Appraisal Institute Presentation September 19, 2009 Breckenridge, Colorado

Objectives Explanation of Various Residential RE Statistical Models Relating sub-markets to the whole HVCC information from NAR Introduction to absorption rate pricing

Objectives

Explanation of Various Residential RE Statistical Models

Relating sub-markets to the whole

HVCC information from NAR

Introduction to absorption rate pricing

Statistical Models-CS Case-Shiller – based on paired residential re- sales in 20 MSA’s - including Denver sold to Fiserv (S&P) which uses the data to develop indices to support sales of options + tradable futures on ChiMerEx is applicable only to residential resale’s data is gathered from recorded information calculated monthly using a 3 month rolling average and published with a 2 month lag

Case-Shiller – based on paired residential re- sales in 20 MSA’s - including Denver

sold to Fiserv (S&P) which uses the data to develop indices to support sales of options + tradable futures on ChiMerEx

is applicable only to residential resale’s

data is gathered from recorded information

calculated monthly using a 3 month rolling average and published with a 2 month lag

Statistical Models-O FHFA (OFHEO) Released Quarterly Data from FNMA and FREDDIE, includes refinances Is a modified version of the WRS approach developed by CS Excludes sales made with jumbo, FHA, and VA financing and multi-family sales

FHFA (OFHEO)

Released Quarterly

Data from FNMA and FREDDIE, includes refinances

Is a modified version of the WRS approach developed by CS

Excludes sales made with jumbo, FHA, and VA financing and multi-family sales

Statistical Model-Z Uses the proprietary algorithm “Zestimate” for any given county using recorded data Refreshed daily Demonstrates the Median Price Offers a median MSA value by intuiting a value for each individual property and applying that to all residential properties in a given county It is a SWAG developed from a WAG

Uses the proprietary algorithm “Zestimate” for any given county using recorded data

Refreshed daily

Demonstrates the Median Price

Offers a median MSA value by intuiting a value for each individual property and applying that to all residential properties in a given county

It is a SWAG developed from a WAG

Statistical Model-M Denver Local MLS Data from Metrolist Inc. Reflects true sale price, is not an index Is not weighted or seasonally adjusted Excludes most new homes sold Excludes private sales Does not include refinance information Suspect because of entry methods

Denver Local MLS Data from Metrolist Inc.

Reflects true sale price, is not an index

Is not weighted or seasonally adjusted

Excludes most new homes sold

Excludes private sales

Does not include refinance information

Suspect because of entry methods

Case-Shiller vs. Denver Actual

Case-Shiller vs. OFHEO

Case-Shiller-OFHEO vs. Actual

Case-Shiller Comparison

Zillow – Denver vs. United States

Denver Average Residential Sold Price

Denver Median Residential Sold Price

Denver Market Activity-MLS

Average Days on Market for Metro Denver Residential

Average Days on Market for Metro Denver Condo

Residential Price Change Analysis

Condo Price Change Analysis

Seasonal Influx Index-Residential

Seasonal Influx Index-Condo

Total Combined Number of Homes for Sale by Year-MLS

Total Combined Number of Homes Sold by Year-MLS

Total Homes sold in Metro Denver as reported by Metrolist 2003 – 47,966 2004 – 54,012 2005 – 53,005 2006 – 50,244 2007 – 49,789 2008 – 47,837 y-t-d 2009 – 27,708 2009 - 40,200 - Projected year end Excludes new homes sold onsite and private sales

2003 – 47,966

2004 – 54,012

2005 – 53,005

2006 – 50,244

2007 – 49,789

2008 – 47,837

y-t-d 2009 – 27,708

2009 - 40,200 - Projected year end

Excludes new homes sold onsite and private sales

Sold Price-Metro vs. HR

Sold Price-Metro vs. GVR

Sold Price-Metro vs. Wash Park

DOM for Metro vs. HR

DOM for Metro vs GVR

DOM for Metro vs Wash Park

HVCC Impact on the Housing Sales Market No Empirical Data NAR has developed Anecdotal Data Random Sample of 40,000 REALTORS 3,600 responses generated. The HVCC appears to negatively affect the processing time of a real estate closing Lost sales were reported by 37% of REALTORS reporting

No Empirical Data

NAR has developed Anecdotal Data

Random Sample of 40,000 REALTORS

3,600 responses generated.

The HVCC appears to negatively affect the processing time of a real estate closing

Lost sales were reported by 37% of REALTORS reporting

Additional Time 76% of REALTORS reported additional time is needed to obtain an appraisal.

76% of REALTORS reported additional time is needed to obtain an appraisal.

Appraiser Fees Reduced fees reported by ½ of Appraiser respondents.

Reduced fees reported by ½ of Appraiser respondents.

Increased Costs to Consumers Percentage of Cost Increases

Percentage of Cost Increases

Unfamiliar Geographic Area 71% of Realtors reported an increase in out of area appraisers accepting assignments

71% of Realtors reported an increase in out of area appraisers accepting assignments

Denver Absorption Rate

Absorption Rate Pricing AR is the current inventory divided by last months closed sales X 12 divided by 52 inventory _____________ lms x 12 / 52

AR is the current inventory divided by

last months closed sales X 12 divided by 52

inventory _____________

lms x 12 / 52

AR Example 21,000 (current inventory) _____________ (sales) 3000 X 12 / 52 Absorption Rate is 30.33 weeks or 7.58 months (buyers market)

21,000 (current inventory)

_____________

(sales) 3000 X 12 / 52

Absorption Rate is 30.33 weeks or

7.58 months (buyers market)

What does it mean? A balanced sub-market is a 6 months supply Less than 6 months, a sense of urgency develops with buyers, prices go up: Sellers Market More than 6 months, a sense of urgency develops with sellers, prices go down: Buyers Market

A balanced sub-market is a 6 months supply

Less than 6 months, a sense of urgency develops with buyers, prices go up:

Sellers Market

More than 6 months, a sense of urgency develops with sellers, prices go down:

Buyers Market

Wrapping Up The various market statistical models trend with relative consistency in spite of different approaches Markets are very local, comparables must be geographically and temporally close HVCC is negatively affecting the market AP Pricing is leading REALTORS toward a better pricing model

The various market statistical models trend with relative consistency in spite of different approaches

Markets are very local, comparables must be geographically and temporally close

HVCC is negatively affecting the market

AP Pricing is leading REALTORS toward a better pricing model