1. Virginia Housing Development Authority Virginia Housing Market Overview Virginia Association of Realtors October 2, 2010

2. 1 vhda.com | 800-227-VHDA Current Market Conditions

3. 2 vhda.com | 800-227-VHDA The Northern Tier is Virginia’s portion of the multi-state greater Washington region. Rapid growth and very high housing costs made it a hot “bubble” market during the boom. This region has been hit hard by foreclosures, and continues to struggle with a large inventory of distressed homes. Downstate regions are less impacted by problem loans and have fewer “underwater” owners. But, they are being far more impacted by the recession that resulted from the housing bust. Northern Tier Downstate Regions Regionally, Virginia is experiencing two different market dynamics.

4. 3 vhda.com | 800-227-VHDA The Northern Tier has led other regions in the downturn and recovery. Source: VAR

5. 4 vhda.com | 800-227-VHDA Prices in the Northern Tier fell quicker and harder than in Hampton Rds. Source: Federal Housing Finance Agency (FHFA)

6. 5 vhda.com | 800-227-VHDA Hampton Rds prices have fallen in tandem with more moderately inflated markets. Source: Federal Housing Finance Agency (FHFA)

7. 6 vhda.com | 800-227-VHDA Prices in lesser inflated markets have only recently declined. Source: Federal Housing Finance Agency (FHFA)

8. 7 vhda.com | 800-227-VHDA Foreclosure sales at distressed prices stimulated the initial sharp rebound in Northern Tier sales. Source: MRIS

9. 8 vhda.com | 800-227-VHDA Sales to investors rose substantially and continue to support the market. Source: MRIS

10. 9 vhda.com | 800-227-VHDA Now, the Northern Tier is struggling to sustain sales as prices recover. Source: VAR

11. 10 vhda.com | 800-227-VHDA Falling listings have contributed more to inventory reduction than rising sales. Source: MRIS

12. 11 vhda.com | 800-227-VHDA With the federal tax credit ended, a new demand driver is now needed. Source: MRIS

13. 12 vhda.com | 800-227-VHDA Factors Impacting Market Recovery

14. 13 vhda.com | 800-227-VHDA The metro core of the Northern Tier has recovered lost jobs, but downstate regions lag. Northern Tier Downstate Regions Unemployment is the key factor in downstate market weakness. Source: Virginia Employment Commission (VEC)

15. 14 vhda.com | 800-227-VHDA Unemployment has replaced problem loans as the driver of foreclosures. Source: Mortgage Bankers Association (MBA)

16. 15 vhda.com | 800-227-VHDA Foreclosures may have peaked in Virginia, but their decline will be slow. Source: Mortgage Bankers Association (MBA)

17. 16 vhda.com | 800-227-VHDA High foreclosure rates are related to two combined problems: 1.High unemployment 2.A large inventory of distressed properties and/or a large share of homeowners who are “underwater” Areas with foreclosure rates above the state average exhibit both problems. Where unemployment is lower—e.g., inner parts of the Northern Tier, including Pr. William Co.— foreclosures rates are stable or declining even where distressed inventories remain high. Likewise, where unemployment is very high— e.g., the Martinsville area—but where few homeowners are “underwater”, foreclosure rates are lower.

18. 17 vhda.com | 800-227-VHDA In mid 2008, foreclosure activity was heavily concentrated in the Northern Tier Region. Source: RealtyTrac and Census Bureau Northern Tier Downstate Regions As economic factors have increased in importance, downstate foreclosures have risen steadily. In contrast, foreclosure activity is declining in the Northern Tier where unemployment is lower. The regional distribution of foreclosures is shifting. *Trustee sales and lender repossessions

19. 18 vhda.com | 800-227-VHDA Source: RealtyTrac and Census Bureau *Trustee sales and lender repossessions Foreclosure rates are most severe in the outer part of the Northern Tier. Northern Tier Inner Outer

20. 19 vhda.com | 800-227-VHDA The stock of lender-owned homes is large and will take time to deplete. Source: RealtyTrac

21. 20 vhda.com | 800-227-VHDA Demand factors remain weak. By traditional measures, the cost of home purchase has dropped. However … 1.Access to favorable mortgage terms and underwriting standards remains a challenge. 2.Consumer purchasing power and confidence remain weak.

22. 21 vhda.com | 800-227-VHDA By traditional measures, homes in most markets are again affordable. Source: MRIS, VAR and Census Bureau

23. 22 vhda.com | 800-227-VHDA Nonetheless, traditional buyers are still struggling to enter the market. Young households are especially impacted by unemployment and under-employment. Access to mortgage credit remains a barrier due to ongoing tightening of lending standards. In some areas 1 st -time buyers have had trouble competing against investors with cash. Would-be repeat and “trade-up” buyers are holding back due to significant loss of equity— prices must recover in order to restore mobility opportunity for current owners.

24. 23 vhda.com | 800-227-VHDA Funds for down payment is a growing barrier for first-time buyers. Higher minimum loan-to-value ratios have significantly increased down payment requirements. Young households lack the savings needed to cover down payment and closing costs. Parents are less able to assist with these costs due to loss of income, home equity and the value of stock holdings.

25. 24 vhda.com | 800-227-VHDA Burdensome debt is another major obstacle for young households. Source: Survey of Consumer Finance Young households are carrying far higher debt loads than in the past. Both credit card and student loan debt are serious problems. Acquiring financial management skills and paying down debt are essential for successful home purchase, and will take time.

26. 25 vhda.com | 800-227-VHDA In Summary: Market conditions will remain challenging for the next several years until the foreclosure problem is resolved and economic recovery takes fuller hold. Continued high levels of distressed sales coupled with weakened demand among traditional buyers will restrain prices and could result in a “double dip” in prices in some markets. Long-term home appreciation will depend on employment and income growth.