Economic Summit 2012

1. Economic Summit 2012 Residential Real Estate in WASHINGTON COUNTY “A Review and a Preview” Presented by Vardell H Curtis, RCE Chief Executive Officer Washington County Board of REALTORS®

3. Road Map to a Housing Rebound If you’re a homeowner these days – and almost two thirds of Americans are – the housing market generally doesn’t fall into the realm of pleasant dinner conversation. The once-booming industry has been bruised and bloodied from nearly every angle. Home prices have plunged 30% nationally over the past 5 years, millions of Americans have lost their homes to foreclosure, and millions more are on the brink with underwater mortgages. Still others are seriously delinquent on their home loans. Still, the U.S. economy is resilient. The recovery has absorbed a debt-ceiling fiasco at home, a near financial meltdown in Europe, and political chaos in the Middle East. The job market is improving, consumers are spending more, and corporate balance sheets remain healthy, all of which are critical for the housing market to rebound. US News – December 2011

4. Road Map to a Housing Rebound The situation in the housing market is tightly bound with what’s happening in the broader economy. A broader economic recovery is going to have to precede a recovery in housing. Really, job growth is so essential for housing demand. Particularly important is the unemployment rate among young Americans between 25 and 34 years old. These are the people forming households and buying their first homes. Due to the bad economy, more young Americans have been “doubling up,” moving in with friends or living at home to ride out lean times. That’s put the kibosh on demand which is part of the reason why there’s still so much housing inventory to work through. US News – December 2011

5. Utah’s Employment Summary Utah continues to be one of the nation’s leading employment growth states. Nearly all industrial sectors have added jobs over the past 12 months, and the employment rebound appears on firm footing as the economy moves into 2012. While nearly all industrial sectors are adding jobs, the lone exceptions are construction and government. Construction, an industry whose growth is important to help sustain overall long-term economic expansion, is trying to rebuild its employment foundation in Utah. It is moving forward in some regions while others are still sluggish. Construction employment is largely unchanged from last year and is an industry still waiting for a rebound to develop. Department of Workforce Services – November 2011

6. Utah Seasonally Adjusted Unemployment Rates November October September November 2011 (p)2011 (r)2011 (r)2010 (r) Washington 8.0 8.4 9.0 9.9 Iron 8.1 8.4 8.9 9.4 Cache 4.7 4.9 5.2 5.9 Garfield 11.5 11.9 12.8 10.1 State 6.4 7.0 7.4 7.6 United States 8.6 9.0 9.1 9.8 Department of Workforce Services – December 2011

7. Construction New housing starts seem like they’re stabilizing. However, they remain well below peak levels. As that pent-up demand comes into play, we should see those housing starts start to slowly increase, and that should help boost our construction sector. We lost so many jobs in construction that any increases show up as relatively good growth. We even see in 2012 construction being the fastest-growing sector in employment at around 4 percent growth, but that’s just related to the fact we lost so many jobs there. Utah Business Magazine – December 2011

8. Builder Confidence Challenged Builders know that many buyers have been sidelined by tightened lending standards. The uncertain economic climate and concerns about job security are discouraging many buyers from exploring a home purchase. While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring. Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements. Realty Times – August 2011

9. Housing Starts and Building Permits Most data the public sees is based on home prices, number of homes sold or foreclosures. Housing permits are a way to look ahead at what is likely to happen in the market. This indicator reports on both the number of housing units on which construction has begun, as well as the number of units for which permits have been issued. It’s generally regarded as a good indicator of future home sales and consumer spending in general. Permits typically are a good indicator of housing starts three to four months in the future. Financial Outlook – Winter 2011/2012

10. Building Permits Historically

11. Building Permits by Month

12. Consumer Confidence Index This indicator is a summary of interviews with some 5,000 consumers nationwide on their feelings about their own financial condition, the strength of the economy, and their outlook for the next six months. Historically, changes in this index have tracked the leading edge of the business cycle well, as it indicates how willing consumers are to spend more and make big-ticket purchases (like a car or a home). Financial Outlook – Winter 2011/2012

13. CCI Surges in December Americans are gaining faith that the economy is on the upswing. An improving job outlook helped the Consumer Confidence Index soar to the highest level since April and near a post-recession peak. The December surge builds on a big increase in November when the index rose almost 15 points. Economists watch confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity. According to the AP poll of economists, conducted December 14 through 20, the U.S. economy is expected to grow 2.4 percent in 2012. In 2011, it likely grew less than 2 percent. The Spectrum / AP – December 2011

14. Consumer Confidence on the Rise In December, on a seasonally adjusted basis, the Zions Bank Consumer Attitude Index (CAI) increased to 81.9 percent, a jump of 14.1 points compared to November 2011. The national Consumer Confidence Index (CCI) increased 9.3 points to 64.5. An index of 70 or below is indicative of slow economic growth. Consumer confidence in stabilizing home prices increased this month as well. Seventy-three percent, compared to 69 percent in November, believe the price of homes in their community will remain unchanged during the next 12 months. Overall, consumer attitudes have taken a more positive direction. Utah Business.com – December 2011

15. Washington County Hit hard by the recession, Washington County’s meteoric population growth has moderated and the county’s construction industry has yet to make a comeback. Manufacturing was hit by the double whammy of construction-related losses, and then again by the national downturn. However, the county’s economy is in recovery – albeit a jobless recovery. Unemployment rates, while still above the state average, are moderating, initial unemployment claims are down and gross taxable sales are up slightly. Department of Workforce Services – December 2011

16. 10 Housing Markets Poised for Biggest Price Recovery The blog 24/7 Wall St. has identified the ten metropolitan areas where home prices are projected to increase the most from the second quarter of 2011 to the second quarter of 2012. Six of these ten metropolitan areas are among the top 50 areas that experienced the worst housing declines from the second quarter of 2008 to the second quarter of 2011. The housing markets in these areas were badly hurt when the real estate bubble burst and were considered to have hit rock bottom. These kinds of markets draw investors, and the inflow of new money causes these markets to bounce back, driving home prices back up. HousingZone.com – November 2011

17. America’s Ten Worst Housing Markets Poised to Recover 10 - Mobile, Alabama 6.2% 9 - Syracuse, New York 7.0% 8 - Las Cruces, New Mexico 7.4% 7 - Niles – Benton Harbor, Michigan 7.5% 6 - St.George, Utah 7.9% 5 - Farmington, New Mexico 8.3% 4 - Yuba City, California 9.2% 3 - Yuma, Arizona 9.5% 2 - Carson City, Nevada 15.5% 1 - Madera – Chowchilla, California 15.5% Wall Street.com – November 2011

18. Markets Poised to Recover – St.George • Change in home prices (2011 Q2 to 2012 Q2): 7.9% • Change in home prices (2012 Q2 to 2013 Q2): 3.5% • Population: 138,492 • Prices reached peak in: 2006 Q4 (-41.4%) • Unemployment: 9.6% Home prices have decreased by 41.4% in St.George, Utah, since the fourth quarter of 2006. In just the last twelve months, prices have dropped 12.4% - the eighth largest drop in the country.However, from the second quarter of 2011 to the second quarter of 2012 prices are projected to increase 7.9% Wall Street.com – November 2011

19. ACCRA Cost of Living – 2011 3Q All ItemsGroceriesHousingUtilitiesTransportHealth Salt Lake City 94.8 92.0 90.4 80.8 95.5 93.4 Provo-Orem 90.2 87.8 84.2 82.1 95.5 88.1 Ogden 90.5 94.9 80.1 102.8 93.5 86.3 St.George 91.4 100.4 81.6 87.6 93.0 90.4 Cedar City 87.8 100.6 70.2 84.3 97.4 85.1 San Diego 130.8 106.3 189.1 112.8 107.3 111.6 San Francisco 161.3 118.8 278.2 90.4 108.8 110.7 Denver 105.3 102.6 114.2 89.5 94.0 105.4 Las Vegas 98.3 104.6 89.9 91.7 101.1 106.4 New York 223.9 148.9 426.5 131.4 127.5 127.1 Council for Community and Economic Research – November2011

20. Mortgage Rates Reach New Record Lows Just in time for the holidays: Mortgage rates reached new all-time lows this week, pushing home buyer affordability even higher, Freddie Mac reports in its weekly mortgage market survey. Rates on 30-year fixed mortgages have been at or below 4 percent for the last eight weeks and now are almost 0.9 percentage points below where they were at the beginning of the year, which means that today’s home buyers are paying over $1,200 less per year on a $200,000 loan. This greater affordability helped push existing home sales higher for the second consecutive month in November, the most since January. Daily REAL ESTATE NEWS – December 2011

21. The Impact of Mortgage Rates The low rates can translate into big savings for home buyers. Five years ago, a home buyer would have been lucky to land a 5% rate on a 15-year loan. On a $200,000 mortgage, that would have meant the borrow would have paid $1,582 a month. Should a borrower land a 3.2% rate on a $200,000 loan now, the monthly mortgage payment would come to $1,400 – a savings of $182 a month. The rock-bottom interest rates, combined with the lowest housing prices in years, have made home buying extremely affordable. CNNMoney.com – December 2011

22. “Interest Rate Heaven” It seems over the past few years we have been in an eternal state of “Interest Rate Heaven.” How soon we forget what rates were just 5 to 10 years ago, and then back to the early 80’s rates of 15 to 20 percent. Can you say “perspective.” Let’s be realistic, mortgage interest rates like the ones we have experienced over the last three plus years cannot be sustained. In fact, the reason interest rates have been so low is primarily because the economy has been in the dumps. Bottom line, a mortgage will continue to be one of the cheapest forms of money that individuals will be able to get. If economic predictions hold true, the inevitable interest rate increase will come. The Daily Spectrum – December 2011

23. Record Low Financing Costs Yes, obtaining credit in many cases is more difficult than a few years ago. Yes, financial issues in Europe have raised anxiety levels throughout the world. Yes, U.S. political uncertainty has done the same. However, one constant is likely to remain in place throughout 2012 and perhaps well into 2013. The Federal Reserve’s most important interest rate – the federal funds rate – has been at an all-time low target range of 0.00%-0.25% since December 2008, a period of three years. Moreover, the Fed’s Open Market Committee has noted frequently its intent to keep that rate at the current level “until at least mid-2013.” Such a statement is almost unprecedented in the Fed’s history. Mainstreet Business Journal – December 2011

24. Refinance Applications on the Rise Amid substantial market turmoil, mortgage rates dropped to the lowest levels of the year, and refinance applications jumped more than 30 percent to the highest levels of the year. Over the past month, refinance application volume has increased by 63 percent. Refinance applications for jumbo loans increased by almost 75 percent relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer. Realty Times – August 2011

25. A Refinance Resurgence Currently, most borrowers are looking to refinance existing loans rather than buy. Last week, mortgage applications climbed 4.1%, driven by a surge of home buyers trying to refinance to record-low rates. According to the Mortgage Bankers Association’s latest Market Composite Index, close to 80% of loan applications were to refinance existing loans. CNNMoney.com – December 2011

26. Present Market Conditions Mortgage rates ended the year hovering near historic lows in an already affordable housing market according to Frank Northaft, vice president and chief economist at Freddie Mac. The low mortgage rates also contributed to the improving environment for the housing market. 30-year fixed-rate mortgages averaged 3.95% with an average of .7 points. Last year at this time 30-year fixed-rates averaged 4.85%. 15-year fixed-rates averaged 3.24 % with .8 points, almost a full 1% lower than last years 4.20%. Market Review and Mortgage Update – January 2012

27. What’s Up – Mortgage Rates? A stronger economy will push Treasury bonds and mortgage rates up because inflation will become more likely and investors demand higher rates to hold bonds. But lots of factors can push rates up or down. For the housing market, which direction rates go is less important than why. Gradual economic recovery is good news for the housing market even if it means higher mortgage rates – because higher mortgage rates should go hand-in-hand with greater housing demand. It is predicted that mortgage interest rates will gradually rise from record 2011 lows to 4.5% by the middle of 2012. Jed Kolko, Trulia Chief Economist – December 2011 Housing Wire – November 2011

28. Restored Higher FHA Loan Limits In an important victory for the housing industry and consumers, Congress approved a much-debated initiative to restore higher loan limits through 2013 for mortgages backed by the Federal Housing Administration (FHA). The measure reestablished a national ceiling for FHA mortgages of $729,750, up from $625,500. The measure also restored local FHA loan ceilings to 125% of the area median home price, up from 115% which will help put a floor under falling home values in markets nationwide. Unfortunately, in the face of extreme opposition in the House, legislators were unable to restore the higher loan ceilings for government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which together provide funding for about half of all U.S. mortgages. National Association of Home Builders – December 2011

29. Cash is KING in 2011 Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases. Between tight lending standards and a desperate search for yield by investors, cash purchases of homes – particularly for distressed properties – became even more common in 2011. Thirty-eight percent of homes purchased in 2011 were bought with all cash. That’s up from 34% in 2010, and double the 19% rate in 2006. This trend is likely to continue in the near term as cash-paying investors are responsible for an increasing share of home purchases. DSNEWS.com – December 2011

30. Investors Stepping Up Here’s another sign the market is nearing the bottom:Investors have started to buy up houses and condos, in some instances paying entirely in cash. It’s a sign these investors are betting on the rebound. That’s a far cry from the heady bubble days when borrowed money seemed the key to riches. The bubble-era speculators who got burned tended to buy at the peak and borrowed too heavily to do so. When the crash came, they quickly saw their wealth erased. Investors buying at current prices are looking for deals. They typically like to pay entirely in cash (or with a relatively small loan) to speed up transactions. That can be vital for an investor wishing to lock in a deal fast. THE WALL STREET JOURNAL – March 2011

31. Investors Back in the Market “There are a number of investors that are taking their money out of Wall Street and are looking for investment rental properties, because they can buy a property for $130,000 - $160,000, put 20 percent down and typically return 7 to 10 percent before the cap rate. So investors are very active in the St.George market.” Utah Business Magazine – December 2011

32. Decline Among Owner-Occupant REO Buyers New Vista Asset Management has published the results of a three-year study on buyers of foreclosed homes, covering 18 counties hit hardest by the mortgage crisis. The company says the percentage of REO homes sold to owner-occupant buyers has decreased in almost every market. Most markets in the study saw their share of owner-occupant REO buyers drop by double-digits over the three-year period. DSNews.com – December 2011

33. REO’s & Short Sales – The New Normal? If you even know anyone who has house-hunted in the past couple of years, you’ve likely heard tales of high drama -- super long escrows, first-time homebuyers being bested by investors’ cash offers, banks resistant to negotiating for repairs – that take place in the course of a distressed property sale. In the coming year, distressed home saleswill continue to represent an increasing share of homes on the market. So, buyers will shift from considering whether to buy a short sale to understanding that they must be educated and prepared to do a deal with a seller, a bank (to buy a REO) or a hybrid of the two (to buy a short sale) to access the full selection of homes on the market. Inman News – January 2012

34. Impact of Foreclosures The number of foreclosed homes on the market continues to pose major challenges, not just to builders who have to compete against that low-priced product, but also to buyers who need to sell an existing home before trading up to a new one. Price data suggests entry-level homes are generally driving the new-home market right now, and that’s because first-time buyers don’t have another home they have to sell. Realty Times – October 2011

35. Faster Foreclosure Processes & Reduced Inventory Getting homes that are likely to be foreclosed upon or homes that already are in foreclosure to the market is key to exposing the nation’s shadow inventory, which has been keeping prices depressed around the country. Next on the to-do list is to clear out the massive housing inventory. Especially with the influx likely to come on to the market when foreclosure processes finally get ironed out. Reducing the supply of homes should help boost prices in the long run, and price appreciation is good for the housing market. US News – December 2011

36. Top Ten Foreclosure States STATERATEAVERAGE FORECLOSURE PRICE Nevada 1-175 $119,180 California 1-211 $237,150 Arizona 1-256 $123,077 Utah 1-290 $166,645 Georgia 1-330 $110,121 Michigan 1-330 $ 59,079 Florida 1-358 $110,503 Illinois 1-427 $124,042 Ohio 1-500 $ 82,873 S. Carolina 1-517 $150,898 NATION 1-579 $182,489 (November 2011)

37. Foreclosure Rates Decrease According to recently released information from CoreLogic data, the rate of St.George area foreclosures among outstanding mortgage loans is 2.51 percent for the month of September 2011, a decrease of 1.75 percentage points when compared to September 2010 when the rate was 4.26 percent. Foreclosure activity in St.George is lower than the national foreclosure rate which was 3.48 percent for September 2011, representing a 0.97 percentage point difference. Also, in St.George, the mortgage delinquency rate has decreased. According to CoreLogic data for September 2011, 6.56 percent of mortgage loans were 90 days or more delinquent compared to 9.73 percent for the same period last year, representing a decrease of 3.17 percentage points. Mainstreet Business Journal – December 2011

38. NOD’s and Trustees Deeds

40. Active Inventory

41. Active Inventory

42. Sold Volumes and Average Price

43. 2011 Sold Volumes and Average Price

44. Sold DOM vs Sold Price

45. Sold DOM vs Sold Price

46. Sold DOM vs Units Sold

47. Sold DOM vs Units Sold

48. Hot Sheet Price Change Trends

49. Price Change Trends in 2011

50. High-End PropertiesWhat the Experts are Saying A little over three years ago, a study of all active listings over $500K was conducted with about 500 properties identified. Today, there are 198 listings in that same price range. While it is true that many homes over $500K three years ago may now, because of market driven pressures, remain on the market but for less than the identified threshold, it is equally true that certain geographic areas and developments have now worked through their excess inventory and remain viable and healthy. Case in point, The Cliffs of Snow Canyon, the Ledges and Stone Cliff, 3+ years ago had 103 homes for sale over $500K. Today, 31. Just another indication of an upswing in the market. Southern Utah Title Company – January 2012