InSight 3q12

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Twin Cities Edition

InSight 3q12

Metrostudy.com

Twin Cities Edition

Metrostudy National Forecast: Single Family Housing Starts to Rise 17%

The recent strengthening in housing is proceeding as predicted, and even slightly STRONGER that previously forecast. Metrostudy’s short-term forecasts have been revised slightly upward for sin-gle-family construction in 2013. The “headline” housing single-family starts number (as reported by the U.S. Census Bureau) is now forecast by Metrostudy to grow as follows:

We anticipate a 17% increase for 2013, with an even greater pace of acceleration taking hold after the economy starts to fully recover. There is a risk that a new economic downturn could sideswipe this housing recovery. Our “base” case scenario is that the problems in Europe weigh on our own GDP and job growth, but do not pull us back into recession. There is of course a significant amount of uncertainty regarding this outcome. Home prices are expected to continue rising, at least in the A, B, and C submarkets. The Case-Shiller numbers will continue to be weighed

down by all of the distress that still exists in the remote suburban areas that got so badly overbuilt during the boom (the D and F submarkets). Homebuilders with well-located sites, meanwhile, will continue to enjoy growing demand and rising home prices for the next several years. It is important to remember that there is no “national housing market.” There are hundreds of metro-politan markets, each moving at a different pace, and each with A, B, and F submarkets. The mes-sage: know your own submarket(s) very well, and track them carefully over the next few years. All of the opportunity (and most of the risk) in 2013 will be at the submarket level.

2012 - 511,000 2013 - 596,000 2014 - 704,000 2015 - 917,000

Metrostudy experts produce the best-documented, most complete, and most comprehensive market studies available, completely custom-ized to your needs. Market Demand Study: A professionally prepared report that incor-porates all the research needed to develop a highly defensible forecast of absorptions for a residential project. This includes a look at the sup-ply and demand in the market as a whole, competitive foreclosure sup-ply, incomes, demographic mix, population projections, as well as a subjective evaluation of the area surrounding the subject property. This report provides comprehensive data on the key comparable projects and competitors, including their remaining lot supplies, and ana-lyzes this information to reach insightful conclusions.

InSight 3q12

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Twin Cities Economic Health Snapshot

Twin Cities Edition

InSight 3q12

Metrostudy.com

Twin Cities Edition

The housing market’s drag on the US economy seems to be letting up. Renewed optimism has returned to the new and existing home market and the outlook over the next year looks fairly promising. While the state of the housing industry’s health can still be debated, the num-bers across the country can’t, as new single family and multi-family home starts are ap-proaching their highest levels since 2008. Here in Minneapolis we are more than six months into our housing recovery and as such are facing new chal-lenges that may have been inconceivable just 12 months ago. While today’s market remains consid-erably more favorable for homebuilders than years past, tight supplies of finished lots across the metro area could actually constrict growth over the next several quarters.

The rate of annual new home starts for single-family and townhome units across the Twin Cities area is 4,239 new units. This is an increase of 47% compared to the third quarter of 2011 and represents the highest annual starts pace since 2008. The new home market is starting to show some consistent growth with annual increases in new home demand occurring in each of the last five quarters. The housing industry appears to be back on solid footings and should no longer be a drag on the overall economy. Metrostudy expects to see steady quarterly housing growth over the next 12 months as the economy continues to im-prove and consumers return to the marketplace with confidence. In addition to improved con-sumer confidence, the new homebuilder’s confi-dence index is beginning to rise as discussions for new developments heat up. Metrostudy’s weekly traffic and contracts report has shown consistent strength throughout our top communities with new contracts up 30% compared to this time last year.

New Home Starts 3rd quarter 12’

InSight 3q12

Metrostudy.com

There are currently 25,349 vacant developed lots throughout the Twin Cities, representing a decline of 9% compared to last year. (12,588 vacant developed lots throughout the metro seven counties, a decline of 13.8% compared to last year). 3q12 represents the lowest supply number since late 2007. The recent uptick in new home demand has created a nice little run on desirable vacant developed lots located throughout the metro. As the market contin-ues to improve we will likely see lot prices start to inch up along with increased raw land transac-tions. While lot supplies tighten throughout the metro area, overall figures will still remain elevated for several years as there are a substantial amount of vacant developed lots located throughout the collar counties of Wright, Sherburne, Isanti, Chisago, St. Croix, WI. and Pierce, WI.

New Home Starts 3rd quarter 12’

Twin Cities Edition

InSight 3q12

Metrostudy.com

Twin Cities Edition

Spotlight on Hennepin County

InSight 3q12

Metrostudy.com

Twin Cities Edition

Spotlight on Top Selling Neighborhood

Pioneer Pass is a develop-ment located in the city of Chanhassen in Carver county. The city of Chanhassen remains one of the top selling market areas across the Twin Cities representing almost 4% of all new home starts. Opened in late 2010 new home sales throughout Pioneer Pass are averaging approximately 2.2 sales per month over the past twelve months. As of 3q12 there were 34 homes closed and occupied, 9 under con-struction, 2 finished and vacant and 47 vacant developed lots. Based on new home starts over the past year Pioneer Pass has 20.1 months of lot supply re-maining. For more information on this or any other new home develop-ment across the Twin Cities please contact Metrostudy.

Metrosearch Insight puts one-touch property research on the map - and at your fingertips. Simply tap a county to view a comprehensive summary of residential new, resale, and foreclosure activity over time period, price range, transaction type, and more. Get further insight through the spotlights on new construction, foreclosure, and lending activity. The property analysis is combined with specific property lookup features in a touchpad-friendly ap-plication.

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InSight 3q12

Metrostudy.com

Twin Cities Edition

Metrostudy Twin Cities Market

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries na-tionwide. In addition to providing information, the company is recognized for its consulting expertise on development,

marketing and economic issues, and is a key source of research studies evaluating the feasibility of residential and com-mercial real estate projects. Services are offered through an extensive network of offices strategically located in major

metropolitan areas throughout the country.

Twin Cities Office · 5000 West 36th St. Suite 130 · St. Louis Park, Minnesota 55416 · 952.426.0754 ·

Metrostudy covers all of the Twin Cities MSA: a total of 13 coun-ties, Our survey team drives over 10,000 miles and over 2,000 subdivisions every 90 days to provide you with the valuable in-formation you need on future lots, vacant developed lots, homes under construction, and homes that have been completed.