mris q2 2008 trends in housing

8/12/2019 MRIS Q2 2008 Trends in Housing

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TRENDS IN HOUSING

Mid-Year 2008


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MID-YEAR 2008TRENDS IN HOUSING

TRENDS IN HOUSING AT MID-YEAR 2008

The Washington Regional Economy and Outlook___________________3

The Baltimore Regional Economy and Outlook_____________________5

The For-Sale Housing Market_____________________________________6

The Condominium Market _____________________________________11

Summary Data on the Mid-Atlantic Housing Market_________________12

One Piece of the Puzzle: Housings Role in the National Economy ___16

Harnessing the Power of the Web: Strategies to Reach Generation Y___17

The Commercial Real Estate Market_____________________________18

Methodology__________________________________________________23

About MRIS and Delta Associates ________________________________24

INSIDE THIS ISSUE

Welcome to the eighth issue of Trends in Housing, a joint publication of MRIS and Delta Associates. This report provides

a regular in-depth look at the issues that shape the Mid-Atlantic housing market.

Inside this issue we present several regular features of Trends in Housing, including:

An analysis of the Washington and Baltimore regional economies

An examination of regional housing data, including a review of trends in the for-sale market

An overview of the commercial real estate market as it relates to the regions housing market

In addition, we offer feature articles, which explore matters that affect housing in the Mid-Atlantic region. In this issue,

our features are:

The housing sectors impact on other industries

Reaching the next generation of homebuyers

We hope you enjoy this publication, and we welcome your feedback. Best wishes for the rest of 2008.

David CharronPresident and CEOMRIS

Future quarterly reports will feature:

The differing housing needs of the areasdemographic segments

A look at trends in military housing needs


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THE WASHINGTON REGIONAL ECONOMY AND OUTLOOK

The Washington area economy continued to prog-ress during the 2nd quarter, albeit at a slower pacethan historical norms. Job growth during the past 12months outpaced the same period in 2007. With alow unemployment rate and one of the strongest eco-

nomic bases, the metro area remains one of the topeconomic centers in the nation.

Job Growth

With 3.0 million payroll jobs, the Washington metroarea ranks the fourth-largest job base among metroareas, behind New York, the LA Basin and Chicago.

Payroll employment increased 26,500 in the Washing-ton metro area over the 12 months ending May 2008,ranking sixth among metro areas in the nation. Thispace of growth, compared to the 15-year average of

53,400 per annum, feels like a significant slow down,especially after growth levels of 55,000 to 60,000 in2003-2006. (See Figure 1)

Job Growth by Sector

The service-providing sector accounted for all of thenet job growth in the Washington metro area duringthe 12 months ending May 2008. The goods-produc-ing sector shed 6,600 jobs.

The top three sectors leading job growth in the metroarea over the past 12 months are Government, Profes-

sional and Business Services, and Education/Health.

Figure 1 Figure 2

The Governmentsector added 12,200 new jobs inthe past 12 months, of which 10,000 were at the localgovernment level.

The Professional and Business Services sector

gained 11,400 jobs during the 12 months ending May2008, below the 15-year average of 20,600.

The Education and Healthsector gained 8,400 newjobs in the previous 12 months, slightly above the15-year average of 8,100.

The Financial sector lost 4,000 jobs over the past12 months, as the continued fallout from the CreditCrunch affected local institutions.

Unemployment Rate

The Washington area unemployment rate ticked up70 basis points during the past 12 months to 3.5% inMay 2008. The current unemployment rate remainsbelow the average unemployment rate of the 1990s,which was 3.9%.

The Washington metro area has the lowest unemploy-ment rate among comparable metros and comparesfavorably to the national rate of 5.5% in May 2008.(See Figure 2)

Source: BLS, Delta Associates; July 2008. Source: BLS, Delta Associates; July 2008.

UNEMPLOYMENT RATESLARGE METRO AREAS

MAY 2007 VS. MAY 2008

PAYROLL JOB GROWTHLARGE METRO AREAS

12 MONTHS ENDING MAY 2008


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Coincident Index

TheWashington Coincident Index, which representsthe current state of the metropolitan area economy,was 115.3 in April 2008 which is below the 10-yearaverage. Despite a cooling economy, the current in-

dex is higher than the cool-downs of 2002 and 1991.(See Figure 3)

The Washington Regions Core Industries

The Washington areas gross regional product (GRP)was $367.9 billion in 2007, an increase of 5.6% fromrevised 2006 figures. We expect the GRP to grow2.5% in 2008.

Approximately one-third of the GRP was generated bythe Federal government the regions most importantcore industry. A core industry is one that imports capi-

tal and exports a good or service. Total Federal spend-ing in the Washington metro area was up in 2007 to$122.3 billion, a 2.6% increase from 2006.(See Figure 4)

Federal procurement1 spending increased 2.1% in2007, after a 4.0% rise in 2006. Although procure-ment spending in the metro area remains solid,spending growth has eased significantly, after grow-ing by 19.0% in 2004 and 22.6% in 2003. We esti-mate that procurement spending will increase 0.5%during 2008. As procurement spending growth eases,so does job growth, given that roughly 7,000 new jobsare created per $1 billion in additional procurementspending.

Washington Area Economic Outlook

We expect the Washington metro area economyto make modest gains in 2008, as the aftermath ofthe Credit Crunch continues to unfold. Although weexpect growth to slow this year, we anticipate mod-estly improving conditions in 2009 and 2010asthe economy regains its footing.

The Professional and Business Services sector shouldcontinue to lead job growth. However, the Construc-

tion and Financial sectors could cut more jobs, as theCredit Crunch has impacted lending and housingstarts.

In consultation with Dr. Stephen Fuller of George Ma-son University, we project that 23,900 new payrolljobs will be created in the Washington area in2008. Job growth will continue to rise in 2009 and2010, with 29,000 and 42,500 new jobs, respectively.(See Figure 5)

1/Federal procurement is the governments outsourcing of work to the private sector and isthe most important component of Federal spending.

THE WASHINGTON REGIONAL ECONOMY AND OUTLOOK

Figure 3

Figure 4

Source: GMU Center for Regional Analysis; July 2008.

Note: Figures are estimates in current-year dollars.Procurement figures do not include US Postal Service and FAA purchases.

Sources: Dr. Stephen Fuller, Delta Associates; July 2008.

CORE SECTORS OF THE ECONOMYWASHINGTON METRO AREA

COINCIDENT INDEXWASHINGTON MSA

APRIL 2007 APRIL 2008

Figure 5

Note: Data restated since 2000 consistent with redefinition of metro area in March 2005.

Source: Dr. Stephen Fuller, Delta Associates; July 2008.

PAYROLL JOB GROWTHWASHINGTON METRO AREA

2000 2010


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THE BALTIMORE REGIONAL ECONOMY AND OUTLOOK

Economic conditions were moderate in the Bal-timore metro area during the 1st half of 2008.The unemployment rate remains low at 4.1% in May2008. The Professional and Business Services andEducation/Health sectors led job growth in the past12 months. Overall, the Baltimore metro area is ex-pected to remain a stable economic generator in thenear-term.

Job Growth by Sector

Baltimore added 8,000 jobs in the 12 months endingMay 2008. The top three sectors leading job growth inthe Baltimore metro area were Professional and Busi-ness Services, Education/Health, and Leisure/Hospi-tality.

The Professional/Business sector created 5,800payroll jobs over the last year. Those gains were tem-

pered somewhat by a loss of 2,300 jobs in the Finan-cial Services sector.

The Education/Healthsector created 5,300 payrolljobs over the 12 months ending May 2008 in the Bal-timore area. Of these new jobs, 87% (on a net basis)were created in the health field.

The Leisure/Hospitalitysector gained 2,000 jobs inthe 12 months ending May 2008.

Unemployment Rate

The Baltimore area unemployment rate was 4.1% inMay 2008, up from 3.4% one year prior. The current

rate is low compared to similar metro areas and com-pares favorably to the national rate of 5.5% in May.

The Baltimore Regions Core Industries

The Federal and State government represents18.1% of the Baltimore metro areas gross re-gional product (GRP). The financial and profession-al services core industry is a comparable size. Balti-mores GRP in 2007 exceeded $130 billion, growth of2.5% from 2006. We expect similar growth in 2008.(See Figure 6)

Baltimore Area Economic Outlook

We expect economic growth in the Baltimorearea to continue its steady but slow growth in theremainder of 2008.We anticipate employment willincrease gradually this year and in 2009, particularly

in the Professional/Business Services and Education/Health sectors. Growth should pick up notably during2010, as the national economy picks up pace.

The Education/Health sector should remain one of thetop producers of metro area jobs, as Johns HopkinsUniversity and University of Maryland, Baltimore areeconomic powerhouses in the metro area and morebaby boomers are taking advantage of health careresources as they age. However, the Financial andConstruction sectors could take further hits.

We anticipate job growth will total 6,000 net new

jobs in 2008. We expect growth to pick up during2009, with 9,000 new payroll jobs and 14,000 newjobs in 2010.

Figure 6

*GRP = Gross Regional Product

Note: Core industry subcomponents were redefined in June 2007.

Source: U.S. Conference of Mayors, Delta Associates; July 2008.

CORE INDUSTRIESBALTIMORE AREA

2007


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After a sluggish 1st quarter, the Washington housingmarket began to pick up steam in the 2nd quarter of2008. Sales velocity increased as sellers cut prices toattract buyers off of the sidelines. However, the na-tional economy has cast a shadow over the Wash-ington market, as slower job growth and challengingcredit access present hurdles to would-be buyers.

As economic conditions still remain snug, buyer psy-chology turns instead to planning for rising food andgasoline prices instead of buying homes. But despitesigns of a market underperforming historic averag-es, Washingtons for-sale housing market haslargely outperformed the national downturn,and a strong regional economy will cushion thesoft housing sector and position it for a strongrebound.

Average metro-wide prices of homes sold in the 2nd

quarter of 2008 were essentially flat from the 1st quar-ter but down 11.6% from the 2nd quarter of 2007. Theaverage Washington area home price in June 2008was $446,716, up 3.3% from revised March 2008 fig-ures but down 12.7% from one year ago.

Washingtons housing market is segmented geo-graphically. Corehomes (in the District, Arlington andAlexandria) experienced essentially flat prices; the2nd quarter 2008 average price is 0.2% higher thanone year earlier. The areas Inner ring (of Fairfax,Montgomery and Prince Georges counties and FallsChurch and Fairfax cities) is seeing 12-month declines

of 7.5%. The Outersuburbs (of Loudoun, Prince Wil-liam and Frederick counties) experienced 12-monthprice declines of 23.7%, as foreclosures and excess

inventory have forced price cuts. Volume was gener-ally stronger outside the Core, which pulled down theregions average price.(See Figure 7)

According to Freddie Mac, the average 30-year fixedrate mortgage at the end of June 2008 was 6.46%,down 21 basis points from the same time one yearearlier. Mortgage rates have hovered in the 6% rangefor two months as the credit market seeks directionand investors look to renew confidence in Fannie Maeand Freddie Mac. Rates fell to a new low of 5.48% inJanuary 2008, following a 75-basis point cut in theFederal Funds rate from the Fed. However, lendingrequirements have become more stringent follow-ing national banking troubles tied to subprime mort-gage lending. Not only have rates risen in the last sixmonths but also mortgages may be more difficult forall but the most credit-worthy buyers to obtain. As a

result, many would-be buyers have remained on thesidelines and out of the housing market.

The current housing market is unlike any in the pastdecade, with historically low mortgage rates but great-er obstacles to credit. Many Washington area countiesare seeing price declines, yet inventory is rising asbuyers try to time the market. REALTORScan helpprovide valuable assistance to both buyers and sellersas the market seeks direction. The average time onmarket in the Washington area is 103 days in the 2ndquarter, above the long-term average of 76 days. Theaverage selling price in the 2nd quarter is 92% of list

price, as sellers remain slow to lower prices to matchbuyer expectations in a shifting market.(See Figure 8)

THE FOR-SALE HOUSING MARKET

Figure 8

Source: National Association of Realtors, Delta Associates; July 2008.

MARKET CHANGESWASHINGTON METRO AREA

AT 2ND QUARTER 2008Figure 7

*Core: DC, Arlington, Alexandria.Inner: Fairfax, Montgomery, Prince Georges and Falls Church and Fairfax cities.Outer: Loudoun, Prince William, Frederick.

Source: National Association of Realtors, Delta Associates; July 2008.

HOME SALES PRICE CHANGEWASHINGTON METRO BY SUB-AREA*

2005 - 2008


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FORECLOSURES: REMAIN AN ISSUE

Foreclosures continue to drive prices down and inven-tory up, particularly in the outer suburbs. The Wash-ington area foreclosure rate in Spring 2008 was 131per 10,000 homes, up sharply from 6 per 10,000 inSpring 2006. By comparison, the national averagein Spring 2008 was 87 foreclosures per 10,000. TheCenter for Regional Analysis reported in May that inaddition to rising foreclosure rates in the outer coun-ties, there are impending hot spots in parts of Fairfaxand Montgomery counties that are expected to affectthose markets later this year. Despite current marketconditions, Washingtons sturdy job growth will po-sition it well to weather the housing and economicdownturn and emerge strong.

The Federal government is considering a number ofproposals to bolster the housing market. The Senate

recently approved a housing bill that would autho-rize the Federal Housing Administration to insure upto $300 billion in new loans to families whose lend-ers agree to write down their mortgages to no morethan 87% of a homes reduced value. The plan is de-signed to help homeowners who have fallen behindon mortgage payments but cannot refinance throughtraditional measures because their homes have fallenin value. The bill also proposes permanently raisingthe FHA loan limit which was raised to $729,500 inmost metro areas through December 31 though theHouse and Senate differ on the new limit amounts.Furthermore, the Federal government is weighing a

proposal from the Treasury Department to augmentcredit for Fannie Mae and Freddie Mac as the two in-stitutions face questions about their capital reserves.

In May, the pending-home sales index, a forward-looking indicator of contracts signed (but not settled)for previously owned homes, fell 4.7% from the Aprilreading. The May index, which is published by the Na-tional Association of Realtors, was 14.0% lower than

in May 2007.

Despite lower prices, the number of sales actuallyrose in some jurisdictions the 2nd quarter of 2008compared with one year earlier. There were 2,197sales in Prince William County in the 2nd quarter of2008, up 67% from the 2nd quarter of 2007. Suchmarket activity is a positive sign in an area trying towork through a high number of foreclosures. The in-crease in sales volume was paired with a 29% declinein average price over the same period, and the timeon market rose from 114 days to 127 days as buyersremained cautious even amid lower prices.

In contrast, the District has experienced price increas-es, but volume has declined and time on market hasincreased. Prices rose 6.3% in the 2nd quarter of 2008from the 2nd quarter of 2007. The number of salesdeclined 28% in the same period, and time on marketrose 10 days to 76, the regions long-term average.

The stratified nature of the Washington area housingis demonstrated when looking at both average salesprice and time on market. Though the regional aver-age time on market is 104 days, it is just 75 days inthe Core jurisdictions. In the Outer counties, time onmarket is 122 days. (See Figure 9)

Figure 9

*Core: DC, Arlington, Alexandria.Inner: Fairfax, Montgomery, Prince Georges and Falls Church and Fairfax cities.Outer: Loudoun, Prince William, Frederick.

Source: MRIS, Delta Associates; July 2008.

AVERAGE DAYS ON MARKET: EXISTING HOUSESWASHINGTON METRO BY SUB-AREA*

2005 THROUGH 2ND QUARTER 2008


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There remains an imbalance in inventory in manyparts of the Washington area. During the housingboom of 2002-2005, some jurisdictions had less thantwo months supply of housing at the then-currentrate of sales, pushing prices up quickly. The Washing-ton area has 7.4 months worth of housing inventoryat June 2008 sales velocity, down from 10.8 monthsat the end of March 2008 but up from 6.8 months atJune 2007. At the low end, Arlington and Alexandriaboth have 4.8 months worth of inventory; Frederickand Prince Georges have 11.7 and 17.1 monthsworth, respectively. Prince Georges County suffersfrom dualing pressures of rising inventory up 23%in June 2008 from June 2007 and sales that fell35% in the same period. Prices have declined 11% inthe county over the past year, but more adjustment isneeded to work through the excess inventory.(See Figure 10)

Buyerscontinue to benefit from the rising inventoryand falling prices. Todays market gives buyers nego-tiating room on price, contingency clauses and homeinspections.

The Senate-passed housing package contains a creditof up to $8,000 for first-time homebuyers, adding anadditional incentive for new purchasers. However, thecredit markets continue to remain a hurdle for manybuyers.

According to John McClain of the Center for Region-al Analysis at George Mason University, the kick-out

rate for all housing types contracts cancelled beforesettlement was 23% in March 2008, after spiking to

66% in August 2007 as the seized financial marketshamstrung some sales. The March rate is higher thanthe 14% recorded one year earlier, but it is the lowestin nine months.

Sellersare adjusting to the shifting market. Homesfor sale in the Washington area averaged 104 dayson the market in the 2nd quarter of 2008, above thelong-term average of 76 days. Even as prices moder-ate, buyers may have difficulty obtaining financing atattractive terms due to problems in the national creditmarket. Sellers who can finance all or part of a buy-ers purchase may facilitate a quicker sale.

Above all, sellers must be aggressive to generate acontract while remaining realistic about local marketconditions. The Wall Street Journal recently outlinedselect strategies for motivated sellers, including hir-ing a REALTORknowledgeable in the area, staging

the interior for a strong first impression, and pricingbelow nearby comparable properties.

The Washington area apartment market remains tightas potential buyers choose to rent and time their en-try into the housing market. In the Washington area,the multi-family vacancy rate rose to 3.6% from 2.9%a year ago; rents increased 3.1% over the past 12months. The shadow rental market of for-sale homesconverted to rentals, as well as condominium projectsconverted to rentals, has augmented the supply avail-able to renters. The Washington multifamily vacancyrate remains below the national rate of 5.6%.

Figure 10

MONTHS OF FOR-SALE INVENTORYWASHINGTON AREA

JUNE 2007 VS. JUNE 2008

*For privately-owned housing units, seasonally adjusted and annualized.

Source: Census Bureau, Delta Associates; July 2008.

Figure 11

*For privately-owned housing units. Through February 2008, annualized.

Source: Census Bureau, Delta Associates; July 2008.

CONSTRUCTION STARTS AND BUILDING PERMITS*UNITED STATES

2000 THROUGH MAY 2008


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Supply remains above demand across the region, andbuildershave scaled back projects until equilibriumis restored. On existing projects, builders have cutprices and increased incentives to sell inventory. Thenumber of building permits in the region has fallenfurther from 2007 levels, as conditions are unfavor-able to builders in a market already working throughexcess inventory. Census data show that the numberof permits for new housing construction in May 2008nationally was down 36% from one year earlier.(See Figures 11 and 12)

The tight national economy has affected builder con-fidence. The National Association of Home Builders/Wells Fargo index of builder confidence fell to 18 inJune, returning to the record low of December 2007since the index began in 1985. An index below 50indicates that more builders view sales conditions aspoor than good.

Home priceshave fallen in many areas of the coun-try. Rising prices for core consumer goods have reinedin housing price growth; oversupply in some areasalso has lowered prices. Lower prices in turn limit op-tions for owner refinancing.

According to Freddie Macs Quarterly Refinance Re-view, the volume of cash-out refinancings fell 19%from a revised $36 billion in the 4th quarter of 2007to $29 billion in the 1st quarter of 2008. The medianage of the refinanced loans was 2.2 years, and themedian appreciation of the refinanced properties was

7% since the original loan had been taken out. In the1st quarter of 2008, the share of cash-out refinanc-ings 56% was the lowest since 2004.


SNUG ECONOMY AFFECTS SPENDING

Consumers are feeling the pinch of rising gasolineand food prices. The consumer price index rose 1.1%in June, the second-highest increase since 1982.Consumer prices rose 5% from June 2007, the high-est rate since May 1991. Rising prices for core goodshave constrained spending for other types of goods.The National Retail Federation reported that June2008 retail industry sales, excluding gas stations,autos and restaurants, were up 0.2% from May andup 1.3% from June 2007.

In the Washington metro area, the Office of Fed-eral Housing Enterprise Oversight (OFHEO) reporteda -5.1% annual change in home prices for the 12months ending March 2008, compared to a decreaseof 0.45% for all of 2007. OFHEO reported a nationalaverage home price decline of 3.1%. (OFHEO and

NAR use different methodologies to calculate pricechanges.) Like many cities across the United States,the Washington area has seen downward pressureon prices, but it is particularly amplified by excess in-ventory and high foreclosure rates in the outer sub-urbs. (See Figure 13)

The Washington metro area housing marketcontinues to seek equilibrium, though many ju-risdictions are slowly working through excessinventory through lower prices and rising vol-ume.An analysis of MRIS data shows that total solddollar value was $6.4 billion in the 2nd quarter of

2008, up from $3.9 billion in the 1st quarter of 2008but down from $8.1 billion one year ago.

Figure 13

ANNUAL ESCALATION OF EXISTING HOMESALE PRICES

*12-month percentage change through March 2008.

Source: National Association of Realtors; July 2008.

Figure 12

CONSTRUCTION BUILDING PERMITS BY STATESELECTED MID-ATLANTIC JURISDICTIONS

2000 THROUGH MAY 2008

Source: National Association of Realtors; July 2008.


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The Washington area economy is experiencing slug-gish economic conditions, with modest growth andjob creation below the long-term average. Supplyand demand are still out of balance in the Washing-ton area housing market, as wages continue to catch

up to the rate of home price appreciation during thehousing boom. Furthermore, the Washington housingmarket suffers from a spatial mismatch, with demandrivaling supply in closer-in areas but a glut of unsoldhomes on the regions fringe.

By late 2008/early 2009 we expect that risingdemand (generated by sturdy job growth, lowinterest rates, net migration, and a rising im-migrant population) and a decline in existinghome listings and new construction will stabilizepricing, leading to an uptick in sales activity.Conditions will improve first in the close-in com-

munities, perhaps by early 2009, with recoveryarriving in the outer counties by late 2009 orearly 2010.


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THE CONDOMINIUM MARKET

Washington. Prices for new units in the regionedged lower, but sales volume of new units inthe District and Suburban Maryland is at its high-est level in nine months. Sales volume (defined asnet binding contracts written with security deposits up)during the 2nd quarter of 2008 was 449 new units.The District had the highest average price per SF, andPrince William/Loudoun had the lowest. MontgomeryCounty and the District had the highest sales volume.In Fairfax County & Falls Church, contract cancella-tions exceeded sales in the 2nd quarter.

The currently marketing pipeline declined for its 9thstraight quarter and has declined 46% from its peak inMarch 2006. At the same time, the inventory-to-salesratio has increased from 2.1 years at the 1st quarterof 2006 to 7.3 years at mid-year 2008.

Over 2,600 units (gross) were removed from thecondo pipeline during the 2nd quarter. About 37% ofthose removals were projects at the selling stage ofdevelopment.

The 2nd quarter continued to see declines in inven-tory, as the market seeks equilibrium and worksthrough excess inventory. At the current sales velocity,it will take about 7.3 years to sell the current inven-tory of 13,990 units. The inventory-to-sales ratio willlikely increase in the short term in most of the metroarea, but by the end of 2008, the ratio will start todecline. Price traction will start to occur by late 2008or 2009 in most of the inner communities as the ratio

approaches the 3.0-year range.

Baltimore. There were 59 new condo sales inthe Baltimore metro area in the 2nd quarter of2008.Sales activity during the past 12 months hasdropped by 90% metro-wide compared to the prior12-month period.New condo prices show a decrease of 1.5% met-ro-wide during the 12 months ending June 2008,once concessions are taken into account. Prices are upby 0.4% in the Northern Suburbs, but down by 0.1%in the Southern Suburbs and 2.3% in Baltimore City.Median condo resale prices in the Baltimore metroarea declined 4.7%, though prices were up 2.2% inHarford County and 0.5% in Baltimore City.

Concessions are down slightly metro-wide fromlast year.Concessions were cut by 130 basis pointsSouthern Suburbs, while there was an increase in theNorthern Suburbs and Baltimore City. Currently, the

Northern Suburbs are offering the most concessions,at 5.3% of the average sales price.

The 36-month pipeline has been steadily declining forthe past year. There are 3,780 unsold units currentlymarketing. In addition, there are 2,726 units plannedwith probable sales within the next 36 months.

Despite the 17% drop in actively marketing inventoryduring the past three months, there is still an elevatedlevel of inventory with slow absorption, so it is like-ly more condo projects will be delayed or removedfrom the pipeline in the months ahead. We look to2010-11 as the period when price traction could re-

turn to the market. Until then, developers would bewise to convert to rental or pursue niche condo dealsat exceptional locations of extraordinary design.


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AVERAGE DAYS ON MARKET - EXISTING HOUSESWASHINGTON METRO AREA


SALES PRICE CHANGE - TRAILING 12 MONTHSWASHINGTON METRO AREA

JUNE 2007 vs. JUNE 2008

SALES VOLUMEWASHINGTON METRO AREA, ALL HOUSING TYPES


SUMMARY DATA ON THE MID-ATLANTIC HOUSING MARKET

Summary:

The Washington area saw a -5.1% change in existinghome values for the 12 months ending March 2008 (per

OFHEO data), below the national average of -3.1%.

Summary:

Through June, the 2008 sales volume was 23,330 homes.

At this pace, annualized 2008 sales will be 16% lowerthan the 2007 volume. Sales in the 2nd quarter of 2008were 11% lower than in the 2nd quarter of 2007.

Summary:

The average time on the market in the 2nd quarter of

2008 was 104 days, down from 119 days at 1st quarter2008 but up from 92 days at 2nd quarter 2007.

Summary:

Prices declined in each of the first six months of 2008,the first declines since May 2007. Prices fell 9.4% in April

2008 from April 2007. In May 2008, prices were 12.5%lower than in May 2007. Average home prices in June2008 were 12.7% lower than June 2007.

Figure 14 Figure 15

Source: MRIS, GMU Center for Regional Analysis, Delta Associates; July 2008.

CHANGE IN EXISTING HOME VALUESSELECT METRO AREAS

2003 - 2008

Source: OFHEO, GMU Center for Regional Analysis, Delta Associates; July 2008.

Figure 16 Figure 17

Source: MRIS, Delta Associates; July 2008.Source: MRIS, GMU Center for Regional Analysis, Delta Associates; July 2008.


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Summary: Prices rose 7.3% in the 2nd quarter from the

1st quarter of 2008 and 6.3% from one year earlier. The

average time on market was 76 days for the 2nd quarter,

compared with 86 days for 1st quarter. The annualized

2008 sales volume is 73% of the 2007 total.

Summary: Prices declined 3.7% in the 2nd quarter of2008 compared with the same period in 2007. Aver-

age days on market fell to 115 from 126 in the previousquarter. Annualized sales volume for 2008 is down 38%from the 2007 total.

Summary: The average price in the 2nd quarter of 2008declined 1.8% from the previous quarter and 19.1% from2nd quarter 2007. Time on market averaged 103 days in

the 2nd quarter, down from 122 days in the 1st quarter2007 but up from 99 days one year earlier. Annualizedsales volume is nearly 97% of 2007 volume.

Includes: Arlington, Fairfax, Fauquier, Loudoun, and Prince WilliamCounties; Alexandria, Fairfax, and Falls Church Cities.

Includes: Frederick, Prince Georges, and Montgomery Counties.

Includes: Anne Arundel, Carroll, Harford, Howard,and Baltimore Counties; Baltimore City.

NORTHERN VIRGINIAHOUSING MARKET INDICATORS


DISTRICT OF COLUMBIAHOUSING MARKET INDICATORS

2004 THROUGH 2ND QUARTER 2008Figure 18 Figure 19

BALTIMORE AREAHOUSING MARKET INDICATORS


SUBURBAN MARYLANDHOUSING MARKET INDICATORS

2004 THROUGH 2ND QUARTER 2008Figure 20 Figure 21

Summary: Average sales prices in the 2nd quarter of2008 were up 6.0% from the 1st quarter but down 1.4%from the same period in 2007. Time on market fell to 118

days from 127 days in 1st quarter. Sales volume in 2008is on pace to be 75% of the 2007 volume.


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Source: MRIS, Delta Associates; July 2008. Source: MRIS, Delta Associates; July 2008.


Includes: Arlington, Fairfax, Fauquier, Loudoun,

and Prince William Counties; Alexandria, Fairfax, and Falls Church Cities.

Includes: Frederick, Prince Georges, and Montgomery Counties. Includes: Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties; Baltimore City.

NORTHERN VIRGINIASINGLE-FAMILY SALES

2ND QUARTER 2007 vs. 2ND QUARTER 2008

DISTRICT OF COLUMBIASINGLE-FAMILY SALES

2ND QUARTER 2007 vs. 2ND QUARTER 2008Figure 22 Figure 23

BALTIMORE AREASINGLE-FAMILY SALES

2ND QUARTER 2007 vs. 2ND QUARTER 2008

SUBURBAN MARYLANDSINGLE-FAMILY SALES

2ND QUARTER 2007 vs. 2ND QUARTER 2008Figure 24 Figure 25

Thousands of Dollars Thousands of Dollars

Thousands of Dollars Thousands of Dollars


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MEDIAN SOLD PRICESELECTED BALTIMORE METRO AREA JURISDICTIONS

JUNE 2007 vs. JUNE 2008

MEDIAN SOLD PRICESELECTED WASHINGTON METRO AREA JURISDICTIONS

JUNE 2007 vs. JUNE 2008Figure 26 Figure 27

AVERAGE DAYS ON THE MARKET2ND QUARTER 2008

Figure 28


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ONE PIECE OF THE PUZZLE: HOUSINGSROLE IN THE NATIONAL ECONOMY

The housing market is about more than just providinghomes it is a linchpin of the national economy. Whenthe housing market is up, its benefits are amplified inmany sectors of the economy and when it declines,the pain may be felt in some surprising places.

The financial industry is wedded to the housing in-dustry, as it reaps profits from mortgage lending andcollateralization. However, as the current subprimelending crisis has demonstrated, lender risk may bedispersed throughout the financial industry. Finan-cial instruments such as collateralized debt obliga-tion bonds spread risk among multiple creditors andbuoyed returns when the market was strong, but fail-ures in those products are now impacting banks of allsizes in all regions of the country.

Job growth can help fuel housing demand, but the

housing sectors performance can in turn influencecertain employment sectors. The construction industrydepends on the housing sectors performance to pro-vide jobs to builders and specialty tradesmen. In theWashington area, the general construction jobs fell by14,600 from a peak in June 2006 to May 2008. Spe-cialized trade jobs declined by 7,200 from a peak inAugust 2006 to May 2008. Jobs in the trades, whichcontribute to remodeling and renovation projects, arealso affected by home values and equity spending. Inturn, suppliers of building materials, such as HomeDepot and Lowes, have seen sales trend lower.

A slowdown in housing often results in a slowdown inconsumer spending as well. Current housing condi-tions have hit home furnishings retailers particularlyhard. The retail chain Linens N Things filed for bank-ruptcy protection in May. The International Councilof Shopping Centers reported that home furnishingsand furniture stores accounted for 27% of the total4,600 announced store closings in 2007. The ICSCprojects that store closings in 2008 will be up 7% from2007. Budget furnishings stores such as Ikea may farebetter than upscale retailers, but shoppers at an Ikeaopening in New York City told the Associated Pressthat they were focused on sales and smaller itemsinstead of large purchases. Scaled-back consumerspending also results in fewer restaurant meals, fewerpurchased services and fewer tips for service industryworkers.

On the flip side, housing is the countrys largest gen-erator of wealth. By paying their mortgages, millionsof Americans are not only paying for a place to livebut investing in their future. As home prices rise, own-ers can withdraw equity to help bolster the economy,

or they can simply maintain a home as an asset inpart of a long-term investment strategy.

Beyond home furnishings, housing performance canaffect auto demand. Ford saw sales slump 28% inJune, in part because of a tighter economic climate.Demand for pickups and other trucks fell by morethan a third, which Ford officials attributed in part to adecline in building and trade workers.

Demand for goods affects the distribution industry:when demand is high, shippers do well; when demandrecedes, shippers see lower results. The railroad com-

pany CSX experienced a 3% decline in freight volumein the 2nd quarter of 2008. The Port Authority of NewYork and New Jersey reported a decline of 12.8%in import volume in March 2008 from the previousyear.

Though the housing market affects many differenteconomic sectors, it is not the only catalyst for eco-nomic activity. However, it is woven deeply into thefabric of the national economy.


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Late Summer in Washington tends to find fewer homebuyers and sellers than the rest of the year whichmakes it a great time for REALTORS to refine theirmarketing tactics and prepare for the fall selling sea-son.

Buyers already greatly use the Internet as part of ahome search: 84% of buyers used the Internet, ac-cording to the 2007 National Association of RealtorsProfile of Home Buyers and Sellers. That number wasup from 80% in the 2006 report.

And the youngest buyers those in their 20s areeven more likely to use the Internet when searchingfor a home. These buyers are ideal for todays mar-ket: if they have good credit, they can take advantageof lower prices and can often close quickly, as they donot have another home to sell.

These youngest buyers tend to have different expec-tations for communication about home purchasesthan buyers even five years ago. Todays young buy-ers those in their 20s and 30s are more likely tocommunicate by e-mail or text message, for instance.They expect rapid results: an agent who waits a day toreturn an email may risk losing business to someoneelse who was faster.

Deloitte Research, in a 2007 report, defines Genera-tion Y as including people born between 1982 and1993 consumers now aged 15 to 26. The 70 millionmembers of Generation Y were the first to grow up

completely with computers, and are fluent in instantmessaging, text messaging and blogs. They pride

themselves on accessibility and networking capabili-ties, and they value information. These are buyerswho may have looked up recent sales in a neighbor-hood before asking a broker to show them a house.

Gen Y expects everything on demand, according tothe May 2008 issue of Consumer Insightmagazine.For marketersand REALTORSthe challenge is toengage and maintain a relationship with Gen Y con-sumers. They are voracious consumers of information,surfing the Web an average of 22 times per month formore than 25 hours total, scanning an average 1,426Web pages in that time. To capture attention of a po-tential buyer, REALTORSneed to be certain that sitesare updated, easy to navigate and present informa-tion clearly. High-quality photography of homes canhave a profound impact.

The big take-away on Gen Y is immediacy, according

to Consumer Insight. These consumers want it wantit customized and they want it now. When they aresatisfied, they are likely to text their friends turningword of mouth into a rapid, digital asset. REALTORScan turn that need for immediacy into the foundationof a relationship by starting a blog to showcase list-ings. Another option is to develop a Facebook widgetor an e-mail list to communicate timely informationabout properties and market conditions. Do not sim-ply post links to news stories or property informationeasily obtained elsewhere Gen Y users will see thisas spam and tune it out. If the information is uniqueand relevant, buyers will come to see you as a valu-

able contact. (See chart below)

HARNESSING THE POWER OF THE WEB:STRATEGIES TO REACH GENERATION Y

ONLINE STRATEGY TIPS FOR REALTORS

Update or redesign sales Web sites

Improve photography skills:take a workshop course or invest in new equipment

Create profiles on social networking sites such asFacebook, MySpace and LinkedIn

Consider an online messaging strategy(such as a blog or a regular e-mail list) to communicate with buyers


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In the Washington metro area, a sturdy economy,consistent employment growth, healthy rent growthand the desirability of investors to own property in thismetro help maintain Washingtons status as one of thetop commercial real estate markets in the country.

The Washington Area Office Market

Despite softening conditions, the metro area re-mains one of the top performing markets in thenation.Although vacancy has risen over the past year,the metro area ranked 6th in lowest overall vacancyamong large metros at mid-year 2008. Given theseconditions, rents increased by an annualized 1.8% inthe 1st half of 2008. The pipeline is up slightly froma year ago, though numerous projects remain scaledback or shelved given the cooling economic climate.

Mid-Year 2008 Washington office market high-

lights:

Net absorption: 739,000 SF, compared to anaverage of 1.35 million SF per quarter in 2007.

Overall vacancy rate:10.0%, up from 9.1% ayear ago. (See Figure 29)

Space under construction:18.9 million SF, upfrom 18.4 million SF a year ago.

Space U/C is 27% pre-leased, down from 35%a year ago.

Rents: Increased an annualized 1.8% in the 1sthalf of the year.

Investment sales: $2.4 billion in the 1st halfof 2008, compared with a record $8.9 billion inthe same period last year. Average sale price:$431/SF.

The Washington metro area office market shouldexperience steady but softening conditions dur-ing the remainder of 2008. The metro area is in thecorrection phase of the cycle, as demand is light, va-cancy is edging up, and rent growth is modest. Condi-tions are expected to remain moderate in 2009, with apick up in 2010, as the metro economy strengthens.

Although demand should remain steady, we expect itwill not be able to keep pace with the level of avail-able space due to robust construction activity. Con-

struction levels should ease over the next year, as ris-ing construction costs, credit difficulties, and lacklusterrent growth make new development harder to justify.Regardless, the Washington area office marketremains a top-performing market in the nation,even under softer conditions.

THE COMMERCIAL REAL ESTATE MARKET

Figure 29

Source: CoStar, Delta Associates; July 2008.

OFFICE VACANCY RATESSELECTED METRO AREAS

2ND QUARTER 2008


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The Baltimore Area Office Market

The Baltimore metro area office market expe-rienced moderating conditions during the 2ndquarter of 2008. Although absorption picked uppace during the past three months, it was boosted bypre-leased deliveries. Vacancy edged up and rents re-acted with minimal growth. Annualized, constructionstarts have eased compared to last year, but the devel-opment pipeline remains high. Overall, the Baltimoremetro area is poised for stable but slowing conditionsin the near-term.

Mid-Year 2008 Baltimore office market high-lights: Net absorption: 606,000 SF, compared to 1.7

million SF in all of 2007.

Overall vacancy rate: 11.6%, up from 11.4% one

year ago.

Space under construction:4.2 million SF, up from2.1 million SF one year ago.

Space under construction is 34% pre-leased,down from 40% a year ago.

Rents: Up 0.2% in 1st half of 2008, compared to0.8% growth in 2007.

Investment sales: $144 million in 1st half of 2008,

compared to $978 million in all of 2007.

We expect the Baltimore area office market toexperience slow conditions during the remain-


der of 2008.We project new supply will outpace de-mand in the next 24 months, as the economy sortsitself out. Job growth will be lower than the long-termaverage. Given these conditions, we anticipate rentswill remain neutral in 2008, as vacancy rises and de-mand tapers. In the long term, the Baltimore metroarea is well positioned for steady future growth.

The Washington Area Retail Market

The Washington metro areas retail market con-tinues to draw its success from an educated,growing population earning above-average in-comes, though it is slowing along with the na-tional economy.

Though job and population growth both slowed in theWashington area in 2007, the region remains healthyand economically sound. Development of residential

and commercial properties, sparked by job growth,has helped prop up demand for retail employees.However, declines in consumer spending have mod-erated the job market. In the 12 months ending May2008, the Leisure/Hospitality sector added 1,200 jobsand the Retail sector shed 300 jobs.

Although the cost of living here is somewhat higherthan in other metro areas, Washingtonians have moredisposable income for all kinds of retail goods. TheWashington metro was among the leaders in averageannual consumer expenditures for all types of goodsin 2006, the most recent data available. The aver-

age annual expenditure in the Washington area was$58,236, 20% higher than the national average.(See Figure 30)

Figure 30

Source: BLS, Delta Associates; July 2008.

AVERAGE ANNUAL HOUSEHOLD EXPENDITURESELECT METRO AREAS

2006


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Incomes in the Washington metro area grew by 21.5%

from 2000 to 2007, compared to 17.8% nationally. Com-pensation in the metro area has risen at a faster pacecompared to other areas, as high-level positions are dif-

ficult to fill with qualified candidates due to a low unem-

ployment rate; this has prompted companies to use highsalaries as a lure. By 2012, the Washington metro areasaverage household income is projected to be $110,300,

compared to $73,700 nationally.

The Washington metro area has over 116.0 million SF

of retail space, inclusive of all types of retail, in just over1,000 shopping centers. Of that space, 52.6 million SFis in 301 grocery anchored shopping centers. Northern

Virginia is home to 52% of the total metro retail inven-tory.(See Figure 31)

Metro-wide vacancy remained chronically low at

year-end 2007 at 2.28%, down slightly from 2.31%one year ago. The year-end 2007 vacancy rate is 98 ba-

sis points lower than the long-term average vacancy rateof 3.26%. (See Figure 32)

Rental rates at grocery-anchored centers in-creased 3.9% in 2007, after rising 5.7% in 2006.Metro-wide average rents were $33.16/SF at year-end 2007, up from $31.91/SF 12 months earlier.(See Figure 33)

The metro area has 24.3 SF of retail space per capita,compared to the national average of 20.0. The area

remains underserved as the growing population con-tinues to demand retail services, particularly in theDistrict of Columbia where there is just 8.7 SF of retailspace per capita. (See Figure 34)

Just over half of the Washington area shopping cen-ters are over 25 years old, while only 16% are agedten years or less. Although new retail projects, suchas DC USA, have entered the market, older centersremain the bulk of retail space.

New centers, along with renovations to the existingstock, are necessary to keep up with demand. How-ever, renovations might be slow to progress, given thelong-term strength of the retail market.

Figure 33

Source: Delta Associates; July 2008.

GROCERY-ANCHORED SHOPPING CENTERASKING RENTS

WASHINGTON METRO AREA 1999 2007

Source: Delta Associates; July 2008.

GROCERY-ANCHORED SHOPPING CENTERWASHINGTON METRO AREA - 2008

(MILLIONS OF SQUARE FEET)Figure 31

Note: Estimate

Source: CoStar, Delta Associates; July 2008.

Figure 32

GROCERY-ANCHORED SHOPPING CENTERVACANCY RATES

1999 2007


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Owners might be reluctant to contribute capital whenreturns are solid with or without renovations. Thisshould start to shift as new centers deliver and cus-tomers are lured by updated product and a new mixof retail.

The Washington metro area retail market re-mains one of the healthiest in the nation. Al-though consumers have retreated from purchasingnon-essential goods during this economic cool down,the metro area retail market has experienced minorjob losses. Given high disposable incomes in the area,vacancy rates were low and rents climbed during 2007at grocery-anchored shopping centers.

We expect the Washington area retail marketwill experience sturdy conditions over the nexttwo years.

The Washington Area Apartment Market

The Washington metro area continues to be one ofthe better apartment markets in the nation due to:

1. A solid job market, though it is cooling.

2. A transient work force that has produced a largepool of Class A renters by choice.

3. A stalled condo market that has turned would-be

condo purchasers into renters.

This solid market experienced stresses during 2007due to shadow rentals from a cooling housing mar-


ket, a ballooning pipeline of supply and a moderatingjobs market. 2008 has brought better news:

The pipeline of supply continues to decline fromits peak in the 4th Quarter of 2007.

Rents continue to edge up despite higher vacancyrates.

Annualized Class A absorption exceeds 5,000 forthe third quarter in a row.

The shadow market seems to have run its course,with absorption and rents showing real strengthfor both Class A and B product.

Highlights of the Washington apartment marketperformance as of Mid-Year 2008:

The regions stabilized vacancy ratefor invest-ment grade apartments (Class A and B) increasedto 3.6% from 2.9% a year ago. The national va-cancy rate is 5.6%; Washingtons is among thelowest in the nation. But it is an elevated rate bylocal historic standards.

Rent increasesover the past 12 months for allinvestment grade product remained below thelong-term average of 4.5% per annum at 3.1%since June 2007. Class A rents grew by 1.8% dur-ing this period, compared to a decline of -0.3% atmid-year 2007.

Source: CoStar, U.S. Census, Delta Associates; July 2008.

RETAIL SPACE PER CAPITAWASHINGTON METRO AREA

2008Figure 34


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Annual Net Absorption, at 6,296 Class A andB apartments, continued to strengthen, from itsslow down in late 2006 to mid 2007. Annual ClassA absorption continued its upward climb to 5,676units 2nd in the U.S. and the highest we haveever recorded for the Washington metro. Averagemonthly absorption at new projects declinedslightly to 16 units per month. However this rateis still remarkable, as the number of projects mar-keting has nearly doubled since last year.

Concessions at Class A projects continued tomove higher, to 4.1% of face rent, compared to2nd Quarter 2007, which was 3.6% of face rent.This upward trend began in the 1st Quarter of2007.

Pipeline: After rising from a historically low18,000 units in 2005, pipeline ballooned to

36,951 units in December 2007, largely drivenby the reversion of condominium projects. In the1st Quarter of 2008, the pipeline began its cycli-cal decline, and has continued downward to33,802 as of mid-year 2008. We believe this slowdownward trend will continue throughout 2008.We will likely look back at 4th quarter 2007 asthe peak of apartment pipeline during this busi-ness cycle.

The Baltimore Area Apartment Market

The demand for rental housing has moderated as job

growth in the Baltimore area has cooled and supplyhas increased.

Apartment Market Highlights at Mid-Year 2008:

Stabilized Class A vacancyhas risen 220 basispoints across the metro area, to 5.4%. Baltimoressouthern submarkets are up to 4.9% from 1.9%a year ago. Baltimores northern submarkets areup 160 basis points to 5.6%. Nonetheless, theBaltimore regions vacancy rate is slightly belowthe national average of 5.6%.

Through mid-year 2008 vacancy rates in the Bal-timore region have steadily increased from a lowof 1.4% in the 3rd Quarter of 2006. As of June2008 vacancy has continued this trend. Rentgrowth has slowed during this period as well. Forthe 2nd Quarter of 2008, vacancy in BaltimoreCity has increased to 6.8%; that is a 260 basispoint increase over this time last year.

Concessions in the Baltimore region have risenslightly compared to the same time last year (4.0%compared to 3.0%).

Average effective rentsin the metro area are$1,342 ($1.35 per SF). This metro area hasdemonstrated slightly negative rent growth of0.5% over the year, due in large part to theSouthern Suburbs (down 1.0% from Mid-Year2007). Effective rent growth in the Downtownsubmarket was again better than in the FellsPoint/Inner Harbor area (-0.5% compared to-1.4%). Rent growth in the Baltimore suburbswas down only slightly by 0.4%.

Supply pipeline metro-wide has trendeddownward by approximately 53 units since lastquarter. Some 3,761 units are planned to de-liver in the next 36 months in the Baltimore

metro area (up from the 3,658 units plannedthis time last year). These counts exclude Bal-timores southernmost suburbs: Anne Arun-del and Howard Counties (whose units are already counted in the Washington metro pipe-line).

Lease-up pace for actively marketing projects in theBaltimore area averages 10 units per month perproject. Projects that have recently stabilized havesimilar average lease-up paces of 11 per month forgarden properties and nine per month for high-riseproperties.

Although the pipeline has moderated, we projectthat supply will slightly exceed the number of unitsthat will be absorbed in the Baltimore area over thenext 36 months. This suggests that while occupancyand rent growth will continue to be positive over thenext three years, they will still warrant close moni-toring.


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METHODOLOGY

Bureau of Labor Statistics Metro Area Definitions

AtlantaAtlanta-Sandy Spring-Marietta, GA

AustinAustin-Round Rock, TX

BostonBoston-Cambridge-Quincy, MA-NH (Metropolitan NECTA)

ChicagoChicago-Naperville-Joliet, IL-IN-WI

(Non-Metropolitan Division)

Dallas-Fort WorthDallas-Forth Worth-Arlington, TX

DenverDenver-Aurora, CO + Boulder, CO

HoustonHouston-Sugar Land-Baytown, TX

LA BasinLos Angeles-Long Beach-Glendale, CA (Metropolitan Division)

Riverside-San Bernardino-Ontario, CASanta Ana-Anaheim-Irvine, CA (Metropolitan Division)

New YorkNew York-Northern New Jersey-Long Island, NY-NJ-PA

PhoenixPhoenix-Mesa-Scottsdale, AZ

San AntonioSan Antonio, TX

San Francisco BaySan Francisco-Oakland-Fremont, CA + San Jose-

Sunnyvale-Santa Clara, CA

South FloridaFort Lauderdale-Pompano Beach-Deerfield Beach, FL

Miami-Miami Beach-Kendall, FLWest Palm Beach-Boca Raton-Boyton Beach, FL

WashingtonWashington-Arlington-Alexandria, DC-VA-MD-WV

(Non-Metropolitan Division)

Single-Family Housing Data

Northern Virginia is defined as Arlington, Fairfax,

Fauquier, Loudoun, and Prince William Counties;

Alexandria, Fairfax, and Falls Church Cities.

Suburban Maryland is defined as Frederick,Montgomery, and Prince Georges Counties.

The Washington Metro Area describes all of thejurisdictions listed above and the District of Columbia.

The Baltimore Metro Area is defined as Anne Arundel,

Baltimore, Carroll, Harford, and Howard Counties;

Baltimore City.

Commercial Real Estate Data

Office, Apartments, Condominiums


Loudoun, and Prince William Counties; Alexandria,

Fairfax, and Falls Church Cities.

Suburban Maryland is defined as Frederick,

Montgomery, and Prince Georges Counties.

The Washington Metro Area is defined by all of the

jurisdictions listed above, plus the District of Columbia.

The Baltimore Metro Area is defined as Anne Arundel,

Baltimore, Carroll, Harford, and Howard Counties, plusBaltimore City.

Retail


Loudoun, and Prince William Counties; Alexandria,

Fairfax, and Falls Church Cities.

Suburban Maryland is defined as Montgomery and PrinceGeorges Counties.

The Washington Metro Area is defined by all of thejurisdictions listed above, plus the District of Columbia.


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ABOUT MRIS AND DELTA ASSOCIATES

Delta Associates

Delta Associates, the research affiliate of Transwestern,

is a firm of experienced professionals offering consulting

and data services to the commercial real estate industry

for over 25 years. The firms practice is organized inthree related areas:

Consulting, research and advisory services forcommercial real estate projects, including marketstudies, market entry strategies, asset

performance enhancement studies, pre-acquisition due diligence, and financial andfiscal impact analyses.

Valuation services for real estate companiesand fractional interests in them.

Subscription data for select metro regions foroffice, flex/industrial, retail, condominium, andapartment markets.

Deltas Trends in Housing team includes: Greg Leisch,

Chief Executive; David Weisel, President, Consulting

Division; Alexander (Sandy) Paul, National Research

Director; and Ann Thompson, Senior Associate.

For more information on Delta Associates, please visit

DeltaAssociates.com

MRIS

Metropolitan Regional Information Systems, Inc. (MRIS)is the nations largest Multiple Listing Service. MRIS

serves nearly 60,000 real estate professionals spanning

Maryland, the District of Columbia, Northern Virginia,and parts of West Virginia and Pennsylvania a total of22,000 square miles.

Customers currently have access to nearly 100,000 ac-tive listings, an archive of over 1.7 million comparable

listings and nearly 5 million public records containing

tax, assessment, and deed transfer information aboutproperties throughout the region. The cutting edge tech-

nology designed by MRIS keeps real estate professionalsbusiness ahead of the curve.

MRIS is owned by 25 Shareholder REALTOR Associa-

tions and governed by brokers who rely heavily on inputfrom the agents, brokers, and shareholders serving onvital committees.

When measuring both listing and selling agent activity,MRIS subscribers generated more than $46 billion insales volume and engaged in over 117,000 transactions

in 2007.

For more information on MRIS, please visit:

mris.com

Headquarters

9707 Key West Avenue

Suite 200Rockville, Maryland 20850301.838.7100

2008 MRIS. All rights reserved. You may not copy nor disseminate this report. If quoted, proper attribution is required. Sources: Associated Press, Bureau ofLabor Statistics, Census Bureau, Commerce Department, Consumer Insight, CoStar, Delta Associates, Dr. Stephen Fuller and John McClain, Center for Regional

Analysis, Deloitte Research, Department of Energy, Federal Reserve, Freddie Mac, Mortgage Bankers Association, MRIS, NAHB, NAR, OFHEO, Port Authority of NewYork and New Jersey, Primary Mortgage Market Survey, RealtyTrac, Reuters, Shopping Center Directory, USA Today, The Wall Street Journal, The Washington Post.

Headquarters

500 Montgomery St.

Suite 600

Alexandria, VA 22314703.836.5700

mris q2 2008 trends in housing

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