Area Local Market Report, Fourth Quarter Today's Market $160,000 Median Price (Red Line) and One-year Price Growth 20 $140,000 $120,000 $100,000 10 0 $80,000-10 $60,000 $40,000 $20,000-20 -30 $0 2000 2002 2004 2006 2008-40 Price Activity Current Median Home Price ( ) $89,900 $173,500 1-year Appreciation ( ) 11.7-4.0 3-year Appreciation ( ) -30.6-5.2 52 3-year (12-quarter) Housing Equity Gain -$39,600 -$9,600 7-year (28 quarters) Housing Equity Gain -$36,200 -$47,600 9-year (36 quarters) Housing Equity Gain -$20,900 -$4,767 Local Trend Prices are above the level from 12 months ago and growing g The price slump wiped out all of the equity gained during the housing boom Conforming Loan Limit* $417,000 $729,250 Local Median to Conforming Limit Ratio 22 not comparable *e: the loan limits for FHA and the GSEs were extended through 2010. Most buyers in this market have access to government-backed finacing 1,000s 250 State Home Sales (Red Line) and Sales Growth 20 200 15 10 150 100 5 0-5 50-10 -15 0 2000 2002 2004 2006 2008-20 Home Sales and Construction Growth Michigan State Existing Home Sales ( vs 2008 ) 13.9 27.2 The sales level is much higher than a year ago and growing. g
Drivers of Local Supply and Demand Local Economic Outlook 1-year Job Change (Dec) -12,100 1-year Job Change (Nov) -12,800 3-year Job Change (Dec) -25,500 Current Unemployment (Dec) Year-ago Unemployment 1-year (12 month) Job Growth 12.2 9.0-3.2 10.0 7.4-4.3 Job losses are a problem and will weigh on demand, but layoffs are declining which could help buyer confidence 's unemployment situation is worse than the national average and weighs on confidence Weak, but better than most markets State Economic Activity Index 12-month change ( - Dec) 36-month change ( - Dec) Michigan -10.4-2.2-20.2-1.3 The economy of Michigan is weaker than the rest of the nation, but improved modestly from last month Local Fundamentals 12-month Sum of 1-unit Building Permits through Dec Long-term average for 12-month Sum of 1-Unit Building Permits 784 3,712 not comparable not comparable The current level of construction is 78.9 below the long-term average Excess supply reduction could result in price escalation over the longer-term if, in the future, there is rapid and robust increase in demand Single-Family Housing Permits (Dec ) 12-month sum vs. a year ago -22.1-23.7 Construction is down from last year, but appears to have bottomed. 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line)
Affordability 30 Affordability - Local Mortgage Servicing Cost-to-Income (Local Historical Average Shown in Red, Average in Green) 25 20 15 10 5 0 1991 1993 1995 1997 1999 Monthly Mortgage Payment to Income Ratio for 2008 6.1 15.4 Historically strong and an improvement Ratio for 6.2 14.8 over the third quarter of this year Historical Average 11.8 22.6 More affordable than most markets 14 12 10 8 6 4 2 0 Recent Trend - Local Mortgage Servicing Cost to Income (Historical Average Shown in Red Dashed Line) 2008 Q1 2008 2008 Q3 2008 Q1 Q3
Median Home Price to Income Ratio for Ratio for Historical Average 6.2 6.1 3.8 7.2 Local affordability has improved and is below the historical average Affordable compared to most markets 10.0 9.0 8.0 7.0 6.0 5.0 4.0 1.0 0.0 Ratio of Local Median Home Price to Local Average Income (Local Historical Average Shown in Red, Average in Green) 1991 1993 1995 1997 1999 The Mortgage Market 30-year Fixed Mortgage and Treasury Bond Yield () 7.0 6.5 6.0 5.5 5.0 1.5 4.5 1.0 4.0 3.5 0.5 0.0 2004 2006 2008 Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis) The spread between the 30-year fixed rate mortgage and the 10-year Treasury is now at comfortable, pre-crisis levels. However, the Federal Reserve and Treasury will stop buying mortgage backed securities (MBS) on March 31st. The agencies had been buying MBS to keep mortgage rates low. Consequently, the end of the program has some market observers concerned about a possible increase in rates. However, the Fed has slashed its purchases of MBS in recent weeks and the private sector has scooped up any remaining MBS. With yields on other investments low, the returns on the MBS, even at 5, are desirable. The Fed has promised that it stands ready to intervene in the market, presumably by resuming purchases, in case there is a sudden increase in mortgage rates. Low mortgage rates have been critical to the improved home sales that are at the core of the housing market and economic recovery.
Looking Deeper. 5.0 4.5 4.0 3.5 1.5 1.0 0.5 0.0 State Total Foreclosure vs. U.S Average ( Average in Blue Dashed Line) Source: Mortgage Bankers' Association Monthly Market Data - November Market Share: Prime (blue) vs. Subprime + Alt-A PRIME: 8.2 1.7 91.8 2.3 11.7 91.8 88.3 88.3 8.2 11.7 2.3 2.6 2.1 2.6 1.7 2.1 The market has a lower share of subprime loans than the average market, but rising prime foreclosures are becoming a problem There was a substantial increase versus October of this year Compared to the national average, today's local rate is low SUBPRIME: 17.3 15.7 15.7 18.4 18.0 18.0 17.3 18.4 The local foreclosure rate has fallen relative to last month Locally, today's foreclosure rate is low relative to the national average ALT-A: 11.1 10.5 10.5 14.8 14.0 14.8 11.1 14.0 Relatively little local change versus October of this year The November rate for is low compared to the national average The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed the foreclosure process and are owned by banks divided by the total number of mortgages for that area. Source: First American CoreLogic, LoanPerformance data