2011 RE Symposium

2011 Lake of the Ozarks Real Estate Symposium Sponsored by RE/MAX Lake of the Ozarks

Russ Cofano Chief Executive Officer Missouri Association of Realtors

U.S. Housing Market Outlook Russ Cofano Chief Executive Officer MISSOURI ASSOCIATION OF REALTORS速 Presentation at: 4th Annual Real Estate Symposium for the Lake of the Ozarks

October 27, 2011

IT’S NOT ABOUT THE NUMBERS

U.S. Annual Existing Home Sales

Monthly Existing Home Sales ‌ Flat Line Outside of Tax Credit

Tax Credit Impact

‌Despite Record Low Rates

‌Despite Affordability vs Rent (index = 100 in 1980)

Economy Losing Momentum

(GDP growth after recession should be sustained 4% to 5% ‌ not 1% as in 1st half in 2011)

Desired Pace

Total U.S. Payroll Jobs – Modest Recovery (1.3 million in the past 12 months)

In thousands

6.5 million below prior peak

Housing Equity (source of funds for small business owners)‌ Down

Source: Federal Reserve

Consumer Confidence in the Tank

Consumer Confidence in the Tank 

October 25, 2011 • The Index now stands at 39.8 (1985=100), down from 46.4 in September.

• The Present Situation Index decreased to 26.3 from 33.3.

• The Expectations Index declined to 48.7 from 55.1 last month

Consumer Confidence in the Tank ď Ž

Consumer confidence is now back to levels last seen during the 2008-2009 recession.

ď Ž

The Present Situation Index posted its sixth consecutive monthly decline, as pessimism about the current economic environment continues to grow.

Distress Sales: 30% to 40% of Transactions Will Remain Significant for Next 2 years

Upside Potential

Serious Delinquent Mortgages ‌ Mostly those who took out loans in bubble years (90+ days late or in foreclosure process)

In 2010, there were 1.5 million distressed sales ‌ need to wait 2.7 years

Very Low Default Among Recent Homebuyers

Fannie and Freddie Backed Mortgage Loan Performance Fannie Mae Vintage

Cumulative Default Rate after 18 months

Freddie Mac Vintage

Cumulative Default Rate after 18 months

2002

3.1%

2002

2.7%

2003

2.5%

2003

1.2%

2004

4.6%

2004

2.0%

2005

4.8%

2005

1.8%

2006

11.6%

2006

6.0%

2007

28.7%

2007

22.3%

2008

12.6%

2008

13.7%

2009

1.2%

2009

1.1%

Source: Federal Housing Finance Agency

Average Credit Score for Loan Origination Normal

2009

2010

If

Fannie

720

761

762

720

Freddie

720

757

758

720

FHA

650

682

698

660

15% to 20% Higher Sales

Downside Potential

Washington Policy Change? 

QRM and 20% down payment requirement ???

• Affordability (staying within budget) more important than down payment



Limit mortgage interest deduction for high income and second homes ???

• Could crush the working class in resort areas • Cascading impact to middle class homes and hurts confidence to buy a home

Improving Factors for Higher Home Sales 

Improving Factors • • • • • •

 

Job Creation (though slowly) Stock market recovery from 2008 – Wealth Effect Rising rents and larger pool of qualified renters Buyers want distressed properties … but at deep discounts International buyers cashing in on the weakened dollar Smart money chasing real estate

Potential Huge Positive … Lending opens up Potential Huge Negative … Washington policy change(s)

U.S. Housing Market Outlook Russ Cofano Chief Executive Officer MISSOURI ASSOCIATION OF REALTORS速 Presentation at: 4th Annual Real Estate Symposium for the Lake of the Ozarks

October 27, 2011

Real Estate at The Lake What is the “Lake� market?

Year Transactions

Volume

Avg Price

2009

1840

$353 Million

$192,000

2010

1807

$328 Million

$182,000

Roughly 2% decline in number of transactions & 7% decline in volume.

2010 Market Breakdown # of Sales

Volume

Avg Price

Residential Waterfront

513 (29%)

$158 Million (50%)

$307,000

Residential Offshore

612 (34%)

$68 Million (21%)

$111,000

$73 Million (22%)

$162,000

Condominiums

451 (25%) Totals =

88%

93%

Real Estate at The Lake How is 2011 tracking?

Year

Sales -3rd Qtr

Volume

2009 2010

1327 1371

248 million 246 million

2011

1418

249 million

More than a 6% increase in the number of sales since 2009

Residential Waterfront Sales $200,000 - $500,000 Year

Avg Sales Price

Sqft

$327,000 $307,000

2210 2251

$148. $136.

2011 $298,000 Through 3rd Quarter

2308

$129.

2009 2010

Price Per Sqft

13% decline in Price per square foot and 4% increase in size of home since 2009

Residential Waterfront Sales $500,000 - $1,000,000 Year

Avg Sales Price

Sqft

$637,000 $625,000

3760 3913

$169. $160.

2011 $668,000 Through 3rd Quarter

4280

$156.

2009 2010

Price Per Sqft

Approximately a 5% increase in Avg Sales Price, 8% decrease in price per sqft, and a 12% increase in avg sqft

Residential Waterfront Sales $1,000,000 & Over Year

Avg Sales Price

Sqft

Price Per Sqft

2009 2010

$1,767,000 $1,854,000

6442 6840

$274. $271.

2011 $1,281,000 Through 3rd Quarter

6198

$207.

24% decline in Price per square foot from 2009, 4 % decline in sqft

Offshore Home Sales Year Avg Sales Price

Sqft

Price Per Sqft

2009

$118,000

1778

2010

$111,000

1847

$60.00

2011 $100,000 Through 3rd Quarter

1780

$56.00

$66.00

15% Decline in price per square foot since 2009

Condominium Sales Year

# Sales

2009 2010

440 451

Avg Price $171,000 $162,000

2011 359 $161,000 Through 3rd Quarter

Avg Sqft 1356 1347 1399

6% Decline in Average Price since 2009

Foreclosure Home Sales Year # of Sales % of Trans

Avg Price

2009

160

14%

$118,000

2010

283

25%

$105,000

25%

$91,000

2011 222 Through 3rd Quarter

Average Price down 23% since 2009

Residential Inventory

7% Decline in number of new residential listings

Real Estate Transactions

6.5% increase since 2009

In Summary 2010 - We are tracking with Last Years numbers Today – We are tracking with Last Years numbers  2010 -Buyers are still buying, in most cases spending close to what they have in the past, today they just get more for their money Today – Buyers are still buying, in most cases spending less than they have in the past and getting more for their money  2010 - Foreclosures and Short sales do exist in our market more than in the past. Today – Foreclosures and Short sales are still here and will continue, but the average price has dropped considerably. 2010 – Transactions and Volume are down slightly Today – Transactions have increased and Inventory has decreased

Developing the Lake

Neil Stewart, Offco, LLC

Kevin Brown Lands End Properties LLC / PROBUILD Construction Services, LLC / PMP Property Management Professionals, LLC

Gary Prewitt, RIS Incorporated & Prewitt Enterprises, LLC

Developing the Lake of the Ozarks 

The Panel:

•Neil Stewart •Kevin Brown •Garry Prewitt

Jeff Green Missouri Shoreline Supervisor Ameren UE

Lake of the Ozarks – FERC Project 459

SHORELINE MANAGEMENT - HISTORY 

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1931 to 1982 • Corps of Engineers (COE) administered all activities 1983 • Union Electric issued residential permits for docks 1987 • Union Electric take lead role in permitting from COE 2001 • SMP meetings begin with re-licensing effort 2005 • Filed first draft of SMP with FERC 2006 • Draft SMP reviewed by public and SMT – considerable input

SHORELINE MANAGEMENT - HISTORY 

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2007 • New License issued in March  Granted one year to file SMP 2008 • Revised SMP submitted to FERC • FERC posted plan for public comment • Environmental Assessment prepared by FERC - no new decks patios or gazebos mentioned – silent on nonconforming structures.

2011 • July 26, 2011 FERC issues order modifying submitted SMP • August 25, 2011 Ameren Missouri files rehearing request • September 26, 2011 FERC grants rehearing for further consideration indicating a final order will be issued.

FERC ORDER HIGHLIGHTS 

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Most of Ameren’s existing programs and policies accepted – ATS program, CDB program, derelict dock program, permitting, etc.

Docks up to 50 slips now do not require FERC review Excavation and dredging permits allowed per COE guidelines Requires a report to be filed with FERC outlining all nonconforming structures and encroachments found along the shoreline. For each structure identified FERC requires we consider:  Removal  Timeline for allowing to remain until removal  Or prove lands are not needed for project purposes (flooding) and revise the project boundary to resolve the encroachment or non-conforming structure Prohibits future permits for decks, gazebos, patios and walkways Outlined unrealistic deadlines and policies for dealing with homes on project property – deadline May 1, 2012.

SHORELINE MANAGEMENT – KEY POINTS OF REHEARING 



Revision to the Project Boundary • Removal of as many encroachments and non-conforming structures as possible.  Must demonstrate property removed is not necessary for project purposes  Environmental Assessment  Agency concurrence  Mitigation measures if required  Legal survey and any fees to be paid for and provided by the owner  Conveyance of the parcel by Ameren Missouri Grandfather all accessory structures in place before March 1, 2008 • Decks, patios, gazebos, boat houses, etc.  Provided they have a permit or apply and obtain a permit.

Structure would be required to comply with pre- license guidelines.

SHORELINE MANAGEMENT – KEY POINTS OF REHEARING 



Effective immediately all existing accessory structures with a valid permit are authorized and remain in full force and effect.

Going forward, no permits will be issued for new construction of decks, patios, gazebos and similar structures located within the project boundary.

NON-CONFORMING STRUCTURES

REHEARING REQUEST  



Allowed if permitted Issue a permit if applied for by July 26, 2016 • Non-conforming if no permit is issued by this date Not allowed if constructed after March 1, 2008

REHEARING REQUEST  



Allowed if permitted Issue a permit if applied for by July 26, 2016 • Cannot cantilever over 3’ from seawall • Non-conforming if no permit is issued by this date Not allowed if constructed after March 1, 2008

REHEARING REQUEST  

Allowed if permitted Must register as a non-confirming structure. Does not comply with current or past guidelines.

WHAT’S HAPPENING AND WHAT’S NEXT? 

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FERC must render a final order on Ameren Missouri’s rehearing request.

Proposed federal legislation “Landowner Protection Act” is pending and proposes to limit FERC’s power regarding removal of existing structures at Lake of the Ozarks.

Ameren has begun assembling information to revise its project boundary with FERC.

QUESTIONS? View FERC order and rehearing request at: www.amerenmissouri.com/lake management plan link)

(shoreline

Specific property questions? – Shoreline Management Office: 573-365-9208 or 365-9212 or lake@ameren.com

Program Summary & Predictions for Real Estate at the Lake of the Ozarks

Our Speakers and Program Planners  

  

Russ Cofano Kevin Brown, Neil Stewart, Gary Pruitt Jeff Green Jeff Krantz – George Bogema & Carrie Case

So When is the Market going to Turn Around?

Will we ever get back to the Market that we had in 2005?

We Have Learned That our Business Is Very Fragile     

Mortgage Crisis Melt Down of Wall Stre Extended Recession 9% Unemployment Local Issues: DNR, Flood Zones and the Lake Project Boundary.

ď Ž

So What Can We Expect For Real Estate at the Lake for 2012 and Beyond

1. Foreclosure Activity Will Continue To Put Pressure on Real Estate Values ď Ž

ď Ž

2010 Foreclosures (all properties) 25% 2011 Foreclosures (all properties) 25%

Foreclosures Off Shore Properties  

2010 2011

181 out of 500 184 out of 480

36% 38%

Foreclosures Lakefront Properties  

2010 2011

41 out of 415 41 out of 457

10% 9%

Prediction for Foreclosure Activity  



Economic Recovery will be Slow.

Many Homeowners who purchased property between 2000 and 2008 are underwater.

Because of these two factors I predict that foreclosures will represent 20% to 25% of our market for the next two years.

2. The Real Estate Industry Is Shrinking 

     

Membership in the National Association of Realtors 2007 1,367,000 2008 1,252,000 2009 1,137,000 2010 1,089,000 2011 1,027,000 (25% Drop from 2007) 2012 965,000 (Back to the number in 2004)

Local Association of Realtors is on the Decline       

Bagnell Dam Association of Realtors 2007 578 2008 542 2009 503 2010 458 2011 412 (30% decline from 2007) 2012 Could decline to 350

3. Real Estate Sales Forecast for 2012

The Real Estate Market at the Lake of the Ozarks Has Reached Equilibrium

Total Sales   

2009 2010 2011

1327 1371 1418

Volume

$248,111,285 $245,866,721 $249,043,643

Sales Prediction for Next Year  

Total Sales Volume 2012 8% 5% Wild Card Chance 10% + Increase

The Lake of the Ozarks Could be Staged for a Dramatic Come Back

Consumer Confidence Needs to Improve   



Decline in the Unemployment Rate Stabilization of the Stock Market A More Comfortable Political Agenda in Washington Real Improvements in the Economy

Positive Things That Will Jump Start 2012     

Completion of our Road System New Commercial Developments Low Interest Rates Large Inventory of Properties A Large Number of Consumers Who Still Have Jobs, Cash and Dreams of Having a Home at the Lake of the Ozarks.

2012 Will Be A Buyer’s Paradise 

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Mortgage Rates Remain at Historic Lows.

A Strong Inventory of Available Properties.

A Large Number of Sellers Who Will Accept Market Value.

For Real Estate At the Lake of the Ozarks There is Light at the End of the Tunnel

Thank You For Your Participation in the 2011 Lake of the Ozarks Real Estate Symposium.

To download this presentation go to: www.lakeretrends.com