realty.wpcarey.asu.edu

Single-family 1.2 million homes Townhouse/condos 150,000 units Apartments 340,000 units

Retail 148 million Sq.Ft. Office 63 million Sq.Ft. Industrial 229 million Sq.Ft.

Success built on failure

Game of checkers

After slow start, local economy and real estate market should structurally strengthen throughout the year.

To build capital for education, retirement and lifestyle (middle-class investment)

Money was cheap and available

What have you done for me lately.

Hyped information and guidance

Just because the bottom is found does not mean that recovery is imminent. ◦ The Titanic found bottom.

Recovery will not be even or include everyone.

What is the driving force for recovery? What will recovery look like?

Census◦ Growth?◦ Demographic

Role of Housing Ownership—American Dream?◦ Tax deduction◦ Secondary market◦ Buy vs. rent Mobility Affordability

Housing market◦ Value recovery◦ Financial services◦ Over hang of homes for sale, vacant and foreclosed

Commercial real estate◦ Increasing foreclosures◦ Loss of tenants◦ Loss of revenue

Economic and job (income recovery)

International, Federal and State deficits ◦ Revenues vs. expenses

Immigration Infrastructure Education Alternative fuels Sustainable development

Success built on failure Deal is the name of the game Understand closely◦ Condition of property◦ Condition of neighborhood ◦ Potential demand◦ Competition

Idea(s) might not be unique Look at trend

Homes are an investment◦ Owner/occupant investor◦ Owner/landlord investor◦ Owner/speculator investor

Motivation◦ Long-term: self-sufficiency◦ Short-term: lifestyle enhancement

Return◦ Income: Rental, Value-added, Financing◦ Appreciation

Stricter underwriting Satisfied homeowner Income concerns Rental vs. owning Consumer confidence Low or no equity—difficulty to sell

2000 2010Population 3,251,876 4,192,887

White Only 66 percent 60 percent

Hispanic 25 percent 30 percent

Black 3.5 percent 4.6 percent

Asian 2.0 percent 3.2 percent

White Hispanic Only

Growth (941,011) 34 percent 45 percent

18+ (74%) 80 percent 62 percent

YEAR TOTAL ABSOLUTE PERCENT CHANGE CHANGE

2008 1,868,000 (47,000) - 2.4

2009 1,841,850 (26,150) -1.4

2010 1,803,170 (38,680) -2.1

2011F 1,819,400 16,230 0.9

2012F 1,848,510 29,110 1.6

Apr Mar Apr Change Change

2010 2011 2011 Yr to Yr Mo to Mo

Total Nonfarm 1,703.8 1,704.3 1,714.8 11.0 10.5

Total Private 1,459.7 1,464.5 1,474.8 15.1 10.3Goods

Producing 195.9 191.4 194.5 -1.4 3.1

Service-Providing 1,507.9 1,512.9 1,520.3 12.4 7.4

0.0

Construction 82.7 77.8 80.4 -2.3 2.6

Manufacturing 110.2 110.6 111.1 0.9 0.5

Retail Trade 205.6 205.9 206.5 0.9 0.6

Health Care 194.5 205.0 206.4 11.9 1.4

Tourism 152.8 156.4 157.9 5.1 1.5

Education 101.2 100.1 100.3 -0.9 0.2

Business Services 272.4 262.6 262.9 -9.5 0.3

Instrument May May 2010 2011

30 year Mortgage 5.0% 4.6% 1-year Index 0.37 0.19 Prime Rate 3.25 3.25 10-year Treasury 3.42 3.46

Permits Maricopa Pinal Pima o 2011 ytd 1,323 184 185o 2010 5,612 1,500 1,000o 2009 6,355 2,130 1,865o 2008 10,348 4,027 2,630 o 2007 21,882 8,147 3,715o 2006 27,976 10,788 8,115o 2005 43,256 18,191 11,035 o 2004 48,136 11,495 9,585 o 2003 39,652 6,730 8,010o 2002 34,309 4,433 6,500

Optimistic Pessimism Consensus

2010 Actual: 7,112

2011 16,900 6,000 12,260

2012 27,800 10,000 18,290

Source: Greater Phoenix Blue Chip

Major issue is competition with foreclosed homes

Market simulation: Entry level Infill Age restricted Green

Area First Qtr. First Qtr.

2010 2011

Maricopa County $ 227,250 $221,900

Peoria 264,440 210,000

South Phoenix 155,700 144,180

Surprise 167,990 167,840

Gilbert 227,025 218,130

Avondale 149,615 146,640

Goodyear 209,315 219,995

Area First Qtr. First Qtr. 2010 2011

Pinal County $133,100 $163,500

Apache Junction 162,585 167,920

Casa Grande 114,000 124,355

Maricopa 120,370 124,355

Queen Creek 139,900 150,235

SALES ACTIVITY Maricopa Pinal 2011 27,950 4,080◦ 2010 106,975 12,765 ◦ 2009 112,725 12,140◦ 2008 81,700 9,985◦ 2007 54,570 3,580◦ 2006 67,035 3,860◦ 2005 110,835 6,110

MEDIAN PRICE 2010 $142,000 102,500◦ 2009 140,000 105,000◦ 2008 186,000 134,000◦ 2007 255,000 193,500◦ 2006 260,600 205,000◦

Area First Qtr. First Qtr. 2010 2011

Maricopa County $145,500 $130,050

Peoria 165,245 149,665

S. Phoenix 114,750 96,840

Maryvale 64,395 52,000

Surprise 139,125 125,000

Mesa 135,675 119,000

Glendale 119,000 100,000

Median Market Market Market Sales Price Share Share

Share (%) (%)

Total 10,265 125,000Foreclosed 3,745 126,645 36Traditional 6,520 125,000 64

REO 2,610 114,465 4025

Foreclosure related 6,355 62

2008 2009

2010

Maricopa County 3.3% 3.8% 3.9%

Pinal County 4.8 5.3 5.6

2008 2009 2010

Maricopa 7.6% 7.3% 9.4% Casa Grande 2.7 2.6 4.4 Apache Junction 7.1 8.7 9.3 Maryvale 9.3 8.9 7.8 Gilbert 2.9 3.5 4.8 Surprise 6.5 7.3 6.9 Avondale 8.0 8.0 6.9 Buckeye 11.6 15.9 14.6

Areas 2009 2010 United States $172,100 $176,900 Phoenix 137,000 144,700 San Diego 350,500 392,800Las Vegas 142,900 142,300Dallas 140,500 134,700Atlanta 123,500 122,700Source: NAR

Area First Qtr. First Qtr. 2010 2011

Maricopa County 156 178

Peoria 159 178

Avondale 225 251

Surprise 159 180

Glendale 190 229

Chandler 154 175

Permits◦ 2011 337o 2010 353 o 2009 561o 2008 1,085o 2007 7,203o 2006 6,187

Median New Unit Sales Price◦ 2010 201,960◦ 2009 169,475◦ 2008 170,875◦ 2007 245,155

Sales Activity◦ 2011 ytd 4,560◦ 2010 16,955◦ 2009 13,735 ◦ 2008 9,420◦ 2007 11,550

Median Resale Home Price◦ 2011 $ 85,000 ◦ 2010 95,000 ◦ 2009 108,000◦ 2008 150,000◦ 2007 179,000

Area First Qtr. First Qtr. 2010 2011

Maricopa County $100,040 $ 85,000

Peoria 77,280 74,865

North Scottsdale 170,840 156,990

South Scottsdale 125,000 107,520

Downtown 99,390 102,550

Union Hills 110,000 81,833

Glendale 54,900 46,000

UNITS AUTHORIZED◦ 2011 ytd 4◦ 2010 408◦ 2009 637◦ 2008 6,365 ◦ 2007 6,676

◦ 2000’s 51,680 ◦ 1990s 51,608 ◦ 1980s 137,436