Michael Orr Director Center for Real Estate Theory and Practice June 20, 2013 Michael Orr Director Center for Real Estate Theory and Practice June 20, 2013 Greater Phoenix Housing Market

Euphoria Denial Despair Hope Skepticism Optimism Enthusiasm Exhilaration Unease Pessimism Panic Capitulation Relief Optimism Enthusiasm The Market Cycle ©

Some Goofy Theories Out There The housing recovery is a sham The banks own a large percentage of homes and are keeping them off the market Institutional investors and hedge funds are dominating the market Ordinary people are not buying homes, it’s mostly investors with cash First time home buyers are not participating Home builders are deliberately slowing sales The housing recovery is a sham The banks own a large percentage of homes and are keeping them off the market Institutional investors and hedge funds are dominating the market Ordinary people are not buying homes, it’s mostly investors with cash First time home buyers are not participating Home builders are deliberately slowing sales

Some Goofy Theories Out There The housing recovery is a sham The banks own a large percentage of homes and are keeping them off the market Institutional investors and hedge funds are dominating the market Ordinary people are not buying homes, it’s mostly investors with cash First time home buyers are not participating Home builders are deliberately slowing sales The housing recovery is a sham The banks own a large percentage of homes and are keeping them off the market Institutional investors and hedge funds are dominating the market Ordinary people are not buying homes, it’s mostly investors with cash First time home buyers are not participating Home builders are deliberately slowing sales Complete bollocks

The Real Situation – June 2013 Chronic shortage of homes for sale Sales prices have risen fast but likely to rest Jul-Sep Loan delinquency back to normal in AZ Foreclosures almost back to normal in Phoenix Normal buyers gaining market share 61% -> 73% Institutional investor impact exaggerated by media New home demand up – but supply constrained Shortages of labor and land impacting builders Luxury market recovering from the bottom up Chronic shortage of homes for sale Sales prices have risen fast but likely to rest Jul-Sep Loan delinquency back to normal in AZ Foreclosures almost back to normal in Phoenix Normal buyers gaining market share 61% -> 73% Institutional investor impact exaggerated by media New home demand up – but supply constrained Shortages of labor and land impacting builders Luxury market recovering from the bottom up

Loan Delinquency Rates Back to normal levels Loan Delinquency Rates Back to normal levels

AZ ranked 5 th worst AZ ranked 43r d 5.9% 9.4% 13.5% 16.3% Normal level is 5%

Foreclosures Almost back to normal levels Foreclosures Almost back to normal levels

long term trend line

Shadow Inventory – Maricopa County 1,220,778 housing units – (excluding multi-family) – 1,027,959 single family homes – 192,819 condo / townhomes How many are owned by banks?

Shadow Inventory – Maricopa County 1,220,778 housing units – (excluding multi-family) – 1,027,959 single family homes – 192,819 condo / townhomes How many are owned by banks? Answer = 3,668 (0.3%) = 3,024 SFR condos 893 are already sold and in escrow 701 are available on MLS So 2,074 are presently in “shadow inventory”

For-sale Housing Supply Very low at low end of market Tight in the middle Adequate at the high end For-sale Housing Supply Very low at low end of market Tight in the middle Adequate at the high end

long term trend line

Pricing Rising almost everywhere – especially at low end Pricing Rising almost everywhere – especially at low end

long term trend line

outlook

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Miller Manor, Buckeye

Sold by Richmond American for $12,500 each in Dec 2009

What Happened to the Completed Homes? What Happened to the Completed Homes?

Current Status 1 Active Listing (+2 UCB) - Equity sale (just)

New Homes Growing but still a very small part (11%) of the market New Homes Growing but still a very small part (11%) of the market

Outlook Chronic low inventory will continue Prices will continue to rise but expect a summer lull Investor buying will slow down as prices rise Foreclosures will drop below normal levels Short sales will continue but at much lower volumes Confidence in the market will grow fast Improving credit -> boomerang buyers Builders cannot meet demand – expect sales metering Luxury market stronger - improving from the bottom up Chronic low inventory will continue Prices will continue to rise but expect a summer lull Investor buying will slow down as prices rise Foreclosures will drop below normal levels Short sales will continue but at much lower volumes Confidence in the market will grow fast Improving credit -> boomerang buyers Builders cannot meet demand – expect sales metering Luxury market stronger - improving from the bottom up

Michael Orr Director Center for Real Estate Theory and Practice June 20, 2013 Michael Orr Director Center for Real Estate Theory and Practice June 20, 2013