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Keller Williams Research

This Month in Real Estate

Released: November 5, 2009Updated: November 9, 2009

14Topics for Buyers and Sellers………………….

Recent Government Action…………………….

The Numbers That Drive Real Estate…………

Commentary…………………………………….

9

3

2

KW Research 2

Budding Signs of Recovery

Budding signs of recovery continued last month. The encouraging news arrived in a number

of closely followed economic indicators. On Thursday, October 29, the U.S. Commerce

Department stated the country's recession has officially ended, at least as leading data

indicates.

U.S. GDP expanded 3.5 percent in the third quarter, the first period of quarterly growth in more

than a year. A strong bounce in housing sales activity in September, mainly due to first-time

buyers' efforts to claim the tax credit before it expires for November 30, pointed to

stabilization in the housing sector. And more good news this week as an extension to the

Home Buyer Tax Credit is working its way through a congressional vote. Many believe this bill

will emerge later in the month, possibly with provisions to include some existing homeowners

and higher income earners.

The recovery will continue to develop in small steps. The Recent Nobel Prize winner in

economics, Paul Krugman, praised the progress, stating the most severe part of the crisis has

now subsided and “the end of the world has been postponed.” Moving forward, trade

imbalances and mounting levels of government debt, as well as high levels of unemployment, will

need to be addressed. For now, governments including the United States will continue to provide

stimulus support until the major economies are firmly on solid ground.

KW Research 3

The Numbers That Drive Real Estate

KW Research 4

Home SalesIn Millions

4.94

5.57

5.09

5.24

4.66

4.55

4.71

4.49

4.74

4.54

5.10

4.89

4.72

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

Seasonally Adjusted Home Sales

Latest data release: October 23, 2009

Source: National Association of Realtors

Existing home sales bounced back strongly in September with much of the increase being attributed to the rush of first-time buyers trying to claim the tax credit before the end of this month. Sales jumped 9.4 percent to 5.57 million units over August sales of 5.09 million, marking five gains in the past six months and is 9.2 percent above levels seen last year. Sales activity is at the highest level since July 2007 when sales hit 5.73 million.

KW Research 5

Median Home PriceIn Thousands

$191 $186 $180 $176 $165 $168 $170 $167 $182 $177 $175$182$175

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



Existing-home price was $174,900 in September, 6 percent higher from its low in January but still 8.5 percent below September 2008. Distressed properties, which accounted for 29 percent of all transactions in September, continue to hold down the median price, as they typically sell for 15-20 percent less than traditional homes.

KW Research 6

Inventory - Number of homes available for sale

In Millions

The current housing supply is the lowest seen in two and a half years. Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, representing an 7.8-month supply at the current sales pace, down 16.1 percent from August’s 9.3-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market. According to Lawrence Yun, NAR chief economist, “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.”

4.2

3.6

3.94.13.9

3.6

3.8

3.63.7

4.24.3

3.83.9

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



Number of Homes Available for Sale

KW Research 7

Mortgage Rates 30-Year Fixed

Source: Freddie Mac

Rates for 30-year fixed loans continue to hover around 5 percent. While having risen above the ultra-low 4.78 percent reached in the spring, rates remain at attractive levels for people looking to buy a home or refinance. As an economic recovery is underway and concerns over inflation come back, experts expect mortgage rates will likely go up.

5.59%

5.29%

4.92%4.87%

5.00%

5.03%

4.94%

5.07%5.04%5.12%

5.14%

5.08%

5.22%

4.80%

4.78%4.82%

4.87%

5.15%

5.03%

5.01%

5.12%

5.10%

5.25%

5.16%

5.04%

5.07%

4.98%

4.85%

4.78%

4.96%4.84%

4.86%

4.82%

4.91%

5.29%5.38%

5.42%

5.32%

5.20%

5.25%

5.14%

5.20%

1/8

1/2

2

2/5

2/1

9

3/5

3/1

9

4/2

4/1

6

4/3

0

5/1

4

5/2

8

6/1

1

6/2

5

7/9

7/2

3

8/6

8/2

0

9/3

9/1

7

10

/1

10

/15

10

/29

Average Weekly Mortgage Rates

KW Research 8

21% 19% 19% 20% 20% 23% 24% 22% 18% 15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Affordability as of September every year. Calculations assume a 20% down payment.


Affordability -% of Income

Historically high affordability conditions coupled with the first-time buyer tax credit are boosting home sales. Home buyers continue to benefit from low home prices as well as unprecedented mortgage rates. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970,” according to NAR President Charles McMillan. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

Percent of Income Required for Mortgage Payments on a Median-Priced Home

Well below the

historical

standard of

25 %

The percentage of a median family’s income required

to make mortgage payments on a median-priced home

KW Research 9

Recent Government Action

KW Research 10

First-Time Home Buyer Tax Credit UpdateOctober 2009

As the deadline for the First-Time Homebuyer Tax Credit crept closer, it became a clear priority on the Hill. An extended and expanded home buyer tax credit is a part of a larger bill that also extends unemployment benefits. This bill was signed by President Obama on Friday, November 6.

The bill essentially remains intact but has a handful of important changes:

Sources: Bloomberg News, The Washington Post, U.S. Government Printing Office

1. Existing homeowners who lived in their previous home for 5 out of the last 8 years will be eligible for up to a $6,500 credit.

2. The income limits have been bumped up $50,000 to $125,000 for individuals and up $75,000 to $225,000 for couples.

3. Those who qualify will have until the end of April, 2010 to findtheir new home and have a signed contract on it. They will have until the end of June to close.

4. Military, foreign services and intelligence employees with extended active service may qualify for a few special provisions, including an extra year to take advantage and they may not need to repay the credit if they move during the first three years.

KW Research 11


� First-Timers: Unchanged

� Prior Owners: $6,500 if lived in prior home for at least 5 years of past 8 years

� First-Timers: maximum of $8,000 or 10% of sales price

� Prior Owners: $0Amount

� November 7, 2009� January 1, 2009Effective Date

� Individual: $125,000

� Couple: $225,000

� Individual: $75,000

� Couple: $150,000 Income Limit

� Contract signed before May 1, 2010, must close before July 1, 2010

� Members of the uniformed services, foreign services, and intelligence employees who served an extended service of 90 days will have until April 30, 2011 and June 30, 2011.

� Must Close before December 1

Deadline

NewPrevious


KW Research 12


�If purchased in 2010, by amending 2010 tax return or claiming on 2011 tax return

� If purchased in 2009, by amending 2009 tax return or claiming on 2010 tax return

How to claim

� Buyer must be at least 18 years old and not classified as a dependent for tax purposes

� Home must cost less than $800,000

� Home must be primary residence for at least 3 years. If home is sold or buyer moves, before 3 years, must re-pay full amount of credit. Exception for military, foreign services, or intelligence with extended 90 days service overseas.

� Home must be primary residence for at least 3 years

Other Restrictions

NewPrevious


KW Research 13

The Consumer Financial Protection Agency has been in the works in Congress for several months. This agency will look out for consumers, protecting them from unfair financial practices, overseeing credit cards and loans. Soon after its creation, the Consumer Financial Protection Agency would bring the Home Valuation Code of Conduct (HVCC) to an end.

The HVCC slipped in under the radar earlier this year. It was the result of a settlement between the New York attorney general and Fannie Mae and Freddie Mac to conduct fair and appropriate appraisals. HVCC actually created a lot of confusion, many improper appraisals, and much frustration from contracts falling through from inaccurate appraisals.

The current code would be replaced by one with a similar goal that allows for public comment and is consistently applied across all federal agencies.

This will give the public the opportunity to weigh in on what has and has not worked from experience. This will hopefully get closer to a code that truly protects consumers, ensures fair values, and prevents future bubbles.

Source: The Washington Post

Could HVCC be on its way out?October 2009

KW Research 14

With the onset of the financial crisis, credit markets that were not backed or insured by the government froze. Mortgages that are backed by the government and purchased by Fannie Mae, Freddie Mac, and Ginnie Mae are called “conforming loans”. One type of non-conforming loan is the “jumbo loan”. Traditionally, jumbo loans are mortgages that are greater than $417,000.

Since the crisis began, tightened lending practices have made this type of loan harder to secure. Jumbo loans currently come with substantially higher costs from larger down payments and higherinterest rates. This has led to a 70% decrease in jumbo loan origination since 2007 and a greater inventory of homes in jumbo territory.

As part of the stimulus bill earlier this year, the conforming loan limits were raised to 125% of median home prices to a limit of $729,750 for 2009 and were set to expire at the end of the year. On October 29, the increased loan limits were extended through 2010. This means it will be easier for sellers whose homes fall in this category and cheaper for buyers to secure financing next year, compared to if the government let the limits expire.

Higher Loan Limits ExtendedOctober 2009

Sources: Inman News, National Association of Realtors

KW Research 15

Topics for Buyers and Sellers

KW Research 16

Unemployment Worries Addressed

The average duration that unemployed workers are out of a job is currently more than six months, near the highest level since the bureau started tracking the figure in 1948. The total number of unemployed people stands at 15.1 million. 5.4 million of those have been looking for work for more than 27 weeks.

With incentives in the housing market, including very low interest rates, a large selection of homes for sale in many markets, and highly affordable home prices, concerns about the job market and possible unemployment have held back many potential buyers.

Here are a few suggestions for potential buyers and current homeowners:

Sources: Bureau of Labor Statistics, CNNMoney.com, etc.

1. Buy well within your means. Although home buyers often want to buy a home they can see themselves growing into, stay within a conservative percentage of what you currently make. If you had to take a part-time instead of a full-time job, if your salary or hours were cut, or if you become a one-income household instead of two, make sure your monthly payment would still be attainable.

Peace of Mind Home Buyers Worried about High Unemployment

KW Research 17

Unemployment Worries Addressed (cont)

Peace of Mind Home Buyers Worried about High Unemployment

Source: Bureau of Labor Statistics, CNNMoney.com, and other sources

2. Put down a large down payment. Not only will your monthly payments be less, but the equity from the down payment creates a buffer zone. If you put 20% down when you purchase your home and home prices in the area drop 5%, you still have at least 15% equity in your home. For sellers, this built-up equity provides flexibility-should you need to sell in a hurry.

3. Have an emergency fund. Experts advise everyone, not just homeowners, to have an emergency fund of at least six months’ worth of expenses. This fund should be saved in a liquid account, like a money market or savings account, for easy access if needed quickly. With the average time to find a new job currently above six months, seven or more months of savings is a good goal.

4. Pay down other debts. Lowering or eliminating debt service is always a good move and is particularly wise in the current job climate. If you were without a job and income, lower fixed monthly expenses help ease your financial burden and stretch the money in your emergency fund.

KW Research 18

Your Local Market

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

Talk to your Keller Williams agent for assistance

interpreting the conditions in your local market.

Keller Williams associates are equipped with all the knowledge and information to help navigate you through the process of buying or selling a home in this challenging market.

KW Research 19

About Keller Williams Realty

Founded in 1983, Keller Williams Realty, Inc., is an international real estate company with more than 74,175 associates and 693 offices located across the United States and Canada. The company began franchising in 1991, and followingyears of phenomenal growth and success, became the third-largest U.S. residential real estate firm in 2009.

The company has succeeded by treating its associates as partners and shares its knowledge, policy control, and company profits on a system-wide basis.

Focusing on helping associates realize their fullest potential, Keller Williams Realty is known as an industry leader in its family culture, unmatched education, profit sharing business model, phenomenal coaching program, and technology offerings. The company provides associates with all the tools needed to grow and

thrive in today’s market.

www.kw.com

KW Research 20

About Paul W. Drury

� Originally licensed as an agent in Ohio in 1986, Paul began with Lehman Johnson Real Estate in Elyria. He acquired his Real Estate Brokerage License in 1992 and became an Associate broker with West Shore Realty. In 1995 he moved his brokerage license to Continental Realty Investment where he began to focus on additional work with commercial and investment real estate. During these years he also performed professional appraisals with The Appraisal House.

� In 2001 he began Drury Realty Consulting and worked as an independent Real Estate Consultant and worked on his own until 2009 when he joined Keller Williams Realty, Greater Cleveland West. “Being a part of the Keller family provides me with tools and serves unachievable strictly on my own, provides me with the tools and networking of a huge national network, while still enabling me to work, act, and function as the manager of my own business. It’s the best of both worlds.” – Paul

� Paul's Home Page

KW Research 21

What we have to offer sellers

� Sellers of Real Estate now have access to tools unimaginable just a few years before. Keller Williams doesn’t spend its money promoting its own name. It doesn’t have to. It puts its resources into providing the best tools and resources to its systems, education, and training, thus providing the most professional real estate team members back into the communities.

� Properties put up for sale by Paul are also; listed on KWLS, a national MLS, implemented by the third largest company in the US; local MLS, the NEOHREX, Northern Ohio Real Estate Exchange; and on many other national sites such as Trulia, Zillow, CyberHomes, and others.

� Other tools brought to bear by Paul include branding using the properties own web address with a virtual tour that can be emailed by link or have the link posted anywhere it can be, to even include Craig’s List and Back Page. Examples of properties sold using this method include:

- 947 Gulf Road in Elyria (sold in 28 days)

- 359 Gayle Drive in Sheffield Lake (sold in 57 days)

- 327 Gayle Drive in Sheffield Lake (sold in 18 days)

KW Research 22

What we have to offer buyers

� Buyers of Real Estate also have access to tools unimaginable just a few years before.

Since Keller Williams doesn’t spend its money promoting its own name, it puts its

resources into providing the best tools and resources to its systems, education, and

training, thus providing the most professional real estate team members back into the

communities.

� Paul is available directly most hours of the day without having to battle assistants and

voice mails (most of the time) and he checks his email constantly.

� Buyers can access Paul’s website at www.druryrealty.com and conduct their own

searches through wolfnet IDX and create their own search profiles for searching for

properties anywhere in Ohio. If relocating out of Ohio, Keller Williams offers one of

the finest relocation referral networks in the nation. While we may not be the biggest

firm in Northern Ohio yet, we are in many areas of the national already.

� Paul’s website is easy to manage and he can set up search profiles for you so you get

notified at about 8:30 am of any new properties that come available. He also has

profiles set up on national websites such as Trulia providing for greater access to

search tools.

KW Research 23

Properties currently for sale

� Properties currently for sale:

- 37101 Hunters Trail in Avon

- 4435 Porter Road in North Olmsted

- 810 Sandalwood Drive in Elyria

� Want your home or property promoted like these?

- Contact Paul for a free, no obligation consultation today at 440-385-5650.

KW Research 24

Follow Paul on line…

Home Web Page

� www.druryrealty.com

On Zillow

� www.zillow.com/profile/PaulWDrury

On Trulia

� www.trulia.com/profile/paulwdrury

On Twitter

� - www.twitter.com/PaulWDrury

On FaceBook

� - www.facebook.com/paul.w.drury

On LinkedIn

� www.linkedin.com/in/paulwdrury

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