1. Phoenix, Arizona Created by: Brent Saxon Appraisal Management Services, Inc. October 2008

2. In 2000, the median sale price (SFR) continued a 10+ year increase which continued through 2005 In 2005 the median sale price increased nearly 40% from the previous year Home sales grew slightly through 2003 and dramatically increased in 2004 and 2005 before sharply falling in 2006-2007 The decrease in the number of home sales can be attributed to a high rate of foreclosures and a downturn in the market Greater Phoenix Real Estate Trends

3. A closer look at the city of Phoenix shows a similar pattern Home sales varied throughout the 2000’s, but still show a decrease in activity beginning in mid 2005 Phoenix Market Trends

4. The average list price and average sale price both fell approximately 45% in Phoenix From October 2007 through October 2008, sales began increasing, however, the price per square foot began to drop Phoenix Market Trends

5. In Mesa, the average sales and list prices dropped approximately 28% from October 2007 to October 2008 The average price per square foot decreased from $152 to $108, or 28.95% in the same period Greater Phoenix Market Trends

6. Scottsdale saw similar declines in list and sale prices, approximately 29% While the days on market held fairly steady, the price per square foot dropped 23.13% Greater Phoenix Market Trends

7. Factors Affecting the Market  In the larger neighborhoods, builders continued to add more homes, at reduced prices while investors are trying to sell and lenders are seeking buyers for foreclosures  This led to declining property values throughout Phoenix, but some of the more established neighborhoods (built and bought before the boom in 2005) held steady and the owners had not over extended themselves

8.  Out of state investors, mainly from California and Nevada, played a lead role in the rapid price appreciation and shortage of available homes  Investors and speculators began buying one or more properties in 2005 when prices were getting higher in Nevada and California  Record low interest rates in 2005 led to people buying multiple homes for investment  This led to an unprecedented increase in prices in 2005, 35.62% as reported by ASU Realty Studies. Investor Speculation

9. Overall, Phoenix was hit the hardest by the rapid appreciation followed by record setting foreclosures The worst areas have been western Phoenix Arizona was a mortgage fraud “hotspot” according to RealtyTrac, Inc, Fannie Mae, and other industry corporations Mortgage Fraud

10. Arizona ranked 6 th in Subprime mortgage fraud in 2006 (MARI:9 th Periodic Report to MBA, April 2007)

11. Downtown Phoenix Hit Hard *Arizona State University, Dept of Realty Studies

12.  Arizona documented the third highest state total in the third quarter, with 40,419 properties receiving a foreclosure filing -- a 9 percent increase from the previous quarter and a 189 percent increase from the third quarter of 2007.  Phoenix documented the sixth highest metro foreclosure rate, with 2.11 percent of its housing units receiving a foreclosure filing during the third quarter.  In 2007 the difference in the median home price b/w foreclosures and traditional sales was 17.5% ($222,073 – $269,021) Foreclosures Affecting the Market

13.  Arizona ranked 4 th in the nation in foreclosures with 1 house in every 201 having filed for foreclosure  In one Phoenix neighborhood, only five homes were foreclosed on in 2005  In 2006, 15 were foreclosed on, most in the last two months of the year  In 2007, 75 homes were claimed by the banks Foreclosures Affecting the Market

14. This chart further illustrates the trend of increased sales in 2005 with a substantial decline after, this chart represents the sales of SFR and condos Notice in 2008 that new home sales remained on a decline while re- sales were beginning to increase This is due to the increase availability of re-sales, from foreclosures, that have been offered at lower prices Foreclosures Affecting the Market

15. The break down of single family and condo units give more insight to how this trend has affected each area Single family homes have experienced the largest decline in property values but are seeing increased sales activity New construction has taken the largest hit in number of sales According to Arizona State University Realty Studies, the high rate of foreclosure sales is pushing down home values across the Phoenix area. For the traditional sales market, the median price of resale homes in Maricopa County was $175,000 in October, while foreclosed properties had a median price of $159,775. One year ago, the median prices were $250,000 and $218,225, respectively Foreclosures Affecting the Market

16. The chart below shows the percent of the normal, short sale, and REO properties representing both active and sold properties In Phoenix, REO and short sale properties make up the majority of the listings and sales since 2007 Foreclosures Affecting the Market

17. In Las Vegas, Phoenix, San Diego, Washington, D.C., and much of Florida, an estimated 25% to 40% of condos under development or apartments that were converted into condos for sale will be put back on the market as rentals, says Marcus & Millichap, an investment brokerage firm. During the real estate frenzy, thousands of apartment renters were forced out by landlords who converted their units into condos for sale. Last year, about 200,000 apartments were sold for conversion to condominiums, on top of 135,000 new condos. (USA Today 7/14/2006) Condominium Market

18. The condo market followed the same path as single family homes through 2008 The abundance of available units and the lack of potential buyers caused an over supply and rapidly decreasing values Many are being converted into apartments Condominium Market

19.  Due to the wave of foreclosures and the decrease in sale prices back to the 2003 and 2004 levels, speculators once again have an eye on Phoenix  Investors are encouraging people to invest in real estate in the Phoenix market for the long term outcome potential  Prior to the rapid appreciation real estate appreciated 5%-6% per year for a long, relatively stable period  Although the decline may not be over in the short term, it is hopeful to return to a stable or increasing market over the next decade

20. This presentation was for informational purposes only. All information was gathered from third party studies and is believed to be accurate but is not warranted. We hope this presentation will aid you in lending or review decisions in your market area. For additional information please contact Jeff Bass at (678) 354-8363 ext. 116 or jbass34131@aol.com for additional information. You can also visit are website at AppraisalManagementServices.net jbass34131@aol.com