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Commentary 2

The Numbers That Drive Real Estate 3

This Month in Washington 8

Topics for Home Buyers, Sellers, and Owners 11

Released:December 2011

KW Research 2

One of the key drivers of homes sales, the employment rate, is beginning to show promising signs of a turnaround. The four-week average for jobless claims, as of November 19, was 394,250, a drop of 3,250 from the previous four weeks, and at the lowest levels since April. Consumer confidence also rose 15 points in the last month, and is now at its highest point since July of this year. Eric Green, Chief Market Economist at TD Securities Inc. said, “The trend remains very constructive. Jobless claims are back below 400,000, which seems to be the pivot point in terms of a strengthening labor market as opposed to a weakening one.”

In addition to improving employment conditions, home affordability also improved as interest rates fell further, opening the door for more first-time home buyers who accounted for 34% of the sales in October, an increase from 32% last month and over loast year. The western United States saw the greatest increase in home sales, which were up 4.4% month to month and up over 15% from last year.

A strengthening job market, along with encouraging signs from the housing sector, including a 10% jump in pending sales for October, are strong economic forces. While mortgage lending still remains a challenge, these forces may send a signal to banks to relax lending regulations and allow for a more rapid recovery.

Commentary

Sources: US Department of Labor, Bloomberg, National Association of Realtors

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Home Sales 4

Home Price 5

Supply of Inventory 6

Mortgage Rates 7

The Numbers That Drive Real Estate

KW Research 4

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

4.4

5.24.9

5.0 4.8

5.1 5.0

Original Tax Credit Scheduled to Expire

Latest Data Release: October 20, 2011. Source: National Association of Realtors “Home Sales” refer to transactions that include single-family, townhomes, condominiums, and co-ops. “Contract Failures” refer to those caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.

Home SalesIn Millions

Existing homes sales improved 1.4% in October, or to an annual pace of 4.97 million, a 13.5% increase from October of last year. Even more dramatic, was the jump in pending home sales, which surged in October by 10.4% from September, and were up 9.2% from October 2010. This jump in pending sales could lead to a strong fourth quarter as signs continue to point to a pent-up demand brought on by current lending conditions of mortgage providers.

October’10-’11

October ’09-’10

Expanded Tax Credit Expired

KW Research 5

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

$170.6 $168.8

$159.8

$169.3

$171.2

$162.5

Home PriceIn Thousands

The national median home price in the U.S. saw a small decline in October to $162,500, from $165,800 in September. This number can be affected by the sale of distressed properties, which typically sell at discounted prices. Distressed properties accounted for 28% of homes sales in October. Yet despite a drop in the median price from last September, the Federal Housing Finance Authority reported that seasonally adjusted prices rose 0.2% in the third quarter from the second quarter in 2011, which could be an early sign of appreciating home prices.

October ’10-’11 October ’09-’10

Latest Data Release: October 20, 2011Source: National Association of Realtors

KW Research 6

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

10.6 9.6

8.3

9.19.5 8.3

8.0

Tax Credit Expired

Supply of InventoryIn Months

By the end of October, the total number of homes on the market had fallen 2.2% to 3.33 million homes, which represents 8 months of inventory at the current sales pace. Since a record high of 4.58 million homes in July 2008, the inventory of homes for sale has been steadily declining. When homes sell faster than they come on the market, the market comes from its current favor toward buyers into balance or in favor of sellers. This can trigger an appreciation in home prices and lead the way to a stronger recovery..

October ’09-’10

October’10-’11

Latest Data Release: October 20, 2011Source: National Association of Realtors

Less than 6 months = Seller’s Market

More than 6 months = Buyer’s Market

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Mortgage rates continue to push lower, dropping to 3.98% from 4.23% in October of 2010, offering historic affordability to today’s home buyers. While mortgage lending conditions continue to be a challenge, more and more people are seeing the advantage of buying a home sooner rather than later. Lawrence Yun, NAR chief economist, said, “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this indicates more buyers are taking advantage of the excellent affordability conditions.”

Mortgage Rates30-Year Fixed

Source: Freddie Mac; December 1, 2011

Type Rate

30-Year Fixed 3.98%

15-Year Fixed 3.30%

5/1 ARM 2.91%

Historical Average 8.90%

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This Month in Washington

KW Research 9

This Month in Washington

“Reform” is the Word

A slow economic recovery, sub-par home sales, and upcoming elections have ignited a plethora of ideas on Capitol Hill regarding housing affordability and financing reform. Many of these conversations revolve around the government backed and largest sources of mortgage funds, Fannie Mae and Freddie Mac. From elected officials to presidential hopefuls, it seems everyone is talking reform these days.

A group of Democrats from the House of Representatives have challenged the government backed and largest sources of mortgage funds in the US, Fannie Mae and Freddie Mac, to produce a strong argument as to why these institutions have refused to reduce principal for borrowers, whose homes are worth less than the mortgage amount. Up to this point both organizations have argued that reducing the principal amounts on these upside down mortgages would have detrimental effects on the overall housing market, and say that their other programs have been more effective and less costly than writing down these loans. Whether or not this is true is what the House of Representatives wants to determine, and they have given Fannie Mae and Freddie Mac until December 9 to prove it.

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This Month in Washington

“Reform” is the Word (cont.)

This challenge from Congress is only the latest of many, as Fannie Mae and Freddie Mac have been under fire since the beginning of the housing crisis in 2006-2007. Congressman Scott Garrett recently introduced a bill that would entirely replace these government sponsored entities with a private alternative. Presidential hopeful Rick Perry also champions the privatization of these institutions, to remove the tax burden from the citizens.

While it is still unclear if and what will happen, there is a large building consensus regarding the level of compensation received by the executives at Fannie Mae and Freddie Mac. Congress and the Senate are both expected to send legislation to the desk of President Obama by the end of this year, ending hefty bonuses paid to these executives and aligning their salaries with federal workers. This legislation would be a substantial pay decrease, considering that total compensation (salary and bonuses) for 12 executives at these firms totaled more than $35 million in 2009 and 2010.

Sources: Reuters, Huffington Post, Rick Perry.org, Associated Press

KW Research 11

This Month in Washington

Conforming Loan Limits Extended

The President signed a bill reinstating loan limits for FHA and VA loans through the end of 2013. Before expiring in October, the previous maximum loan limit was $729,750 in the priciest areas for government-backed or sponsored entities including FHA, VA, Fannie Mae, and Freddie Mac. On October 1, the limit returned to $625,500 in those most expensive areas. The return to the $729,750 level does not extend to Fannie Mae and Freddie Mac. Overall, this is expected to have minimal impact as loans in this range account for a small share of overall loans. However, buyers and sellers in high-end markets with homes in that price range now have more mortgage options, which can lead to a more affordable mortgage.

Sources: HousingWire.com, NationalMorgageProfessional.com

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Topics for Home Buyers, Sellers, and Owners

KW Research 13

Deciding to Buy

When first-time home buyers decide they are ready to buy, it is important for them to begin the process by carefully assessing their values, wants, and needs—both for the short and long term. This is a critical step since consultation sessions normally start with the buyers’ values. Afterward, buyers can explore their wants and needs and, once defined, determine actual criteria.

A recent study shows how important the following home-buying factors were to buyers:

• List Price: 72%• Location: 69%• Neighborhood: 55%• Floor Plan: 37%• Square Footage: 28%• Schools: 22%

By having the home-buying criteria in mind before walking into a consultation, buyers are off to a better start when meeting with their real estate agent. The consultation allows buyers to fill in any missing gaps within their values, wants, and needs.

Source: KW Market Navigator and KW Research

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Although it is important to stay informed about what is going on in the national economy and housing market, many different factors impact your real estate market.

Talk to your KW associate for assistance interpreting the conditions in your local market.

KW associates are equipped with the knowledge and information to help you navigate the home-buying or selling process in this challenging market.

Your Local Market

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About Keller Williams Realty

•Keller Williams Realty Inc. is the second-largest real estate franchise operation in the United States, with 700 offices and more than 80,000 associates in the United States and Canada. The company has grown exponentially since the opening of the first Keller Williams Realty office in 1983, and continues to cultivate its agent-centric culture that emphasizes access to leading-edge education and promotes an economic model that rewards associates as stakeholders. The company also provides specialized agents in luxury homes and commercial real estate properties. For more information, or to search for homes for sale visit Keller Williams Realty online at

www.kw.com

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The opinions expressed in This Month in Real Estate are intended to supplement opinions on real estate expressed by local and national media, local real estate agents, and other expert sources. You should not treat any opinion expressed in This Month in Real Estate as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Keller Williams Realty, Inc., does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind. All information presented herein is intended and should be used for educational purposes only. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. All investments involve some degree of risk. Keller Williams Realty, Inc., will not be liable for any loss or damage caused by your reliance on information contained in  This Month in Real Estate.