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  • 1. Austin Area Local Market Report, Third Quarter 2009 Today's Market… Median Price (Red Line) and One-year Price Growth $250,000 12% 10% $200,000 8% 6% $150,000 4% 2% $100,000 0% $50,000 -2% -4% $0 -6% 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Austin U.S. Local Trend Price Activity Current Median Home Price (2009 Q3) $189,100 $177,900 Prices are down compared to a year 1-year Appreciation (2009 Q3) -0.9% -11.7% earlier and continue to weaken 3-year Appreciation (2009 Q3) 7.7% 7 7% 0.5% 0 5% 3-year (12-quarter) Housing Equity Gain $13,600 $867 This area has held onto a modest 7-year (28 quarters) Housing Equity Gain $32,100 -$45,900 improvement in equity despite the market 9-year (36 quarters) Housing Equity Gain $38,100 $3,467 decline Conforming Loan Limit* $417,000 $729,250 Most buyers in this market have access Local Median to Conforming Limit Ratio 45% not comparable to government-backed finacing *Note: the 2009 loan limits for FHA and the GSEs were extended through 2010. State Home Sales (Red Line) and Sales Growth 1,000s 700 25% 20% 600 15% 500 10% 400 5% 0% 300 -5% 200 -10% -15% 100 -20% 0 -25% 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Home Sales and Construction Growth Texas U.S. Sales growth during the third quarter State Existing Home Sales -1.9% 5.9% remains sluggish compared to the ( (2009 Q3 vs 2008 Q3)) national average
  • 2. Drivers of Local Supply and Demand… Local Economic Outlook Austin U.S. Not 1-year Job Change (Sep) -8,700 Job losses are a problem and will weigh Comparable on demand, but layoffs are declining Not 1-year Job Change (Aug) -10,900 which could help buyer confidence Comparable Not Unemployment has risen since the same 3-year Job Change (Sep) 37,500 Comparable period last year, but Austin's labor market Current Unemployment Rate (Sep) 7.2% 9.8% has been more resilient than the national Year-ago Unemployment Rate 4.6% 6.2% average 1-year (12 month) Job Growth Rate -1.1% -3.1% Respectable compared to other markets State Economic Activity Index Texas U.S. Texas's economy has contracted more 12-month change (2009 - Sep) -4.3% -3.2% than the rest of the nation and continues 36-month change (2009 - Sep) -0.1% -1.1% to soften Local Fundamentals Austin U.S. 12-month Sum of 1-unit Building Permits through The current level of construction is 61.0% 6,642 not comparable Sep 2009 (1,000s) below the long-term average Excess supply reduction could result in Long-term average for 12-month Sum of 1-Unit price escalation over the longer-term if, in 17,010 , not comparable p Building Permits (1,000s) (1 000s) the future there is rapid and robust future, increase in demand Single-Family Housing Permits (Sep 2009) Low construction will help to maintain a -28.5% -34.9% 12-month sum vs. a year ago tight supply and to stabilize prices Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line) 30,000 25,000 20,000 15,000 10,000 5,000 0
  • 3. Affordability Affordability - Local Mortgage Servicing Cost-to-Income (Historical Average Shown in Red Dashed Line) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Monthly Mortgage Payment to Income Austin U.S. Ratio for 2008 13.7% 19.5% Historically strong and an improvement Ratio for 2009 Q3 12.5% 15.6% over the second quarter of this year Historical Average 14.1% 23.2% Good relative to the nation Recent Trend - Local Mortgage Servicing Cost to Income (Historical Average Shown in Red Dashed Line) 16% 14% 12% 10% 8% 6% 4% 2% 0% 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3
  • 4. Median Home Price to Income Austin U.S. Ratio for 2008 5.0 7.1 Local affordability conditions have Ratio for 2009 Q3 5.0 6.2 weakened relative to local history Historical Average 4.6 7.2 Affordable compared to most markets Ratio of Local Median Home Price to Local Average Income (Historical Average shown in Red Dashed Line) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 The Mortgage Market 30-year Fixed Mortgage Rate and Treasury Bond Yield (%) 3.0 7.0 6.5 2.5 6.0 2.0 5.5 5.0 1.5 4.5 4.0 1.0 3.5 0.5 3.0 2.5 0.0 2.0 2004 Q3 Q1 2005 Q3 Q1 2006 Q3 Q1 2007 Q3 Q1 2008 Q3 Q1 2009 Q3 Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis) The spread between the 30-year fixed rate mortgage and the 10-year Treasury bond fell again in the third quarter and stands close to the historic average. This decline of the spread suggests that the financial markets view the risk on mortgage debt as close to a "normal" state and that the private sector will buy up excess demand if yields rise. Consequently, the Fed is likely to phase out its program of buying up mortgages in the secondary market to keep rates low, leaving the private sector to fill the void. Mortgage rates are likely to rise in first or second quarter of 2010 as the Fed exits the mortgage market.
  • 5. Looking Deeper…. State Total Foreclosure Rate vs. U.S Average (U.S. Average in Blue Dashed Line) 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Mortgage Bankers' Association Monthly Market Data - August 2009 Austin U.S. 12.3 9.2% The A ti Th Austin market h a l k t has lower share of h f Market Share: % 90.8% 87.7% subprime loans than the average market, Prime (blue) vs. 90.8 87.7 but rising prime foreclosures are Subprime + Alt-A % % becoming a problem 9.2% 12.3% There was a substantial increase versus 0.7 0.7% 2.3% PRIME: 0.5 2.3% July of this year % 1.7% Foreclosure + REO % Rate Compared to the national average, 0.5% 1.7% Jul-09 Aug-09 Jul-09 Aug-09 today's local rate is low There has been little change locally 6.8% 18.0% SUBPRIME: 6.8% 18.8 compared to July % 18.0 Foreclosure + REO 6.4% % Rate Locally, today's foreclosure rate is low 6.4% 18.8% Jul-09 Aug-09 Jul-09 Aug-09 relative to the national average Relatively little local change versus July 4.0% 14.5% ALT-A: 14.5 of this year 4.0% 12.1 % Foreclosure + REO 3.8% % Rate The August rate for Austin is low 3.8% 12.1% Jul-09 Aug-09 Jul-09 Aug-09 compared to the national average The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed the foreclosure process and are owned by banks divided by the total number of mortgages for that area. Source: First American CoreLogic, LoanPerformance data