Prince William County GovernmentPrince William County Government

Prince William County Real Estate Market Update

Senate Finance Committee Hearing

September 18, 2008

1Date: 9/18/2008

History of Real Estate Appreciation in Prince William County

-3.83%

17.44%

7.60%

17.47%

27.20%

18.30%

22.98%

-14.82%

-25.00%-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

CY8

0, F

Y82

CY8

2, F

Y84

CY8

4, F

Y86

CY8

6, F

Y88

CY8

8, F

Y90

CY9

0, F

Y92

CY9

2, F

Y94

CY9

4, F

Y96

CY9

6, F

Y98

CY9

8, F

Y00

CY0

0, F

Y02

CY0

2, F

Y04

CY0

4, F

Y06

CY0

6, F

Y08

CY0

8, F

Y10

CY of Value, FY of Revenue

Actual Residential Appreciation: Actual Ave.5.8%, with Forecast, 4.7%Inflation Rate, Annual Ave. 3.6%

FY10 Forecast

CY80-07 Average

2Date: 9/18/2008

History of Prince William County Real Estate Tax Rate

$1.300

$0.758

$0.910

$1.070

$1.160$1.230

$1.340$1.360

$0.970

$0.787

$0.68

$0.76

$0.84

$0.92

$1.00

$1.08

$1.16

$1.24

$1.32

$1.40

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

3Date: 9/18/2008

4Date: 9/18/2008

Foreclosures in PWC

0 5 8 6

237 223

316

717

134

537 512

584

4744343717171618

255

20520117214311612298

446

771

661

0

100

200

300

400

500

600

700

800

900JA

N.

FEB.

MA

RC

H

AP

RIL

MA

Y

JUN

E

JULY

AUG

.

SE

PT.

OC

T.

NO

V.

DE

C.

2006 2007 2008

2006 Total: 2492007 Total: 2,8052008 (Through July): 3,645

5Date: 9/18/2008

2008 PWC Foreclosure Map

6Date: 9/18/2008

Single Family Home Sales and Active Listings - July 2007 to July 2008

487

231

3,111

3,481

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Jul-0

7

Aug

-07

Sep

-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Sales Active ListingsSource: MRIS

7Date: 9/18/2008

Balance of Foreclosuresas of Date Indicated

14 17 19 36 57217

612

949

2,6302,921

2,589

2,0992,115

1,483

1,242

487

1390

500

1,000

1,500

2,000

2,500

3,000

3,500M

ar-0

6

Apr

-06

May

-06

Jun-

06

Jul-0

6

Aug

-06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb-

07

Mar

-07

Apr

-07

May

-07

Jun-

07

Jul-0

7

Aug

-07

Sep

-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

8Date: 9/18/2008

Prince William County Average Sales Price – Single Family and Townhomes

$304,095

$485,977

$190,149

$321,937

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

Jul-07 Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Single Family Avg. Sold Price Townhome Avg. Sold PriceSource: MRIS

9Date: 9/18/2008

Prince William County Average Sales Price – Single Family and Townhomes

July 07 July 08 % Change

Single Family Average Sold Price $485,977 $304,095 -37.4%

Townhome Average Sold Price $321,937 $190,149 -40.9%

10Date: 9/18/2008

Volatility Between Neighborhoods Within Residential Real Estate Markets

Always had disparity between residential and non-residential properties

Now volatility within the residential market – neighborhoods are experiencing dramatic differences in the extent of market value declines

Fairness and equity issues

Transparency in assessments process

Loss of credibility in annual re-assessment

Loss of trust and confidence in government

11Date: 9/18/2008

Other Major Revenue Sources And Impact on County Operating Budget

Personal Property TaxNew auto sales declining nearly 20% during the past yearNew trucks selling for as much as a 20% discountExisting trucks depreciating at an accelerated rate

Sales Tax revenue declined nearly four percent (3.7%) from prior fiscal year

Business license (BPOL) revenue declined over seven percent (7.2%) from prior fiscal year

County agencies preparing scenarios where budgets are reduced 33% due to local and additional state budget reductions

12Date: 9/18/2008

13Date: 9/18/2008

Why the Foreclosures are inPrince William County

The Perfect Storm of IngredientsConstruction Boom – PWC was the leading edge as Ffx became built-upLarge pool of lower income and first-time buyersExisting stock of lower priced homesSub-Prime Loans – the Turbo FuelThe Invisible Speculator – Playing the market w/New Homes

PWC was a speculator’s dream

14Date: 9/18/2008

Foreclosures and Vacant Property Are Toxic

Foreclosures drive down prices.Foreclosures discourage buyers.Foreclosures and Vacancies require costly County oversight to maintain properties not being kept up.Multiple vacant and foreclosed properties present a danger of neighborhood decay and can foster crime and graffiti.

15Date: 9/18/2008

What Can Be Done?Since Fall of 2007, PWC Finance Staff studying ways to aid housing market.Limitations

No budgeted funds to support the effortCounty would not underwrite the effort via a subsidyCounty could not utilize any debt issuance that would count against its ceiling on debt.

CXO Foreclosure Task ForceMembers drawn from OEM, Finance, Public Works, Planning, Housing, Coop. Extension, and CAO

16Date: 9/18/2008

Overview of “Home Help” Initiative

Longstanding desire to have PWC Police, Fire, and Educators live in the CountyHigh housing costs have resulted in many of these workers being forced to live in outlying areas Current housing market downtrend has resulted in hundreds of homes in the County being placed in foreclosure and depressing home prices generally“Home Help” is designed to offer incentives for qualifying County employees to relocate inside the county borders and simultaneously reduce the inventory of homes for sale inside the county

17Date: 9/18/2008

Possible Funding Mechanism Pass Thru CD Financing

County makes market rate investment in 10-yr CD with participating local bank in the amount required to fund an employee’s mortgage.Employee purchases home in the County (foreclosure may be bought at below-market prices).The bank provides a mortgage loan to the employee at a below market rate, but with a positive spread to the rate it is paying on the CD. i.e. CD rate = 3.9%; mortgage rate = 4.9%, amortized asa 30-year loan.Downpayment assistance options may be developed.

18Date: 9/18/2008

OutlookJanuary 1, 2009 Landbook

FY10-14 Fiscal Plan

FY10-15 Capital Improvement Program

Additional ShocksGeneral Economy

State Budget Reductions

Real Estate Market