1. 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

2. Euphoria Denial Despair Hope Skepticism Optimism Enthusiasm Exhilaration Unease Pessimism Panic Capitulation Relief Optimism Enthusiasm The Market Cycle © 2013 www.cromfordreport.com

3. 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

4. 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

5. 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

6. Loan Delinquency Rates Back to normal levels Loan Delinquency Rates Back to normal levels

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

11. Foreclosures Almost back to normal levels Foreclosures Almost back to normal levels

13. long term trend line

16. 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?

17. 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 + 644 condos 893 are already sold and in escrow 701 are available on MLS So 2,074 are presently in “shadow inventory”

23. 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

24. long term trend line

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

31. long term trend line

33. outlook

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36. Miller Manor, Buckeye

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

38. What Happened to the Completed Homes? What Happened to the Completed Homes?

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

41. 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

43. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

47. 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

48. 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