december 2009 charleston market report

8/9/2019 December 2009 Charleston Market Report

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www.charlestonmarketreport.com


The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.William Arthur Ward

December 2009 IssueIn This IssueReflections on the past DecadeCartoonsBen BernankeRisk in 2010Stiglitz: 6 Harsh Lessons We Failed to LearnTNX - 10 Year Treasury Yields2009 Stock Market TallyCharleston

Reflections on the past DecadeHappy New Year and Happy New Decade everyone!

I am sure everybody can reflect on the ups and downs of this past decade. I think what is important is that we refleon the good and bad and learn important lessons that came each of our ways through this thing called life. I guess twords would sum up my feelings of the past decade: No Regrets. The last decade was truly an incredible learninexperience for me personally and in business. I have had the luxury of participating in the DotCom bubble and 9/1as a Financial Consultant and the real estate boom/bust and credit meltdown as a former appraiser and consultant.

What I have tried to pass on to all the readers of the CMR since September 2006 is the importance of riskmanagement from different perspectives. I could have easily taken my knowledge and tried to bamboozle the CMreaders with real estate or investment deals to line my own pocket but this was never my style or intention. I actuahad potential buyers wait on the sidelines in 2006-07 until the correction ran its course instead of taking the easy reestate commission.

This is what the past decade taught me by being in the trenches of the stock market, real estate and credit marketsduring extreme volatility created by sheer greed and ignorance. Although these lessons that I learned from the


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markets did not feel very good while they were actually occurring the experience and knowledge I gained from themis priceless.

As many of you know I took a ton of heat in September 2006 for being quoted in Post and Courier saying "I think ia lending bubble. Lending is out of control. The way some people finance their homes is crazy. I also made thecomment:

For the country, "We are not so much a housing bubble as a lending bubble," he said. "Many lenders are involved ihigh-risk financing scenarios with borrowers when they push high-risk loans and do not expect loan defaults when

the market turns ugly," he said. "My main worry for the local real estate market here is the possibility of nationwidrecession, which could drag down the U.S. real estate market even further."

You must remember that in 2006 everyone in Charleston and other parts of the country were still high on real estateand those quotes cost me a lousy job and I moved on. Today it is hard to believe how certain so called professionain the real estate and lending industry could not comprehend these comments. However, the individuals who attackme for those right to free speech comments have now lost millions on bad real estate deals, lost thousands oftransactions in the mortgage business because you can not get a mortgage with just a heartbeat anymore, andlocal/national banks have lost billions in poor residential and commercial loans.

In my opinion, if you just stick with the truth you usually come out ahead. The individuals who attempted to tarnis

my reputation for the comments above were worried about their wallets and so called businesses that were built onsmoke and mirrors. Many of the loans and appraisals made before and after my comments were published were jupile of crap. If you decide to pursue a purchase a home or pursue a career in real estate just make sure that you havthe knowledge to decipher the truth from the lies so you do not lose money.

The Torah teaches that we measure our success, not by what we achieve for ourselves, but rather, by how we impacon our fellow man and the extent through which we become a blessing to others. This does not mean that we shouldneglect ourselves or our own needs, but rather, that we should expand ourselves to include others and make theirconcerns our own.

The readers of the CMR who waited to purchase real estate until 2009 have saved a ton of money. They found a

source of truth and educated themselves. I am not the only guy who is doing this type of research but trust me therare much fewer people writing about the truth in the markets rather than those who have a financially induced hiddagenda to make mullah (money) such as some of the clowns you see on CNBC each day.

I appreciate you all spending your hard earned money to read these reports each month and I hope they help you inyour future personal and/or business decisions.


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Cartoons


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Ben Bernanke Time Magazines Man of the YearHow About: Dumbass of the Decade

You just cant make this stuff up! This choice by Time Magazine displays the collusion between the government athe main stream media. Bernanke as Person of the Year is almost as bad as President Obama receiving the NobelPeace Prize. I believe in the next year or so it will become apparent to all the sheeple out there who just gobble u

all the BS from the main stream media as the truth that Ben Bernanke is actually Dumbass of the Decade instead Man of the Year when everyone realizes what he actually did with our money. The only true way to find out whhe did is to audit the Fed. Unfortunately, if the Fed were audited we would probably have another stock market crawhen everyone realizes where all the money went to.


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The Dumbass Bernanke Timeline

On July 1, 2005, Bernanke stated without hesitation that we were not experiencing a housing bubble: I thinwhat is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.

November 2005, on derivatives: With respect to their safety, derivatives, for the most part, are traded amovery sophisticated financial institutions and individuals who have considerable incentive to understand them

and to use them properly. And the Federal Reserves responsibility is to make sure that the institutions it

regulates have good systems and good procedures for ensuring that their derivatives portfolios are well

managed and do not create excessive risk in their institutions.

February 15, 2006: Housing markets are cooling a bit. Our expectation is that the decline in activity or theslowing in activity will be moderate, that house prices will probably continue to rise.

February 2008: I expect there will be some failures of smaller banks (Bear Stearns collapsed a couple ofweeks later).

But then again, I guess in regards to his nomination we are talking about achievements in 2009. That was thyear Bernanke said, "Currently, we dont think [the unemployment rate] will get to 10 percent."

This is the same chairman of the Federal Reserve who told us that Fannie and Freddie were adequately capitalized

and in no danger of failing.

Unfortunately, he has not just been wrong about housing, unemployment, banking, and derivatives his policies hadirectly contributed to all of the problems we now face.

High unemployment and the weak dollar threaten to further undermine our economy, yet his policy is to just keepborrowing. The massive debt his policies have slapped the American taxpayer in the face and are weakening theU.S.s position as global economic leader and hurting already tenuous relations with foreign governments. Bernankhas supported the policies of Greenspan and our current and previous administrations the very policies that got usinto this mess. He has supported the leveraging of the American economy to rescue companies long past saving andthe borrowing of billions from foreign governments to line the pockets of corrupt investment bankers.

Risk in 2010Before we all get goo goo gaga over the resurgence in the stock market, real estate and certain aspects of theeconomy we all need to take a step back and remember what just happened and where we are going. This is agovernment led recovery while the private sector is still recovering from the credit cancer that manifested over thpast 10 years. Anytime your gooberment throws approximately $15 trillion at a problem there is certainly going be some appearance of a recovery. However, many problems still linger in our overall economic structure that couput a damper on future bullishness I have regarding the future of Charleston. The credit cancer has not gone awaand if it rears its ugly head again down the road and places more fear in the minds of the consumer real estate alongwith other businesses will suffer. The trillion dollar question to ask yourselves is if the so called economic repairs

sustainable. Based on what I know regarding the complicated international monetary system is the answer would bthat current monetary policies are not sustainable. The reasons are:

Foreign governments have allowed the U.S. to run up our deficit by purchasing our debt.

The Federal Reserve has artificially kept interest rates low which has created a massive carry trade that hascaused the stock market to have ridiculous appreciation.

Gold continues to move higher just as it has since the beginning of the decade.

Banks still hold tons of toxic assets that are never going to appreciate back to the level of what they paid.


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The same morons that helped steer us into this crisis such as Larry Summers, Tim Tax Cheat Geitner,Congress, etc. are still in charge of the economic policy.

Our economy is still over leveraged and a rise in interest rates will be a shock with negative consequences.

Our debt to GDP continues to rise as our Congress continues to show a lack of discipline with the U.S.checkbook.

The current experiment to repair the economy is unchartered territory and much more complicated thanduring 1930s when the Great Depression occurred.

I would recommend the following in 2010 and beyond.

Buy a residential home to live in NOT to invest in for spectacular profits like seen during the go go days.Real estate is typically a leveraged investment that is not liquid and can become a dangerous trap.

Be very careful with commercial real estate. Many sectors of CRE are tricky and are not going to besuccessful investment plays for novice investors.

Look outside of the U.S. to invest in the stock market. Make sure you have a financial advisor whounderstands risk management through the use of options or using stop losses.

The days of buy and holdare over and you have to implement and a much more tactical approach toinvesting that is more active than some people prefer. Again, use a very experienced financial advisor for thapproach who understands and has a game plan for risk management.

If you are going to become an investor or already are an investor in real estate or stocks then get educated oget more educated. Ignorance is the problem most people have when they lose money in the markets. Focuyour education around risk management strategies.

Sales volumes are being propped up by government intervention (tax credit, aggressive FHA lending, Freddie andFannie bailout, and Fed mortgage rate intervention) and investor activity that now exceeds 2005 levels as a % of toactivity. In other words, there would be far fewer home buyers today (just as there was in 1968-70, 1973-75, 1981-and 1990-92) and house prices would be falling even further.


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Market Share of 4 Biggest Banks Since 1998Can you say Too Big To Fail (TBTF) still rules?


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- How Big is the Total At-Risk Mortgage Universe?

Of the loans in existence today at least 75% were refinanced or attained through a purchase from 2003-2007 thebubble years. On several occasions in the past couple of years, Jim The Clown Cramer has quantified the at-riskloan universe as being around 14 million, which represents everyone who purchased a home between 2005-2007. B

then he says there is no way everybody who bought a house from 2005-2007 will ever default. So, he pairs it bacto 20% or 25% of 14 million whatever. He is incorrect on a number of levels.

First off, the bubble years were really 2003-2007. But aside from that, the number of people who purchased ahome is only a small piece of the entire pie. The bubble years were not about purchases, rather refis. During thebubble years refis, cash-out refis and HELOCs were at least 4:1 over purchases. A purchase is no more risky thanexisting homeowner with a great payment history who pulled out 90% or 100% of their equity at a 50% DTI. In facthe latter are more riskypurchases in general are always considered the safest loans.

This means the true potential at-risk loan universe is any Prime, Alt-A, or Subprime borrower that did apurchase or refi from 2003-2007. Obviously, not every single borrower is at-risk but we have no way of really

knowing how many of the 43 million + loans from that period still in existence today are destined for trouble. Thisespecially true when even borrowers with 800 scores and 70% LTVs are at risk of default because their DTIstarted out at 50% and after the fact, they expanded their credit portfolio because all credit was so easily attained una couple of years ago.

- 13 to 15 Million Loans at Imminent Risk of Default- Potentially, 20 Million Homeowners over the Next Few Years

The chart below breaks out all of the loans in existence by loan type. Of the loans originated during the troubleyears, the far right columns show the conservative number of loans in which the borrowers either borrowed at 50%DTI or went Limited Doc (stated income, light doc, no doc, no ratio). The two columns are not mutually exclusive.

The last Mortgage Bankers Association report estimates that the total number of loans in some sort of delinquency,default, or foreclosure status to be about 8.2 million, or 14.41% of all loans.If the true number of imminently at-rloans is somewhere between 13 and 15 million, the default and foreclosure crisis is about 60% over.

The problem with the final 40% is that it crushes everyone other than Subprime households and likely happens ovelonger period of time than the two-year Subprime Implosion.

In addition to the imminent defaulters, a large percentage will default for various unforeseen reasons tied to themacro. Throw in top strategic defaulters and we could easily see a situation over the next few years in which 20MILLION homeowners are either delinquent, defaulted, or in the foreclosure pipeline.


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Source: www.mhanson.com/blog

Stiglitz: 6 Harsh Lessons We Failed to Learn

Economics Nobel laureate and Columbia University professor Joseph E. Stiglitz has what very well be the best yeaend piece I have seen to date;

The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on whic

we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the wor

The world has also learned some valuable lessons, though at great cost both to current and future prosperity cost

that were unnecessarily high given that we should already have learned them.

What were those 6 harsh lessons?

1. Markets are not self-correcting, and without adequate regulation, they are prone to excess.2. There are many reasons for market failures. Too-big-to-fail financial institutions had perverse incentives: Privatigains, socialized losses. .3. When information is imperfect, markets often do not work well and information imperfections are central infinance.4. Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programsearly emerged from the crisis faster5. There is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some centrbanks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared tothe costs imposed on economies when central banks allow asset bubbles to grow unchecked.6. Not all innovation leads to a more efficient and productive economy let alone a better society. Private incentivematter, and if they are not properly aligned, the result can be excessive risk taking, excessively shortsighted behavioand distorted innovation.


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TNX - 10 Year Treasury Yields Bloomberg.com Morgan Stanley Sees 5.5% Note as U.S. Faces DeficitsIf Morgan Stanley is right, the best sale of U.S. Treasuries for 2010 may be the short sale.

Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surgewill push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in adecade, Greenlaw said. Investors are demanding higher returns on government debt, boosting rates thismonth by the most since January; on concern President Barack Obamas attempt to revive economic

growth with record spending will keep the deficit at $1 trillion. Rising borrowing costs risk jeopardizing recovery from a plunge in the residential mortgage market that led to the worst global recession in sixdecades.

When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after

yourself, Greenlaw said in a telephone interview. Market signals will ultimately spur some policy action but not naive enough to think it will be a very pleasant environment.Yields on the 3.375 percent notes maturing in

November 2019 climbed 4 basis points to 3.84 percent at 11 a.m. in London today, according to BGCantor

Market Data. The price fell 10/32 to 96 5/32. They have risen 65 basis points this month, the most since April

2004, as government efforts to unfreeze global credit markets lessened the appeal of the securities as a haven . Edward McKelvey, senior economist in New York at Goldman Sachs Group Inc., the top-ranked U.S.

economic forecasters in 2009, according to data compiled by Bloomberg, expects yields to drop to 3.25percent. Goldman Sachs says unemployment will average 10.3 percent in 2010, hindering the recovery.

When we take a look at the Point & Figure chart of the Ten Year Yield (TNX) below it demonstrates since thebeginning of the year that the trend has been on the upside. If I were going to predict where interest rates move in2010 then I would be in agreement with David Greenlaw that they continue to move up since the Fed is supposed to


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reduce the Ponzi quantitative easing by reducing the purchase of the U.S. Treasuries like it has this year. I am nosure if 30 year fixed mortgages will hit 7.5-8% but I do feel they will be higher than the current 5.3% 30 year rate.

We must all remember that there are two main factors behind super duper low interest rates: The Federal Reserve athe Chinese buying our Treasuries.

The Fed has created massive artificial demand for more U.S. debt in two ways; by direct purchase of bonds beingauctioned (During the first 2 months of the new fiscal year, the Federal Reserve grew its balance sheet by about $65billion, in effect purchasing about 22% of the federal governments new debt) and by secretly buying Treasury bon

from primary dealers (banks) a few days after the auction. The entire package of Fed buying of Treasury debt keep interest rates low runs in the hundreds of billionsThe Feds balance sheet ballooned to $2.24 trillion in assetsof last week, up 142 percent from the beginning of 2008.

This is just one example of the Ponzi Financing used to keep the housing market from hitting the skids.

China holds about $2.27 trillion in foreign reserves, about two-thirds of it in US dollars, up 19% from a year earlierThe country held Treasury bills worth about $797.1 billion in August, making China the worlds largest holder of UTreasuries outside the United States, according to the US Treasury Department.


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So if you are interested in buying a home I would seriously consider pulling the trigger this winter. This time of th

year is a great time to purchase (if you have a good deal) due to the seasonality of real estate. The winter season isalways the slowest and sellers are more inclined to negotiate because of the slow activity. Remember, the longer thseller waits they have to continue paying the mortgage until their homes sells so as a qualified buyer you have majoleverage this time of year due to these factors along with the high number of competitive homes on the market at thtime and the difficulty to obtain financing. I also believe it is important to understand that sellers will be slow to reto an increase in mortgage rates on sales price since they are getting beat up so bad already that it would be in abuyers best interest to move as quickly as possible if they have to buy a home in Charleston. If you are a real estateagent (especially a buyers agent) I would definitely be discussing these scenarios with your clients at this time.


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2009 Stock Market TallyVia Bloomberg, here are the final closing data for December 31st 2009:Dow -18%S&P500 - 23.5%Nasdaq Comp - 44%

Last years big market rally failed to rescue investors from the single worst return of any decade in history f

equities.

This 2009 move off of the bear market lows wasnt enough to restore money lost in both bears (dot com bubband credit collapse) of the 2000s.

Annual returns for the S&P 500 the past decade?An average annual loss of 0.9% a year since 1999 including dividends. S&P noted this was the first negativereturn for a decade since data began in 1927.Source: The Big Picture


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Charleston

Jobs, Jobs, JobsCharleston actually did fairly well in the recent YTD job loss category compared to the top 100 largest employmenmarkets. We ended up ranked 83 out of a 100. Only one metro area in this top 100 actually gained jobs since lastyear, McAllen, TX.

Employment in 100 Biggest Markets (November 2009)

Metro areaPrimary

state Jobs (Nov.

2008) Jobs (Nov.

2009)Raw

change Percent

change

Youngstown-Warren-Boardman

Ohio 236,100 219,000 -17,100 -7.2%

Detroit-Warren-Livonia

Michigan 1,880,900 1,752,300 -128,600 -6.8%

Las Vegas-Paradise Nevada 903,500 843,100 -60,400 -6.7%

Boise City-Nampa Idaho 266,900 250,000 -16,900 -6.3%

Phoenix-Mesa-Scottsdale

Arizona 1,841,700 1,731,500 -110,200 -6.0%

Milwaukee-Waukesha-West Allis

Wisconsin 851,500 801,000 -50,500 -5.9%

Bradenton-Sarasota-Venice

Florida 264,000 249,100 -14,900 -5.6%

Portland-Vancouver-Beaverton

Oregon 1,034,600 982,400 -52,200 -5.0%

Sacramento-Arden-Arcade-Roseville

California 873,200 829,300 -43,900 -5.0%

Wichita Kansas 313,100 297,600 -15,500 -5.0%

Atlanta-SandySprings-Marietta

Georgia 2,399,600 2,282,500 -117,100 -4.9%

San Jose-Sunnyvale-Santa Clara

California 912,000 869,300 -42,700 -4.7%

Riverside-SanBernardino-Ontario

California 1,201,100 1,145,900 -55,200 -4.6%

Salt Lake City Utah 644,100 614,700 -29,400 -4.6%

Charlotte-Gastonia-Concord

NorthCarolina

851,400 813,900 -37,500 -4.4%

Cleveland-Elyria-Mentor

Ohio 1,053,500 1,008,000 -45,500 -4.3%

Greensboro-HighPoint

NorthCarolina

363,600 347,800 -15,800 -4.3%

Providence-Fall River-Warwick

RhodeIsland

568,200 543,500 -24,700 -4.3%

Tampa-St.

Petersburg-Clearwater

Florida 1,211,600 1,159,700 -51,900 -4.3%

Chicago-Naperville-Joliet

Illinois 4,513,900 4,327,300 -186,600 -4.1%

Orlando-Kissimmee Florida 1,062,500 1,018,500 -44,000 -4.1%

San Francisco-Oakland-Fremont

California 2,014,100 1,931,000 -83,100 -4.1%

Akron Ohio 340,100 326,600 -13,500 -4.0%

Colorado Springs Colorado 257,200 246,800 -10,400 -4.0%

Honolulu Hawaii 457,000 438,700 -18,300 -4.0%


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Metro areaPrimary

state Jobs (Nov.

2008) Jobs (Nov.

2009) Raw

change Percentchange

Lancaster Pennsylvania 238,200 228,900 -9,300 -3.9%

Lansing-East Lansing Michigan 228,900 219,900 -9,000 -3.9%

Seattle-Tacoma-Bellevue

Washington 1,761,100 1,692,600 -68,500 -3.9%

Oxnard-ThousandOaks-Ventura California 286,200 275,200 -11,000 -3.8%

Tucson Arizona 379,100 364,700 -14,400 -3.8%

ndianapolis-Carmel Indiana 914,200 880,900 -33,300 -3.6%

Toledo Ohio 317,300 306,000 -11,300 -3.6%

Albuquerque New Mexico 397,400 383,500 -13,900 -3.5%

Dayton Ohio 394,900 381,000 -13,900 -3.5%

Denver-Aurora-Broomfield

Colorado 1,244,100 1,200,700 -43,400 -3.5%

Los Angeles-LongBeach-Santa Ana

California 5,521,500 5,326,600 -194,900 -3.5%

Grand Rapids-Wyoming

Michigan 382,700 369,800 -12,900 -3.4%

Houston-Sugar Land-Baytown

Texas 2,623,800 2,534,900 -88,900 -3.4%

Nashville-Davidson-Murfreesboro-Franklin

Tennessee 757,800 731,700 -26,100 -3.4%

acksonville Florida 614,600 594,500 -20,100 -3.3%

San Diego-Carlsbad-San Marcos

California 1,294,300 1,251,000 -43,300 -3.3%

Allentown-Bethlehem-Easton

Pennsylvania 345,200 334,200 -11,000 -3.2%

Cincinnati-Middletown Ohio 1,040,100 1,006,500 -33,600 -3.2%

Chattanooga Tennessee 246,500 238,800 -7,700 -3.1%

Durham-Chapel Hill North Carolina 294,300 285,100 -9,200 -3.1%

Springfield Massachusetts 298,100 288,800 -9,300 -3.1%

Birmingham-Hoover Alabama 523,900 508,100 -15,800 -3.0%

Minneapolis-St. Paul-Bloomington

Minnesota 1,781,100 1,728,400 -52,700 -3.0%

Harrisburg-Carlisle Pennsylvania 330,600 321,000 -9,600 -2.9%

Philadelphia-Camden-Wilmington

Pennsylvania 2,817,700 2,736,800 -80,900 -2.9%


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Metro areaPrimary

state

Jobs(Nov.2008)

Jobs(Nov.2009)

Rawchange

Percentchange

Trenton-Ewing New Jersey 240,100 233,200 -6,900 -2.9%

Bridgeport-Stamford-Norwalk

Connecticut 417,800 406,000 -11,800 -2.8%

Knoxville Tennessee 333,000 323,600 -9,400 -2.8%

Louisville-JeffersonCounty

Kentucky 619,700 602,300 -17,400 -2.8%

Miami-FortLauderdale-PompanoBeach

Florida 2,345,600 2,280,500 -65,100 -2.8%

St. Louis Missouri 1,358,400 1,320,300 -38,100 -2.8%

Scranton-Wilkes-Barre Pennsylvania 263,200 256,200 -7,000 -2.7%

Tulsa Oklahoma 440,000 428,000 -12,000 -2.7%

Fresno California 301,300 293,600 -7,700 -2.6%

Oklahoma City Oklahoma 581,500 566,100 -15,400 -2.6%

Augusta-RichmondCounty

Georgia 215,500 210,200 -5,300 -2.5%

Bakersfield California 239,400 233,300 -6,100 -2.5%

Buffalo-Niagara Falls New York 559,200 545,400 -13,800 -2.5%

Poughkeepsie-Newburgh-Middletown

New York 258,700 252,300 -6,400 -2.5%

Hartford-WestHartford-East Hartford

Connecticut 561,000 547,800 -13,200 -2.4%

Lexington-Fayette Kentucky 257,500 251,400 -6,100 -2.4%

Albany-Schenectady-Troy

New York 453,800 443,200 -10,600 -2.3%

Greenville-Mauldin-

Easley

South Carolina 318,800 311,600 -7,200 -2.3%

Pittsburgh Pennsylvania 1,154,000 1,127,400 -26,600 -2.3%

Spokane Washington 219,600 214,500 -5,100 -2.3%

Kansas City Missouri 1,020,800 998,600 -22,200 -2.2%

New York-NorthernNew Jersey-Longsland

New York 8,639,800 8,453,700 -186,100 -2.2%

Raleigh-Cary North Carolina 520,300 509,100 -11,200 -2.2%

Baton Rouge Louisiana 380,000 372,000 -8,000 -2.1%

Boston-Cambridge-Quincy

Massachusetts 2,504,400 2,451,300 -53,100 -2.1%


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Metro areaPrimary

state

Jobs(Nov.2008)

Jobs(Nov.2009)

Rawchange

Percentchange

Memphis Tennessee 634,400 620,900 -13,500 -2.1%

Winston-Salem North Carolina 216,600 212,000 -4,600 -2.1%

Baltimore-Towson Maryland 1,312,500 1,286,700 -25,800 -2.0%

Syracuse New York 329,100 322,600 -6,500 -2.0%Omaha-Council Bluffs Nebraska 472,300 463,100 -9,200 -1.9%

Madison Wisconsin 349,400 343,000 -6,400 -1.8%

Richmond Virginia 620,100 608,800 -11,300 -1.8%

Dallas-Fort Worth-Arlington

Texas 2,998,300 2,947,600 -50,700 -1.7%

Charleston-NorthCharleston-Summerville

SouthCarolina

298,600 293,900 -4,700 -1.6%

Rochester New York 525,700 517,100 -8,600 -1.6%

Des Moines-West DesMoines

Iowa 325,000 320,300 -4,700 -1.4%

New Haven Connecticut 278,800 275,100 -3,700 -1.3%

New Orleans-Metairie-Kenner

Louisiana 530,400 523,400 -7,000 -1.3%

Worcester Massachusetts 248,000 244,900 -3,100 -1.3%

El Paso Texas 280,200 276,700 -3,500 -1.2%

Huntsville Alabama 213,000 210,500 -2,500 -1.2%

Columbus Ohio 944,900 934,900 -10,000 -1.1%

Columbia South Carolina 365,600 362,700 -2,900 -0.8%

ackson Mississippi 260,500 258,500 -2,000 -0.8%

Little Rock-North Little

Rock-Conway

Arkansas 347,700 344,800 -2,900 -0.8%

San Antonio Texas 855,400 849,200 -6,200 -0.7%

Austin-Round Rock Texas 785,200 780,900 -4,300 -0.5%

Washington-Arlington-Alexandria

District ofColumbia

3,021,300 3,006,000 -15,300 -0.5%

Virginia Beach-Norfolk-Newport News

Virginia 767,700 764,700 -3,000 -0.4%

McAllen-Edinburg-Mission

Texas 221,100 223,800 2,700 1.2%


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I believe a very important question to ask ourselves is housing in Charleston really affordable. We can do this bylooking at the averages. The average wage in Charleston, SC (according to the BLS) is $37,523 as of 4/09 so for amarried couple we will use an annual salary of $75,000. I think am being generous here assuming both the husbanand wife both are working and earning $37k per year. The Census shows the median household income in 2007 w$47,233.

Salary Paycheck CalculatorYour Pay Check Results

Monthly Gross Pay $6,250.00Federal Withholding $720.83

Social Security $387.50

Medicare $90.63

South Carolina $412.50

Net Pay $4,638.54

So after the Gooberment takes taxes out this average married couple is left with $4638.54 per month to spend on thhouse, car, food, gas, etc.

If I average the past year for Single Family Residential Homes (Excluding condos and townhouses) I get a mediansold price in the Tri-County of $193,700.

Now lets take that $193k home and finance it with an FHA loan using a 3.5% down payment.

Down Payment $6,779.50

Loan Amount $186,920.50

Annual Interest Rate 5.85%

Loan Period in Yrs 30

Start of Loan 1/1/2010

Schedule Monthly PMT $1,102.72

Scheduled # of

Payments 360

Total Interest $226,052.87

Debt to Income (DTI) 23.8%

PITIPI ($1102.72) + TI ($233.65) = $1336.37*PITI means Principal, Interest, Taxes and Insurance.

If we take a look into the past at home price to income ratios we can get a better feel for what we are dealing withtoday.

1950Median household income: $3,319Median home price: $7,354Home price / income = 221 percent


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1960Median household income: $5,620Median home price: $11,900Home price / income = 211 percent

2010Median household income: $75,000Median Home Price: $193,700Home price/income = 258 percent

In conclusion, the buyers who are acting financially responsible and actually make $75,000 in the Charleston area ain not too bad of shape when comparing to the 50s and 60s if they purchase a home in the median price range in theTri-County area. Obviously, this is the reason that the lower end of the market is where all the action is these daysbecause the banks had to wise up and lend based on true income and not lies. This is the main reason there is such huge disparity between the lower and upper end of the market in Charleston. The upper end of the market was builon demand created by false lending principals that allowed unqualified buyers to obtain financing on upper endhousing they truly could not afford. For this reason we must look at this current real estate market as three separatemarkets, which I describe below. Comparing the upper to the lower end is like comparing apples to oranges and thproof is in the stats below. The inventory is three times higher for the $400k and up homes and the demand is lowedue to stricter underwriting. The result will mean more falling prices for those upper end homes until credit improv

for Jumbo loans and the inventory is reduced. This will take years to work out.


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Tri-County Residential Data

SFD(Houses) and SFA (Condo/Townhomes) All Prices


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SFD ($0-$400,000)

SFD ($400,001 and up)

SFD ($0-$400,000)


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SFD ($400,001 and up)

When you take a peak at the Charleston residential market I feel you have to divide it up into three different segmein order to understand it. Those 3 segments are:

1. Short Sales and Foreclosures2. The lower/mid end market3. The upper end market

As you can see from the charts above the upper end market stats are approximately four times higher than thelower/mid market for Single Family Detached (SFD) and Single Family Attached (SFA).

The simple answer behind this disparity is supply and demand. The reason why the upper end of the market hashigher inventory, longer Days on Market, and bigger discounts (Sold Price vs. List Price) and the reason is that therare fewer buyers and credit is much more difficult to obtain after the meltdown. Think of all the stated incomebuyers who used to lie in order to qualify for a $600,000 house who can no longer qualify for a mortgage in 2009.The other bottleneck really hurting the upper end of the market more than the lower end is the fact that many ofthese sellers are upside down meaning their home is worth less than it was 2-3 years ago. Many of these sellers dnot have enough cash to bring to the closing table in order to satisfy current market value it would require to sell thhome in todays market.


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DisclaimerThe research done to gather the data in The Charleston Market Report involves examining thousands of listings. Wthis much data inaccuracies will occur. Care is taken in gathering and processing the data and information within threport is deemed reliable. IT IS NOT GUARANTEED. The real estate market is cyclical and will have its ups anddowns. Past performance cannot determine future performance. The purpose of the Charleston Market Report is toeducate you on current and consistent market conditions by reporting leading market indicators with the support oftraditional real estate data.

This information is offered with the understanding that the author is not engaged in rendering legal, tax or otherprofessional services. If legal, tax or other expert assistance is required, the services of a competent professional are

recommended. This is a personal newsletter reflecting the opinions of its author. It is not a production of myemployer. Statements on this site do not represent the views or policies of anyone other than me.

Investing in real estate is not a get-rich-quick scheme nor is there any guarantee you will make a profit. Every efforhas been made to make this report as complete and accurate as possible. However, there may be mistakes. Thereforthis report should be used only as a general guide and not as the ultimate source for making money in real estate.

december 2009 charleston market report

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