HISTORY REPEATS ITSELF

HISTORY REPEATS HISTORY REPEATS ITSELFITSELF

Drawing on the past to Drawing on the past to determine the futuredetermine the future

Sharon Hanley, Partner Sharon Hanley, Partner Hanley GroupHanley Group

THE NEW AXIOMFOR SALES SUCCESS

• FINANCING – Land

• FINANCING – Construction

• FINANCING – Take-Out

LAND FINANCING

• 30+ land parcels back to bank/seller • Foreclosed lots held to stay “healthy”• Financing non-existent for land• Sellers unable to cover land draws

CONSTRUCTION FINANCING

• Unavailable to most builders• Some out-of-pocket building• Private financing on small projects• TARP not loosening builder finance

TAKE-OUT FINANCING

• Difficult to qualify• Ratios need careful revamp• Appraisals low even with comps• AITD’s and 2nd’s not acceptable• Agents frustrated by delays

Interesting Facts

• Price Reductions– Range from 13% to 25% of median– Decreases do not include incentives

• Conversions – 87 active in 2005 – 4 in 2009– About 50% now leasing

And Now For A History

• Active Tracts• Sales• Cancels• Inventory• Traffic

256302 280

229 207 222 214 202 189 213 240 257 238 245 245289

350299

226

138

0

50

100

150

200

250

300

350

400

SAN DIEGO COUNTY - All InventoryActive Tracts

Average For Year 1990 Through 2009

New To Market• 2005 - 200• 2006 – 159• 2007 - 76• 2008 - 14• 2009 - 20 – 50 % in 4th Qtr• 2010 - 6 – Confirmed for 1st Qtr• 2010 - 31 – Possible 2010 Openings

Inventory Available for 2010

• 1,897 - For Sale Now• 2,462 - Planned/Unreleased Active Tracts• 307 - Confirmed Openings• 2,769 – Available Inventory 2010

• 2,683 – Total Sales 2009

New Home Sales Rates

• Total Annual Sales• Average Annual Sales Per Month• Total Monthly Sales• Average Monthly Sales• Cancellation Rates

6826 72286179 5688 6439 5764

6296 8526 8374 8719

112709633

11245

13296

1510214541

9073

5864

2641 2683

0

2000

4000

6000

8000

10000

12000

14000

16000

SAN DIEGO COUNTY - All InventoryTotal Annual Net SalesYear End Total 1990 Through 2009

2.2 2.0 1.8 2.12.6

2.22.5

3.5 3.7 3.43.9

3.1

3.9

4.5

5.14.1

2.21.6

1.0 1.6

0

1

2

3

4

5

6

7

8

SAN DIEGO COUNTY - All InventoryAverage Net Sales Per Tract Per Month

Year End Average Per Month 1990 Through 2009

SAN DIEGO COUNTY - All InventoryAverage Sales Per Month Per Tract

January 2004 through December 2009 By Month

4 . 3

7 . 2

6 . 45 . 9

2 . 52 . 8

2 . 1

1. 10 . 6

1. 3 1. 40 . 8

1. 6 1. 51. 0

2 . 1

1. 1 1. 7

2 . 12 . 1

1. 91. 8

2 . 3

0 . 90 . 70 . 9

0 . 9

1. 2

0 . 70 . 9

3 . 3

5 . 5

2 . 2

2 . 2

1. 8

3 . 3

3 . 5

4 . 2

5 . 9

2 . 6

1. 82 . 7

6 . 9

5 . 4

5 . 5

5 . 3

4 . 9

4 . 2

2 . 8

2 . 5

2 . 5

2 . 3

1. 7 1. 8

2 . 21. 8

2 . 11. 9

2 . 4

2 . 3

1. 9

1. 3

0 . 8

1. 6

0 . 70 . 6

1. 3

1. 72 . 0

7 . 2

5 . 0

7 . 2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

3.2 2.92.4 2.6 2.9 2.5

2.84.0

5.4 5.55.9 5.3

5.2

7.1 7.9

5.8

2.82.1

1.0

2.3

0

1

2

3

4

5

6

7

8

SAN DIEGO COUNTY - AttachedAverage Net Sales Per Tract Per MonthYear End Average Per Month 1990 Through 2009

2.0 1.7 1.6 1.82.5

2.02.4

3.4 3.5 3.33.7

2.7

3.7

3.6

3.5

2.5 1.51.2

0.9 1.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

SAN DIEGO COUNTY - Detached OnlyAverage Net Sales Per Tract Per Month

Year End Average Per Month 1990 Through 2009

37.1%35.0% 34.5%

29.4%26.1% 26.1%

23.6%

19.0% 19.4% 18.5% 17.2%22.6%

16.4% 13.0%13.7%

23.0%

31.4%

30.1%

33.3%

17.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

SAN DIEGO COUNTY - All InventoryAverage Cancellation Rate

Year End Average 1990 Through 2009

SAN DIEGO COUNTY - All InventoryMonthly Cancellation Rate

January 2004 through December 2009 By Month

12 %8 % 7 %

16 %

2 2 %

2 8 % 2 9 % 3 0 %

3 7 %

2 8 %

3 5 %

2 5 %2 3 %

5 2 %

3 3 %

4 2 %

3 3 %2 9 %

3 9 %4 1%

3 6 %

2 4 %

3 0 %

17 %

2 5 %

17 %19 %

16 %2 0 %

16 %2 0 %

13 %12 %

2 6 %

3 8 %

2 3 %2 2 %

2 6 %

10 %

3 0 %

3 5 %

3 4 %

18 %18 %

18 %

19 %19 %

2 0 %

2 5 %

2 9 %

3 1%

3 1%

3 6 %

3 0 %

2 8 %

3 4 %

2 7 %

2 7 %

2 6 %

2 3 %

2 2 %

4 0 %5 0 %

2 6 %

4 2 %4 4 %

19 %14 %

3 7 %

7 %

11%7 %

0%

10%

20%

30%

40%

50%

60%

3602

13851803

1506 1389849 560

420 254800

1240 879945

1242

3148

4758

4540

29552001

1821

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

SAN DIEGO COUNTY - All InventoryAvailable For Sale - Released & UnsoldYear End Total 1990 Through 2009

13.3

4.76.9 7.6

6.7

4.0 2.62.2 1.2

3.45.0 3.3 4.1

5.3

11.6

14.8 14.1

10.711.4

16.7

0123456789

101112131415161718

SAN DIEGO COUNTY - All InventoryAverage Available Per Tract

Year End Average Per Month 1990 Through 2009

11.7

6.1

9.1 9.5 9.6

5.13.3

2.41.5

4.0

7.6

5.5

6.75.2

4.5

5.8

6.5

6.86.1

5.0

0

1

2

3

4

5

6

7

8

9

10

11

12

13

SAN DIEGO COUNTY - DetachedAverage Available Per Tract

Year End Average Per Month 1990 Through 2009

52 4538 36

44 38 4259

7060 56 50

61 61 6650

32 27 20 190

25

50

75

100

SAN DIEGO COUNTY - All InventoryAverage Traffic Per Active Tract

Average For Year 1990 Through 2009

101 98 8876 74 76 74 72 82 77

62 70 67 59 56 5365 70

90

51

0

25

50

75

100

125

150

SAN DIEGO COUNTY - All InventoryTraffic To Generate One Net Sale

Average For Year 1990 Through 2009

SAN DIEGO COUNTY BUILDER SALES 2009

Total Sales 2683Shea Homes , 238

Pacifica Companies , 199

Pardee Construction , 159

Standard Pacific , 123

Bosa Development , 114

William Lyon Homes , 114

K Hovnanian Companies , 107

Brookfield Homes , 106

Builders 11-20 Totals, 591

Builders 21-30 Totals, 337

Builders 31-40 Totals, 143

Builders 41-101 Totals, 253

D R Horton Company , 99 Cornerstone Homes, 100

Projections 2010

• Price increases of estimated 5%• Sales increase of estimated 10-15%• Dependent upon

– Available Inventory– Take-out Financing– Construction Loan Financing