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

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

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

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

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

Case-Shiller vs. Denver Actual

Comparison of Case-Shiller Index to Metro Area Combined Sold Prices

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Jan-03F

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110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

ACSP CS

Case-Shiller vs. OFHEO

Comparison of Case-Shiller and OFHEO

110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

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235.00

240.00

245.00

250.00

255.00

260.00

265.00

270.00

275.00

280.00

285.00

CS OFHEO

Case-Shiller-OFHEO vs. Actual

Case-Shiller and OFHEO compared to Metro Combined Average Sold Price

100.00

120.00

140.00

160.00

180.00

200.00

220.00

240.00

260.00

280.00

Jan-03F

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$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

CS OFHEO ACSP

Case-Shiller Comparison

Denver in Comparison to Phoenix, AZ and the Composite 20 Market

50.00

60.00

70.00

80.0090.00

100.00

110.00

120.00

130.00

140.00150.00

160.00

170.00

180.00

190.00

200.00

210.00220.00

230.00

240.00

250.00

Jan-03

Mar-03

May-03

Jul-03

Sep

-03

Nov-03

Jan-04

Mar-04

May-04

Jul-04

Sep

-04

Nov-04

Jan-05

Mar-05

May-05

Jul-05

Sep

-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep

-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep

-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep

-08

Nov-08

Jan-09

Mar-09

May-09

AZ-Phoenix CO-Denver Composite-20

Zillow – Denver vs. United States

Denver Average Residential Sold Price

Average Residential Sold Price

$220,000

$225,000

$230,000

$235,000

$240,000

$245,000

$250,000

$255,000

$260,000

$265,000

$270,000

$275,000

$280,000

$285,000

$290,000

$295,000

$300,000

$305,000

$310,000

$315,000

$320,000

$325,000

$330,000

$335,000

$340,000

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Denver Median Residential Sold Price

Median Residential Sold Price

$175,000

$180,000

$185,000

$190,000

$195,000

$200,000

$205,000

$210,000

$215,000

$220,000

$225,000

$230,000

$235,000

$240,000

$245,000

$250,000

$255,000

$260,000

$265,000

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Denver Market Activity-MLS

Market Activity Active vs. Sold

Residential and Condo

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Aug

'07

Sep

'07

Oct

'07

Nov

'07

Dec

'07

Jan

'08

Feb

'08

Mar

'08

Apr

'08

May

'08

Jun

'08

Jul '

08

Aug

'08

Sep

'08

Oct

'08

Nov

'08

Dec

'08

Jan

'09

Feb

'09

Mar

'09

Apr

'09

May

'09

Jun

'09

Jul '

09

Aug

'09

Active

Sold

Average Days on Market for Metro Denver Residential

Average Days on Market for Metro Denver - Residential

859095

100105110115120125130

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006 2007 2008 2009

Average Days on Market for Metro Denver Condo

Average Days on Market for Metro Denver - Condo

9095

100105110115120125130135140

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006 2007 2008 2009

Residential Price Change AnalysisLocal Price Change Analysis

Year-to-Year Comparison Monthly Net $/SF Based on Contract Date - Residential

$151.26

$148.43

$156.39

$161.17

$165.46

$170.50

$167.66 $168.07

$162.98

$159.53$157.51

$153.02

$150.45

$155.13

$150.29

$153.20$154.44

$159.85

$153.07 $153.62

$145.41

$147.89

$137.35 $137.42

$132.10$134.16

$140.85$142.32

$144.45

$154.60$153.62

$150.87

$130.00$135.00

$140.00$145.00

$150.00$155.00

$160.00$165.00

$170.00$175.00

2007 $/sf 2008 $/sf 2009 $/sf

Condo Price Change Analysis

Local Price Change AnalysisYear-to-Year Comparison Monthly Net $/SF Based on

Contract Date - Condo

$139.75$141.58

$145.81

$149.42

$152.29 $151.34 $152.25

$148.76$147.31

$143.65

$136.74

$142.08

$136.92

$144.78$143.77

$147.36

$140.77

$147.76

$140.25$141.44

$136.57

$132.57

$124.33

$134.06

$121.03$119.48

$130.89

$133.94 $134.46$136.73

$137.91$140.18

$115.00

$119.00

$123.00

$127.00

$131.00

$135.00

$139.00

$143.00

$147.00

$151.00

$155.00

$159.00

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2007 $/sf 2008 $/sf 2009 $/sf

Seasonal Influx Index-Residential

Seasonal Influx Index% of Annual Sales Occurring Each Month Based on Contract Date - Residential

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

2006

2007

2008

AVG

Seasonal Influx Index-CondoSeasonal Influx Index

% of Annual Sales Occurring Each Month Based on Contract Date - Condo

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

200620072008AVG

Total Combined Number of Homes for Sale by Year-MLS

Total Combined Number of Homes for Sale

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2005

2006

2007

2008

2009

Total Combined Number of Homes Sold by Year-MLS

Number of Combined Homes SOLD

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2005

2006

2007

2008

2009

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

Sold Price-Metro vs. HR

Comparison of Average Residential Sold Price for Metro Denver and Highlands Ranch

$200,000

$225,000

$250,000

$275,000

$300,000

$325,000

$350,000

$375,000

$400,000

$425,000

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Highlands Ranch

Sold Price-Metro vs. GVR

Comparison of Average Residential Sold Price for Metro Denver and Green Valley Ranch

$125,000

$150,000

$175,000

$200,000

$225,000

$250,000

$275,000

$300,000

$325,000

$350,000

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Green Valley Ranch

Sold Price-Metro vs. Wash Park

Comparison of Average Residential Sold Price for Metro Denver and Washington Park

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,000

$650,000

$700,000

$750,000

$800,000

$850,000

$900,000

$950,000

$1,000,000

$1,050,000

$1,100,000

$1,150,000

$1,200,000

$1,250,000

$1,300,000

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Washington Park

DOM for Metro vs. HR

Comparison of Average Days on Market for Metro Denver and Highlands Ranch

0

20

40

60

80

100

120

140

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Highlands Ranch

DOM for Metro vs GVR

Comparison of Average Days on Market for Metro Denver and Green Valley Ranch

0

20

40

60

80

100

120

140

160

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Green Valley Ranch

DOM for Metro vs Wash Park

Comparison of Average Days on Market for Metro Denver and Washington Park

0

20

40

60

80

100

120

140

160

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Metro Denver Washinton 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

Additional Time

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

Appraiser Fees

• Reduced fees reported by ½ of Appraiser respondents.

Increased Costs to Consumers

• Percentage of Cost Increases

Unfamiliar Geographic Area

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

Denver Absorption Rate

Denver Market Absorption Rate

0

5

10

15

20

25

30

35

40

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

We

ek

s

2005

2006

2007

2008

2009

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 Example

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

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