Sussex County, Delaware Housing Update

Below are graphs and information about the current real estate market, as of Dec 5, 2008.

As you can see, we’re lower than we’ve ever been for as far back as the data goes (1970). In fact, from 1982 until now, only one month (Jan ’91) had lower new homes sales than in October. I still believe and am actually becoming more and more convinced that the bottom in sales will be either October or November. Again, I see this is as a good thing . . . even though sales are dismal . . . I have a hard time believing they can go much lower which means they really must bottom soon. All we need to have is a couple months with better sales than the previous month and hopefully the media will do a 180 and switch to the “Housing has Bottomed” camp. In regards to prices, on a National level, homes have never been more affordable . . . I don’t care what the media is saying . . . the math doesn’t lie. When you take today’s median home price (existing homes, not new), combined with today’s interest rates and household income, the % of income needed to make the mortgage payments on the median priced home has never been lower. See chart below:

Right now, only 25% of the median household income is needed to pay for the Median priced home using today’s 30 yr fixed rates (5.53%). So, I really don’t buy the “Houses still aren’t affordable” argument. If anything, I think prices

have overshot on the downside (similar to what’s going on with oil). Also, I think this past month will prove to be the peak of negativity. Even though the employment news today was ugly, employment is very much a lagging indicator and reflects

the economic conditions of several months prior. So, employment will be one of the last things to bottom during the recovery. Home sales will probably be one of the first things to bottom. The moves the gov’t is taking to help housing should also help. They already announced the plan to by $600 billion in mortgage backed securities (from Fannie and Freddie) to bring down interest rates. Now, as I’m sure you already know, they are talking about taking additional steps to bring conforming loan rates down to 4.5%. With a 4.5% rate and prices where they are, anyone with money to do so would be crazy not to be buying real estate. I am confident that the next few months will prove to be one of the best times in history to invest in real estate.

Also, I think the stock market bottomed on November 21^st and I think that bottom will hold (especially after seeing how the market today completely shrugged off the dismal job numbers). Again, the quickest way to an improvement in consumer sentiment is a rising stock market. Another encouraging sign for housing is how much the Builder Stocks have skyrocketed since November 21^st. Check out the chart below of the Philly Housing Sector Index:

It’s up 50% from its lows. That’s an encouraging sign.

Remember, don’t believe everything you read . . . at every single major market bottom in history, the news reports were horrible and all calling for the end of the world as we know it. The world didn’t end then and it’s not going to end now.