Miami June Market Analysis

Sibley Realty Inc. Monthly Market Analysis

Miami, FL

June, 2009

The Miami housing market is currently considered one of the weakest in the nation. Home prices have been sinking at an accelerated rate, 20% for the year and 8% on a quarterly basis. Miami has been hit hard by the foreclosure crisis, currently having the eighth highest foreclosure rate in the country and foreclosures rising 96%. Also, contributing to the situation is the 2% decline in unemployment and a jump in jobless rates to 6.2%. Job losses were felt across all industries and are expected to continue into the foreseeable future.

Key market indicators:

•- Prices are still declining and have stabilized slightly.

•- The city is still in a buyer's market.

•- The median single family home price is about $290,000.

•- The average properties have been on the market in Miami for 245 days.

•- There are about 8,600 properties on the market currently in Miami.

•- The median price per square foot for properties in Miami is about $160.

The situation that Miami is in is the result of unsustainable growth and development in the real estate industry. Our industry is linked to the national economy and in the 4^th quarter of 2007, the national recession started. The real estate recession started earlier. We saw this coming earlier and it has taken other industries longer to catch up. The overall recovery of real estate has begun. Real estate will lead the national economy out of the recession. Much of what happens with real estate is linked to the national economy. There are three things that have to happen for us to sustain the type of recovery we have to have for the economy to recover:

•1. Stabilize Financial Markets.

•a. Federal government has been proactive with TARP and other stimulus packages designed to get the financial markets in order. The reality is that nothing else will happen without some sort of stabilization in the financial markets. Earning reports are recovering, showing reductions of bad assets on the books. Private purchase of toxic assets are too new to determine their final impact but there is a lot of capital on the sidelines waiting to buy these distressed assets. They will eventually come to a valuation of these assets which will allow the private community to come in and help stabilize the markets. The stress tests were close to worst case scenarios and the transparency afforded by these tests have allowed banks to go back into the market and start rebuilding the base of these financial organizations.

•2. Restore Consumer Confidence.

•a. The GDP shrunk by 8% in the fourth quarter of 2008, a dramatic drop. Within the last 15 months, 5 million jobs have been lost in the United States. This is hard to come back from in the near term. We have seen a lot of data that suggests that this trend is changing. Consumer spending us up over last year's quarter. The economic stimulus plan is working through the system and the effect has not yet been felt. Inflationary pressures will be felt a few years from now but right now we need economic improvement. Unemployment may reach 10% but the number of people who are losing their positions is declining. Consumer confidence is rising and this is very important to our industry, it rose 14 points last quarter. Another barometer is the stock market which, since the beginning of the year shows growth and that people are getting off of the sidelines and that many assets are undervalued. As consumer confidence rises, more people will follow in purchasing these undervalued assets.

•3. Stabilization of Housing Values.

•a. We have had a 30% reduction of housing values across the nation. What this does for financing opportunities and credit lines is profound across the board. These things have to stabilize for us to move in the right direction . As the markets bottom and, "Flat is the new up", a huge pent up demand for housing will be released as people realize that the bottom is here. Ultimately to stabilize housing, we will have to burn off 2 Million in excess inventory and prevent additional housing product to come on the market. Some of this has been done in the programs set up to prevent foreclosures. Some programs failed while others are being retooled and will have an impact moving forward. Homeowner stability plan has some significant impact as it changes the game as lenders are trying to figure out how to work with this plan and will make a difference in reducing the number of foreclosures. Too few people qualify for these programs because they have either lost their job or the value of their houses has decreased so much. Also, a 2^nd wave of foreclosures will be hitting in the summer months of this year and will bring more products on the market. As far as demand is concerned, a lot of interest for first time homebuyers due to the $8,000 tax-credit. Also, mortgage rates are at historic lows and a lot of people in the real estate community are trying to encourage a gov't buy down of mortgage rates down to 3-4.5%. Other proposals will help to create additional demand. But nothing will help more than consumer's perception of value. In Miami-Dade, home sales showed significant improvement in March which jumped up and April has moved up as well. Inventories have been reduced from 11 to 9 months. There has been an uptick in luxury home sales as well. Also, the media is starting to come around as well. Overall 2009 will be the worst year in real estate, 4.6 million resale units only, however sales are increasing in many areas and prices should stabilize in the first half of 2010. Fannie Mae is prediction 5.20-5.30 million home sales.