook, Myspace, etc.)*12 Video hosting websites (e.g. YouTube, etc.)**1 Warning: Get Better or Get Left Behind!!! 93

94 Method of Home Purchase Page 94 200120032004200520062007200820092010 Through a real estate agent or broker 69%75%77% 79%81%77%83% Directly from builder or builders agent 151412 13121086 Directly from the previous owner1599997655 Through a foreclosure or trustee sale 111*113104

95 Buyer Rep. Arrangement with Agent 20092010 Yes, a written arrangement43%40% Yes, an oral arrangement1917 No2829 Dont Know1113 95

96 What Buyers Want Most from Agents Help with the price negotiations 14% Help buyer negotiate the terms of sale 12% Help with paperwork 10% Determine what comparable homes were selling for 6% Help determining how much home buyer can afford 3% Help find and arrange financing 2% Other 3% 96

97 How Buyers Found Their Agent 200520092010 Referred by (or is) a friend, neighbor or relative44% 48% Internet website710 Used agent previously to buy or sell a home11109 Visited an open house and met agent767 Saw contact information on For Sale/Open House sign676 Walked into or called office and agent was on duty445 Referred through employer or relocation company443 Personal contact by agent (telephone, email, etc.)333 Newspaper, Yellow Pages or home book ad211 Direct mail (newsletter, flyer, postcard, etc.)1** Other667 97

98 Number of Agents Interviewed by Buyers 2002200520092010 One59%64%66%64% Two22201921 Three1910 Four or more--566 98

99 Reputation of agent 20% Agent is friend or family member 17% Agents knowledge of the neighborhood 12% Agent has caring personality/good listener 11% Agents association with a particular firm 3% Professional designations held by real estate agent 2% Other 5% Most Important Factors When Choosing an Agent 99

100 200520092010 Good financial investment94%87%85% Better than stocks*5447 About as good as stocks*2630 Not as good as stocks*79 Not a good financial investment134 Dont know51011 Buyers View of Home as a Financial Investment 100

101 Only 9% did!!! Would Buyer Use Agent Again or Recommend to Others? 101

102 Method Sellers Used to Find Agent 200520092010 Referred by (or is) a friend, neighbor or relative43%40%41% Used agent previously to buy or sell a home282423 Personal contact by agent (telephone, email, etc.)554 Visited an open house and met agent454 Referred by another real estate agent or broker344 Internet website234 Saw contact information on For Sale/Open House sign433 Referred through employer or relocation company353 Walked into or called office and agent was on duty232 Direct mail (newsletter, flyer, postcard, etc.)332 Newspaper, Yellow Pages, or home book ad222 Advertising specialty (calendar, magnet, etc.)*11 Other*56 102

103 20022010 One76%66% Two1619 Three810 Four--3 Five or more--3 Number of Agents Contacted Before Deciding Who to Sell Home With 103

104 What Sellers Most Want from Agents 200520092010 Help price home competitively17%22%23% Help find a buyer for home2821 Help seller market home to potential buyers*1920 Help sell the home within specific time frame2719 Help seller find ways to fix up home to sell it for more12107 Help with negotiations and dealing with buyers555 Help with paperwork/inspections/preparing for settlement734 Help seller see homes available to purchase311 104

105 200520092010 Reputation of agent57%36%35% Agent is honest and trustworthy*2123 Agent is friend or family member*16 Agents knowledge of the neighborhood171312 Agent has caring personality/good listener*64 Agents association with a particular firm644 Professional designations held by agent311 Other1734 Most Important Factors in Choosing an Agent to Sell Home 105

106 Negotiating Commission Rate or Fee 20092010 Real estate agent initiated discussion of compensation44% Client brought up the topic and the real estate agent was willing to negotiate their commission or fee 25 Client brought up the topic and the real estate agent was not willing to negotiate their commission or fee 99 Client did know commissions and fees could be negotiated but did not bring up the topic 10 Client did not know commissions and fees could be negotiated1311 106

107 Only 24% of sellers use the same agent they used previously to buy or sell a home. Would Seller Use Agent Again or Recommend to Others? 107

108 Method Used to Sell Home 200120032004200520062007200820092010 Sold home using an agent or broker79%83%82%85%84%85%84%85%88%* For-sale-by-owner (FSBO)1314 1312 13119** Sold to home buying company111111111 Other733232233 * Highest Level in 9 Years! ** Lowest Level in 9 Years! 108

109 Incentives Offered to Attract Buyers 20092010 None58%56% Home warranty policies2125 Assistance with closing costs1820 Credit toward remodeling or repairs65 Other incentives, such as a car, flat screen TV, etc.34 Assistance with condo association fees11 Other54 109

110 Annual KW MLS Study Top 5 Full Service vs. Top 5 Limited Service 110

111 22% Less 21% Less 34% Less 15% More 11% Less 27% Less 111

112 5% Slower 2% Faster 16% Slower 5% Faster 13% Faster 5% Faster 112

113 113

114 7% Increase 34% Decrease 18% Decrease 4% Decrease 16% Increase 114

115 115

116 Median Commission Rates Overall commission rates softened slightly in 2010, averaging 5.42%. Source: KWRI Internal Commission Studies

117 Median Commission Rates – Seller Side Seller side commission rates decreased slightly by less than a tenth of a point. Source: KWRI Internal Commission Studies

118 Median Commission Rates – Buyer Side Buyer side commission rates decreased more than a tenth of a point to 2.86% in 2010. Source: KWRI Internal Commission Studies

119 Median Commission Amount – Seller Side Median commission amount on the seller side increased by 26% due to a substantial 23% gain in the median price of homes in the sample. Source: KWRI Internal Commission Studies

120 Median Commission Amount – Buyer Side On the buyer side, commission amounts increased by approximately 11% due to a 4% increase gain in the median price of homes in the sample. Source: KWRI Internal Commission Studies

121 So, What Do We Do? 121

122 Marnie Bennett 1.Have a business plan/ know your goals and numbers 2.Invest in yourself through education and training. Set aside time and money specifically for that purpose 3.Be willing to adapt and embrace change / Internet, Social Media 4.Recognize whats working for you, and more importantly whats not working – What is your Unique Selling Proposition? 5.Be aware of your weaknesses and work to overcome them – or hire smartly to complement your skill set Bennett Real Estate Professionals Ottawa, Ontario 260 units $3.9M GCI $73M closed volume 122

123 Chris Heller 1.Create the habit of discipline to do your job every day 2.Focus on the two Es: efficiency and effectiveness 3.Desire – Be willing to do whatever it takes 4.Improve your versatility, the ability to deal with a wide variety of people 5.Absolute commitment to having a schedule and following a schedule The Heller Real Estate Group San Diego, CA 149 units $2.2M GCI $86.5M closed volume 123

124 Ben Kinney 1.The market should dictate your activity 2.Take listings and focus on pricing 3.Market for cheap 4.Leverage the Internet 5.Focus on the activity not the result Bellingham, WA 278 units $1.6M GCI $64M closed volume 124

125 Persistence and determination alone are omnipotent. The slogan Press On has solved and always will solve the problems of the human race. - Calvin Coolidge 125

126 P RESS O N! 126


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