January 2010 Charleston Market Report

www.charlestonmarketreport.
com
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”
William Arthur Ward
January 2010 Issue

In This Issue
Cartoons
The Nationalization of Housing
Charleston Residential Real Estate
Charleston Commercial Real Estate
The FDIC is Broke
Foreclosures
No Fear in the New Year
What Deflationists Are Missing
Cartoons
www.charlestonmarketreport.com
The Nationalization of Housing
Existing home sales volumes are off 30% from the peak and have returned to 1998 levels (see the chart below that
removes some of the month-to-month gyrations). While this might seem like a plunge, a little more historical analysis
is in order.
Current resale volumes represent 4.4 transactions per 100 households, which is higher than the historical norm (since
1968) of 3.9 transactions per 100 households. As shown in the chart at right, transaction volume remains well above
the norms. Some of the boost in the early part of this decade was due to allowing Fannie and Freddie to raise
the limits on conforming loans from $207,000 in 1996 to $417,000 in 2006, and even higher "jumbo
conforming" loan limits in the last few years. With Fannie and Freddie now controlled by the government, we
expect major changes there, beginning in the spring when their budgets are due to be approved.
Sales volumes are being propped up by government intervention (tax credit, aggressive FHA lending, Freddie and
Fannie bailout, and Fed mortgage rate intervention) and investor activity that now exceeds 2005 levels as a % of total
activity. In other words, there would be far fewer home buyers today (just as there was in 1968-70, 1973-75,
1981-83 and 1990-92) and house prices would be falling even further.
Therefore, if you run a business that is tied to housing, pay far more attention than usual to what is going on in
Washington D.C. as it is likely to determine the health of your business in 2010.
Watch all of the nuances in pending bills, which are likely to include changes to down payment requirements, FICO
scores, insurance premiums, limits on certain types of buildings, dollar limits, and limits on costs that can be paid by
the seller. When steady job growth returns - which it almost certainly will not in the next few months, despite this
month's encouraging news - market factors should be able to take over.
Source: John Burns Real Estate
Charleston, SC Real Estate
I have not published my trend momentum charts in a couple of months. One of the reasons I became “bullish” on the
“affordable” segment of the market was the improvement in these charts along with some major job announcements
from Boeing and others. These trend charts were directly responsible for my ability to see the distress occurring in
the local Charleston market back in 2005-2006. The charts do not lie because they are based on the irrefutable law of
supply and demand. Could these charts worsen? Yes, if the overall economy takes another major blow and credit
tightens again but I do not believe we will see anything like we witnessed in 2008-09 again because of the number of
jobs coming to Charleston.
Just to give everyone a reminder of how these charts work please read below:
In order to identify trends in the real estate market it is important to measure past data with current data. Once we
know which way the leading indicators are going, we should be able to identify the major trends in the market. In
order to analyze our leading indicators, I use monthly data to help identify “market momentum” for tracking real
estate trends. The momentum measures the speed at which the trends can change in the market.
How to interpret the market momentum charts.
When the trend reading crosses the “0” line, this means the trend of this Leading Indicator has changed from a
downtrend to an uptrend or vice versa. Thus, as the “0” line is approached there is a strong possibility that you will be
able to anticipate a real estate market trend reversal.
Trend:The general direction (up or down) in which a Leading Indicator is moving.
Moving Average (MA): This calculation gives you a monthly average for the Leading Indicator data over a certain
period of time. The MA is important because it smoothes out month to month data and fluctuations and gives you a
very good sense of market direction.
Market Momentum:Measures whether the trend is getting stronger or weaker.

Trend Identification: A series of steps must be taken in order to create the Leading Indicators.
1. Gather the monthly data.
2. Calculate the 12 month moving average for each indicator.
3. Calculate the momentum reading for each indicator.
4. Analyze the data.
Existing Home Sales

This is one of the best leading indicators of real estate price trends. Buyers create the demand for housing that is
directly linked with price movement. When this trend increases it demonstrates more buyers coming into the market
and prices tend to rise. Sellers do play a role in the transaction of a house or condo, but the buyer plays the dominate
role because they must be willing to pay the price the seller is asking.
Vital Sign Market Momentum Chart
Tri-County Existing Residential Sales Top of the real
40 estate market.
Above "0" Line: Favorable market conditions.

30
Recession NASDAQ Correction

20
Market Momentum Reading
Mar 1990- Feb 1991
10
Dec. 2009 = - 9
-10
9/11
-20
-30
Below "0" Line: Unfavorable market conditions.
-40
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Source:CTAR
The first chart above shows some dramatic improvement since April 2009, which was the lowest reading in the past
19 years. The reason this occurred is that 2008 was such a horrendous year for housing and the economy after the
credit collapse occurred. The reason the trend is improving is due to the terrible sales figures that occurred after the
credit markets shut down in 08. We are seeing improvements due to the nationalization of the housing market via the
1st time homebuyer tax credits, price drops and Federal Reserve mortgage repurchase program, which keeps interest
rates artificially low. Those of you who heeded the warnings of this newsletter and remained patient are saving big
bucks right now because list prices have dropped and interest rates are still low. Those who did not listen, especially
on the upper end of the market, probably have lost a large amount of equity over the past few years. The homes with
owners looking to sell who are “upside down” (owe more than the home is worth on the market) are clearly headed
for the rental market or the short sale/foreclosure market at some point. This a major problem with many of the
homes purchased over the past few years when demand was artificially high due to easy credit.
If we break up the local Tri-County residential market in two categories the difference in sales for 2009 are
staggering.
Price Range Percentage of Sales

1. Less than $350k 82%
2. Greater than $350k 18%
A much more detailed breakdown of sales is below.
Sold Listings
Price Range # of Listings Average DOM % of Listings
$0 - $9,999 5 105 0.06%
$10,000 - $19,999 18 93 0.22%
$20,000 - $29,999 45 94 0.56%
$30,000 - $39,999 65 76 0.81%
$40,000 - $49,999 93 86 1.16%
$50,000 - $59,999 109 95 1.36%
$60,000 - $69,999 115 98 1.44%
$70,000 - $79,999 111 99 1.39%
$80,000 - $89,999 120 111 1.50%
$90,000 - $99,999 187 85 2.34%
$100,000 - $109,999 243 105 3.04%
$110,000 - $119,999 276 102 3.45%
$120,000 - $129,999 367 86 4.60%
$130,000 - $139,999 387 90 4.85%
$140,000 - $149,999 389 100 4.87%
$150,000 - $159,999 442 91 5.54%
$160,000 - $169,999 497 87 6.22%
$170,000 - $179,999 404 91 5.06%
$180,000 - $189,999 371 98 4.65%
$190,000 - $199,999 315 90 3.94%
$200,000 - $219,999 520 103 6.51%
$220,000 - $239,999 452 112 5.66%
$240,000 - $259,999 345 113 4.32%
$260,000 - $279,999 263 107 3.29%
$280,000 - $299,999 213 129 2.66%
$300,000 - $349,999 362 137 4.53%
$350,000 - $399,999 269 144 3.37%
$400,000 - $449,999 203 165 2.54%
$450,000 - $499,999 156 196 1.95%
$500,000 - $549,999 110 189 1.37%
$550,000 - $599,999 75 191 0.94%
$600,000 - $649,999 66 199 0.82%
$650,000 - $699,999 49 218 0.61%
$700,000 - $749,999 38 187 0.47%
$750,000 - $799,999 38 229 0.47%
$800,000 - $849,999 25 283 0.31%
$850,000 - $899,999 18 290 0.22%
$900,000 - $949,999 16 273 0.20%
$950,000 - $999,999 26 135 0.32%
$1,000,000 - $1,049,999 13 230 0.16%
$1,050,000 - $1,099,999 15 193 0.18%
$1,100,000 - $1,149,999 10 157 0.12%
$1,150,000 - $1,199,999 6 246 0.07%
$1,200,000 - $1,249,999 17 141 0.21%
$1,250,000 - $1,299,999 14 228 0.17%
$1,300,000 - $1,349,999 8 94 0.10%
$1,350,000 - $1,399,999 5 204 0.06%
$1,400,000 - $1,449,999 3 549 0.03%
$1,450,000 - $1,499,999 5 82 0.06%
$1,500,000 - $1,549,999 4 420 0.05%
$1,550,000 - $1,599,999 2 332 0.02%
$1,600,000 - $1,649,999 2 114 0.02%
$1,650,000 - $1,699,999 3 274 0.03%
$1,700,000 - $1,749,999 3 8 0.03%
$1,750,000 - $1,799,999 6 144 0.07%
$1,800,000 - $1,849,999 6 185 0.07%
$1,850,000 - $1,899,999 0 0 0.00%
$1,900,000 - $1,949,999 4 195 0.05%
$1,950,000 - $1,999,999 2 162 0.02%
$2,000,000 - $2,499,999 23 229 0.28%
Over $2,500,000 24 117 0.30%
# Total Listings: 7,978 Average Price: $255,486 Median Price: $183,000

Highest Price: $7,375,000 Lowest Price: $2,500 Average DOM: 113
New Building Permits

Real estate construction is one of the largest industries in the United States. Homebuilders are very aware of the
demand for housing in the areas of the country where they offer their services. Historically, the trend in building
permits will drop before the economy weakens.
It should also be noted that local municipalities can have an effect on this indicator. The town of Mount Pleasant is a
great example of government manipulating the market that reduces the number of building permits allowed which can
cause housing prices to escalate quicker than normal. Inventory gets scarcer as demand increases. The end result was
a significant increase in housing prices once the town decided to control the number of building permits allowed each
year
New Building Permits
50

40
NASDAQ Correction Top of the real

30
estate market
9/11
20
10
Dec. 2009 = -20

-10
-20
-30
-40

-50
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Source:US Census
You may be asking yourselves why the Building Permit trend chart would be improving. Part of the reason is
detailed in the following article which appeared in the 1/31/10 Post & Courier:
http://www.postandcourier.com/news/2010/jan/31/change-in-plans/
Most builders, developers, buyers, sellers and real estate agents did not do their homework! They listened to the main
stream media and fools like Ben Bernanke who kept telling everyone that “everything was contained.” Now the
“peeps” in the homebuilding industry are scrambling to position themselves to capture the affordable market in
Charleston. Buyers can not lie about their income and get a Stated “No Doc” Mortgage anymore. Buyers must now
document their incomes and most can only afford the homes less than $350k, which I have been discussing for a long,
long time. The result is that some of these newer subdivisions are becoming “mutt subdivisions” (I made that up! ☺)
with a mixture of tract built and custom built homes. Not good if you own the custom built home.
What these developers are doing is unfortunate in my opinion but a necessary move if you can relate to Darwinism.
This scenario could be much worse for these residents but I am sure that is not much comfort. All I can say them is
“You got bamboozled into buying an overpriced home at the top the market and feel thankful you have a roof over
you head. It could be worse.”
Monthly Inventory Ratio
This ratio is calculated by dividing sold monthly listings by new active monthly listings. In most cases demand is
more sensitive to change than supply. Supply is more sluggish since it takes time to build new homes. On the other
hand it is more difficult to withdraw supply already on the market. As a consequence, markets cycle between
oversupply, equilibrium and shortage.
Typically the changes in cycles can take years. Inventory in a buyers market tends to be high because the market is
oversupplied with homes based on demand. Inventory in a sellers market is low because of the scarcity of homes
available based on demand. As this ratio increases it signals an increase in inventory levels and a decrease in demand.
This can ultimately lead to housing prices to stagnate and possibly fall if the trend lasts long enough. This occurs
because sellers will become more motivated to sell their property the longer it stays on the market.

Tri-County Monthly Inventory Ratio
40

30
Recession
Mar 1990- Feb
20 1991
Dec. 2009 = 8
10
9/11
-10
NASDAQ Correction
-20

-30
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Source:CTAR
• The Single Family Detached (SFD) market has 9 months of inventory <$350k vs. 32.5 months >$350k when
we average out what is in the MLS for 2009.
• The Single Family Attached (SFA) market has 17 months of inventory <$350k vs. 70 months >$350k when
we average out what is in the MLS for 2009.
• Obviously the inventory situation is much worse (practically 2 times worse) for townhouses/condos vs. houses
based on the stats above.
• This is another example of developers not doing their homework in order to determine what buyers really
desire along with way too many condo conversions in the past.
Single Family Detached
Tri-County (<$349,999)
Monthly Current Months
Month Year Avg List $ Avg Sale $ Avg $/Sqft Median Sold $ Avg DOM
Sales Inventory Inventory
January 2009 273 $184,082 $177,155 $99 $168,870 93 3964 14.52
February 2009 290 $188,788 $182,127 $99 $178,964 88 3995 13.77
March 2009 395 $185,692 $179,264 $99 $175,000 109 4017 10.16
April 2009 388 $187,025 $180,116 $98 $176,331 104 3978 10.25
May 2009 474 $189,027 $182,035 $103 $178,945 97 3907 8.24
June 2009 492 $194,616 $188,543 $103 $182,000 89 3862 7.84
July 2009 538 $192,506 $186,318 $103 $179,000 90 3860 7.17
August 2009 448 $201,689 $195,405 $104 $185,000 95 3852 8.59
September 2009 470 $186,086 $180,658 $102 $175,000 85 3868 8.22
October 2009 508 $182,632 $176,799 $101 $165,450 82 3841 7.56
November 2009 553 $181,669 $177,022 $101 $167,000 79 3729 6.74
December 2009 366 $188,910 $181,927 $98 $175,117 88 3738 10.21
Annual: 5195 $188,649 $182,465 101 $175,000 91 3884 8.97
Single Family Detached

Tri-County (>$350,000)
January 2009 51 $809,861 $739,931 $247 $450,000 135 2859 56.05
February 2009 54 $717,803 $645,762 $233 $503,750 151 2981 55.20
March 2009 85 $701,905 $642,745 $226 $486,000 177 3043 35.80
April 2009 76 $884,164 $784,640 $261 $525,000 170 3155 41.51
May 2009 92 $887,190 $798,878 $236 $535,000 167 3172 34.47
June 2009 131 $691,451 $630,737 $223 $510,000 185 3112 23.75
July 2009 120 $794,143 $717,299 $240 $495,000 205 3024 25.20
August 2009 101 $666,461 $614,774 $219 $508,598 182 2965 29.35
September 2009 89 $683,601 $638,223 $218 $475,000 184 2892 32.49
October 2009 92 $768,458 $705,458 $225 $487,500 191 2839 30.85
November 2009 84 $631,417 $584,987 $205 $450,000 157 2757 32.82
December 2009 115 $820,979 $744,265 $239 $520,000 205 2682 23.32
Annual: 1090 $752,958 $685,870 230 $500,000 180 2957 32.55
Single Family Attached
Tri-County (<$349,999)
January 2009 67 $164,225 $153,963 $116 $145,000 123 1945 29.02
February 2009 65 $172,917 $158,170 $119 $157,030 160 1956 30.09
March 2009 95 $165,998 $158,626 $118 $140,000 121 1980 20.84
April 2009 68 $134,742 $126,745 $109 $117,650 168 1994 29.32
May 2009 126 $160,174 $149,985 $131 $146,250 133 2014 15.98
June 2009 119 $170,699 $164,921 $131 $152,000 124 2007 16.86
July 2009 143 $156,779 $150,137 $120 $136,500 134 1963 13.72
August 2009 118 $158,350 $151,231 $115 $137,784 144 1928 16.33
September 2009 144 $167,590 $158,493 $124 $147,500 133 1918 13.31
October 2009 145 $159,029 $151,035 $110 $137,000 111 1950 13.44
November 2009 133 $153,974 $148,229 $112 $132,000 121 1936 14.55
December 2009 105 $168,037 $160,851 $117 $153,000 136 1911 18.20
Annual: 1328 $161,212 $153,200 119 $140,000 132 1958 17.69
Single Family Attached

Tri-County (>$350,000)
January 2009 16 $811,301 $785,088 $368 $470,000 224 953 59.56
February 2009 9 $1,056,450 $1,042,238 $484 $700,000 112 980 108.88
March 2009 14 $946,471 $897,798 $363 $487,500 197 999 71.35
April 2009 15 $876,260 $814,864 $473 $610,000 112 1005 67.00
May 2009 10 $597,830 $576,652 $353 $512,500 328 1024 102.40
June 2009 14 $650,914 $606,678 $352 $480,000 298 1010 72.14
July 2009 20 $521,795 $483,353 $328 $442,000 169 980 49.00
August 2009 10 $758,865 $692,878 $349 $635,000 177 964 96.40
September 2009 11 $693,890 $642,191 $389 $550,000 316 931 84.63
October 2009 16 $730,592 $650,543 $323 $501,000 145 915 57.18
November 2009 16 $710,343 $639,552 $380 $557,500 358 934 58.37
December 2009 15 $775,413 $615,833 $363 $475,000 271 926 61.73
Annual: 166 $748,903 $689,956 373 $508,500 224 968 69.97
The following bullets and charts come from Doug Holmes of Carolina One Real Estate. I do not know Doug very
well and he recently started sending me his newsletters. Doug is also a math professor at the College of Charleston. I
like his data because he is telling the truth and analyzing it in a manner that I feel is helpful to the market. His data
also backs up much of what I have been discussing on this website the past 3.5 years since September 2006.
If you want his newsletter you can email him at dholmes@carolinaone.com.
• Charleston residential market was down about 9% in number of transactions and 9% in price for 2009 versus
2008. That includes SFD, SFA, and mobile homes in the tri-county area. SFD (single family detached) wasn't
quite as bad, down 6% in transactions and 8% in price. In fact SFD inventory has fallen a little to just over
6200. That's 67% of the overall inventory. On the other hand, SFA inventory has been rising.
• Buyer activity as shown by the number of contingents on the hot sheet each week was actually up about
6% in 2009 versus 2008. Short sales kept us from closing more of them though.
• Short sales and foreclosures account for 21% of the contingent listings currently on the MLS. And those
are just the ones listed correctly under the “Special” category. There is easily another 4%, making the ss/fc
market about 25% of what's under contract.
• Shingle prices are going up in the middle of February and we have a lot of homes that need new roofs. It's
been 20 years since HUGO.
I read somewhere that there are over 6000 distressed homes in the Tri-County market right now. I can not
remember the source.
Charleston Commercial Real Estate
Courtesy of Grubb & Ellis, WRS
www.barkleyfraser.com
Grubb & Ellis has the best quarterly commercial real estate reports for the Charleston market IMO. Go check out
their website if you want more info.
Q4 2009
Office Market Ends Decade on a Soft Note

At the end of the decade, Charleston, South Carolina is faced with the highest vacancy in nine years of tracking the
office market. The final year-end vacancy was approximately 21 percent, 25 basis points higher than the 18.5 percent
vacancy at the end of 2008. Only the short lived drop of 2003 matched this level of vacancy which was also 18.5
percent.
Prices have dropped sharply in the past twenty four months, with the average price of office space in Charleston
dropping from $26.64 per square foot at the end of 2007 to just $20.32 per square foot at the end of 2009, a decrease
of 24 percent or about 1 percent per month. This is evident in both new leases and renewals, as transactions are
primarily short-term lease renewals where landlords are cutting rates aggressively to keep tenants in place for short-
term deals.
The sales market has been stagnant with investment properties and owner occupant transactions kept to a minimum.
Sellers (and their banks) have resisted dropping prices in line with the reduction of rental rates. More aggressive
pricing is expected in the next twelve months enabling both investors and owner occupants to become more active in
2010.
The big movers in the 2009 office market were governments and educators. Specifically, the City of North Charleston
purchased its 150,000-square-foot headquarters in the summer of 2009 leaving behind a small fraction of a footprint
in its former city hall space just down the street. New or expanding educators in the market include ITT, Virginia Col-
lege & Strayer University, with others eyeing up expansions or market entry.
The rising vacancy is anticipated to peak in mid-2010 with a slow recovery to follow. In the meantime, those owners
who can afford to professionally maintain their property’s appearance and offer aggressive rates should see the most
success in the coming year.
Forecast
• Vacancy rates will peak in the middle of 2010.
• Office purchase prices will remain soft.
• Tenants will seek value opportunities over high quality spaces.
Office Trends Report – Q4 2009
Industrial Market Glad to See 2009 End
The past year was difficult for all and the Charleston industrial market was no exception. The increased vacancy rate,
compressed rental rates and lack of sales all reflect how dismal 2009 was for many people involved in the real estate
market. However, there were some positive indicators that give everyone involved some hope that 2010 will be better.
Maersk Shipping Company, the port of Charleston’s largest customer, renewed its contract with the Port Authority to
continue to call on Charleston until 2014, which should coincide with the completion of the Panama Canal
renovations. The Panama Canal Authority has invested heavily in improvements allowing it to handle the biggest
ocean going freight liners. In February 2010 Charleston is scheduled to receive its first call from an 8,000+ TEU
vessel. Currently Charleston is the only port in the southeast with the air and water drafts in place to handle ships of
this size.
Another positive indicator is the arrival of Boeing’s second manufacturing facility. The facility, which works on
assembling parts for the 7E7 Dreamliner, is supposed to deliver over 3,800 direct jobs to a region suffering from the
4th highest state unemployment in the country. In addition, dozens of additional suppliers are thought to be
considering locating facilities in Charleston to service this new plant.
Further validation of Charleston’s position in the global supply chain was the recent announcement by TBC Tire
Kingdom to locate its new distribution facility here. The firm has signed a lease to occupy a 1.1 million-square-foot
build-to-suit facility that will be completed by year-end.
Forecast
• Rental rates will finally stabilize by the end of the year. Existing well located product will be king.
• Transaction activity will increase as some owners will be forced to sell due to inability to refinance and
investors on the side lines will reenter the game.
• Industrial market will bounce back before the other market segments.
Industrial Trends Report Q4 2009
The Charleston Retail Market Remains Steady
Overall market conditions remained relatively unchanged in the fourth quarter of 2009 compared to third quarter.
Vacancy rates in the Charleston MSA crept down slightly 10 basis points to 8.4 percent. While that number is not
positive, it shows that the market is heading in the right direction. However, compared with the fourth quarter of 2008
where vacancy was at 7.2 percent, it has a long way to go.
The announcement of Boeing selecting North Charleston, SC for its assembly plant for the 787 Dreamliner was
welcome news to the low country and to the entire state of South Carolina. Reports have stated that the direct
economic impact reaches into the billions of dollars and Boeing plans to employ close to 3,800 people.
Leasing activity was slow during the third quarter of 2009 however very few vacant spaces were added to the market
compared to the first quarter of 2009. Tenants are beginning to have a positive outlook on the future with the
reduction in competition as a result of attrition among retailers. An increase in leasing activity is expected during the
first quarter of 2010 and throughout 2010 and 2011.
Landlords with existing properties are poised to do well in the upcoming quarters due to the fact there are few retail
developments planned that have not already broken ground. Difficulty finding financing will continue to slow the
development of new retail centers allowing landlords with existing availabilities to capture those tenants with
expansion plans.
The sale of retail properties continues to remain slow due to the unavailability of financing and low demand.
According to the Charleston Commercial Multiple Listing Service only two retail sales transactions occurred during
the fourth quarter of 2009 compared to 12 transactions during the same quarter two years ago.
Forecast
• Very few (if any) new developments will break ground in 2010 as banks are still struggling with tightened
credit and the possibility of pending foreclosures.
• Tenants that fared well over the last several quarters may thrive with the lack or competing retail businesses.
• The Charleston market will recover faster than the national average.
Retail Trends Report Q4 2009
The FDIC is Broke
The FDIC is bankrupt to the tune of a negative 8 billion which is evident in the chart below. This essentially means
we are not out of the current crisis and there is still work ahead to repair the damage that has been done.
Resolution Trust went through a quarter-trillion in the 1990s, bailing out S&Ls in a crisis that was not nearly so
serious and largely didn’t involve the broader banking sector. The bailout size gets mixed up between TARP, the Fed
overpaying for MBS, and the FDIC itself, but there's probably $2 trillion of bad-asset write-downs coming. Of that
amount, the FDIC will have to cover on the order of $400 billion, and that can only come from Congress (which
means taxpayers).
Source: http://www.fdic.gov/about/strategic/corporate/cfo_report_3rdqtr_09/balance.html
Foreclosures
LAS VEGAS, CAPE CORAL, MERCED FORECLOSURE RATES HIGHEST AMONG MAJOR METRO AREAS IN 2009
Top 20 Cities are from California, Florida, Nevada and Arizona;
Utah, Illinois, Oregon, Idaho Cities Indicate Foreclosure Problem is Spreading
Charleston, SC ranked #64 out of 203 MSAs.
IRVINE, Calif. – Jan. 28, 2010 – RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure
properties, today released its Year-End 2009 Metropolitan Foreclosure Market Report, which shows that cities in four
Sun Belt states accounted for all top 20 foreclosure rates in 2009 among metro areas with a population of 200,000 or
more, but foreclosure activity showed signs of spreading into previously insulated areas as unemployment became
more of a driving factor.
California accounted for nine of the top 20 metro foreclosure rates, followed by Florida with eight, Nevada with two
and Arizona with one. The highest-ranked metro area outside of those four states was in Boise City-Nampa, Idaho,
which ranked No. 24 with 4.66 percent of its housing units receiving at least one foreclosure notice in 2009.
“While it was expected that cities from states with the highest levels of foreclosure activity would top the charts, there
is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship
than what we’ve seen over the past few years,” said James J. Saccacio, chief executive officer of RealtyTrac. “Areas
like Provo, Utah, Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S.
average in 2009. And markets like Honolulu, Minneapolis and Seattle saw foreclosure activity increase at more than
twice the national pace over the past 12 months — although all three of those markets still had 2009 foreclosure rates
that were at or below the U.S. average.”
Top 10 metro foreclosure rates
Las Vegas posted the nation’s highest metro foreclosure rate for the year, with more than 12 percent of its housing
units receiving a foreclosure notice in 2009 — more than five times the national average. Las Vegas reported a
quarter-over-quarter decline in foreclosure activity in the fourth quarter — as did all the other metro areas with
foreclosure rates ranking among the top 10 for 2009.
With 11.87 percent of its housing units receiving a foreclosure notice in 2009, Cape Coral-Fort Myers, Fla.,
documented the second highest metro foreclosure rate. Other Florida cities in the top 10 were Orlando-Kissimmee at
No. 7 (8.17 percent), Port St. Lucie at No. 9 (7.58 percent), and Miami-Fort Lauderdale-Pompano Beach at No. 10
(7.16 percent).
Merced, Calif., registered the nation’s third highest metro foreclosure rate, with more than 10 percent of its housing
units receiving a foreclosure notice in 2009. Other California cities in the top 10 were Riverside-San Bernardino-
Ontario at No. 4 (8.80 percent), Stockton at No. 5 (8.62 percent), and Modesto at No. 6 (8.53 percent).
The Phoenix-Mesa-Scottsdale metro area in Arizona documented the nation’s eighth highest metro foreclosure rate in
2009, with more than 8 percent of its housing units receiving a foreclosure notice during the year.
Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one
foreclosure filing entered into the RealtyTrac database during the year for metropolitan statistical areas with a
population of 200,000 or more based on Census bureau estimates. Some foreclosure filings entered into the database
during the year may have been recorded in previous years. Data is collected from more than 2,200 counties
nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report
incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens
(LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or
REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is
received for a property during the year, only the most recent filing is counted in the report.
2009 U.S. Metro Foreclosure Market Data
%∆ from %∆ from
Rate Properties with %Housing 1/every 2008 2007
Rank Metro Name Filings Units X HU
-- U.S. Total 2,824,674 2.21 45 21.21 119.67
1 Las Vegas-Paradise, NV 94,862 12.04 8 41.12 212.19
2 Cape Coral-Fort Myers, FL 42,734 11.87 8 4.13 234.12
3 Merced, CA 8,389 10.10 10 1.18 124.85
4 Riverside-San Bernardino-Ontario, CA 126,376 8.80 11 12.55 143.90
5 Stockton, CA 19,540 8.62 12 -7.51 84.22
6 Modesto, CA 14,812 8.53 12 -0.48 101.09
7 Orlando-Kissimmee, FL 72,141 8.17 12 54.01 357.86
8 Phoenix-Mesa-Scottsdale, AZ 133,809 8.03 12 36.98 343.12
9 Port St. Lucie, FL 15,630 7.58 13 21.52 217.55
10 Miami-Fort Lauderdale-Pompano Beach, FL 172,894 7.16 14 43.50 198.28
11 Vallejo-Fairfield, CA 10,702 7.14 14 10.08 105.93
12 Bakersfield, CA 19,174 7.13 14 18.30 154.74
13 Naples-Marco Island, FL 12,251 6.38 16 31.15 339.58
14 Reno-Sparks, NV 11,037 6.15 16 62.24 311.06
15 Sacramento--Arden-Arcade--Roseville, CA 47,810 5.64 18 13.96 92.36
16 Deltona-Daytona Beach-Ormond Beach, FL 13,125 5.32 19 49.25 215.05
17 Sarasota-Bradenton-Venice, FL 20,507 5.26 19 18.84 201.53
18 Lakeland, FL 14,405 5.19 19 40.52 177.98
19 Fresno, CA 14,974 4.92 20 19.12 141.28
20 Salinas, CA 6,729 4.83 21 4.81 166.28
21 Palm Bay-Melbourne-Titusville, FL 12,685 4.78 21 23.47 147.80
22 Tampa-St. Petersburg-Clearwater, FL 62,719 4.77 21 16.95 161.71
23 Visalia-Porterville, CA 6,350 4.69 21 42.92 189.03
24 Boise City-Nampa, ID 11,009 4.66 21 103.34* 398.82*
25 Ocala, FL 7,295 4.58 22 39.67 275.84
26 Jacksonville, FL 26,537 4.53 22 55.87 178.11
27 Prescott, AZ 4,561 4.36 23 70.95 400.11
28 San Diego-Carlsbad-San Marcos, CA 49,125 4.34 23 9.33 142.96
29 Greeley, CO 3,934 4.25 24 6.53 43.16
30 Provo-Orem, UT 5,818 4.11 24 100.76 579.67
31 Oxnard-Thousand Oaks-Ventura, CA 11,155 4.09 24 32.45 157.32
32 Los Angeles-Long Beach-Santa Ana, CA 175,810 3.99 25 37.06 203.37
33 Fayetteville-Springdale-Rogers, AR-MO 6,912 3.77 27 31.66 336.64
34 Atlanta-Sandy Springs-Marietta, GA 78,835 3.73 27 17.65 57.10
35 Detroit-Warren-Livonia, MI 69,171 3.64 27 0.36 10.18
36 Santa Rosa-Petaluma, CA 6,859 3.47 29 30.30 171.54
37 San Francisco-Oakland-Fremont, CA 54,083 3.20 31 17.66 137.08
38 Chicago-Naperville-Joliet, IL-IN-WI 119,662 3.19 31 33.39 108.87
39 San Jose-Sunnyvale-Santa Clara, CA 19,920 3.15 32 27.42 217.86
40 Flint, MI 5,963 3.02 33 1.71 10.77
41 Tucson, AZ 12,798 3.01 33 41.52 201.27
42 Santa Barbara-Santa Maria-Goleta, CA 4,432 2.93 34 33.70 150.82
43 Salt Lake City, UT 11,413 2.91 34 72.19 208.96
44 Pensacola-Ferry Pass-Brent, FL 5,616 2.85 35 34.00 130.83
45 Memphis, TN-MS-AR 15,334 2.80 36 -11.08†† 35.92††
46 Denver-Aurora, CO 28,962 2.78 36 -12.02 9.04
47 Santa Cruz-Watsonville, CA 2,781 2.70 37 30.26 205.60
Washington-Arlington-Alexandria, DC-VA-
48 MD-WV 56,347 2.64 38 1.70 158.51
49 San Luis Obispo-Paso Robles, CA 2,976 2.57 39 63.07 235.89
50 Colorado Springs, CO 6,485 2.54 39 11.12 68.62
51 Lansing-East Lansing, MI 4,981 2.54 39 19.22 38.86
52 Ogden-Clearfield, UT 4,484 2.53 39 76.67 124.76
53 Rockford, IL 3,623 2.52 40 16.23 60.38
54 Chico, CA 2,380 2.51 40 50.35 167.72
55 Indianapolis-Carmel, IN 18,408 2.47 41 -9.39 26.16
56 Grand Rapids-Wyoming, MI 7,829 2.46 41 12.24 60.43
57 Toledo, OH 7,359 2.46 41 -7.52 27.85
58 Atlantic City, NJ 3,063 2.42 41 34.05 136.89
59 Cleveland-Elyria-Mentor, OH 22,430 2.38 42 -19.00 -19.31
60 Columbus, OH 17,672 2.29 44 -9.32 28.18
61 Portland-Vancouver-Beaverton, OR-WA 20,017 2.26 44 87.35 287.40
62 Minneapolis-St. Paul-Bloomington, MN-WI 29,115 2.20 45 57.80 169.66
63 Canton-Massillon, OH 3,899 2.20 46 -13.05 -4.53
64 Charleston-North Charleston, SC 6,198 2.20 46 77.04* 645.85*
65 Holland-Grand Haven, MI 2,136 2.13 47 43.84 119.53
66 Salem, OR 3,110 2.13 47 93.17 198.75
67 Dayton, OH 7,914 2.08 48 -14.27 1.28
68 Gainesville, FL 2,387 2.08 48 81.38 188.29
69 Macon, GA 2,056 2.00 50 11.32 52.41
70 Fort Collins-Loveland, CO 2,543 2.00 50 19.67 49.24
71 Milwaukee-Waukesha-West Allis, WI 12,578 1.92 52 23.54 92.50
72 Savannah, GA 2,698 1.87 53 37.86 161.43
73 Akron, OH 5,710 1.85 54 -30.86 -19.18
74 Ann Arbor, MI 2,661 1.81 55 -4.49 58.77
75 Trenton-Ewing, NJ 2,539 1.81 55 4.66 81.36
76 Cincinnati-Middletown, OH-KY-IN 16,358 1.80 56 -2.23 24.77
77 Green Bay, WI 2,391 1.78 56 126.64* 519.43*
78 Saginaw-Saginaw Township North, MI 1,555 1.75 57 -18.80 17.27
79 Kansas City, MO-KS 15,067 1.75 57 10.86† 49.59†
80 Youngstown-Warren-Boardman, OH-PA 4,568 1.74 57 -8.69 28.93
81 Worcester, MA 5,491 1.74 58 -13.45 78.63
82 Tallahassee, FL 2,737 1.72 58 50.80 134.13
83 Kalamazoo-Portage, MI 2,483 1.72 58 5.48 100.08
84 Greenville-Mauldin-Easley, SC 4,585 1.71 59 47.90 1,656.70*
85 Birmingham-Hoover, AL 8,174 1.64 61 267.21* 245.92*
86 Seattle-Tacoma-Bellevue, WA 22,772 1.62 62 43.15 180.20
87 New Haven-Milford, CT 5,633 1.61 62 -10.79 48.59
88 Little Rock-North Little Rock-Conway, AR 4,748 1.61 62 9.50 77.50
Myrtle Beach-Conway-North Myrtle Beach,
89 SC 2,707 1.61 62 279.66* 2,137.19*
90 St. Louis, MO-IL 19,465 1.58 63 -10.07† 26.08†
91 Chattanooga, TN-GA 3,497 1.53 65 7.07†† 152.31††
92 Bridgeport-Stamford-Norwalk, CT 5,361 1.53 65 -8.73 119.71
93 Charlotte-Gastonia-Concord, NC-SC 10,732 1.51 66 9.49 13.40
94 Dallas-Fort Worth-Arlington, TX 35,520 1.50 67 2.86 -4.58
95 Brownsville-Harlingen, TX 2,151 1.50 67 29.27 131.04
96 Tulsa, OK 5,843 1.47 68 22.32 65.29
Nashville-Davidson--Murfreesboro--Franklin,
97 TN 9,253 1.45 69 -1.92†† 75.48††
Virginia Beach-Norfolk-Newport News, VA-
98 NC 9,794 1.44 70 49.85† 363.73†
99 Columbia, SC 4,461 1.44 70 64.98 362.76
100 Eugene-Springfield, OR 2,143 1.43 70 78.88 179.40
101 South Bend-Mishawaka, IN-MI 1,997 1.43 70 -7.25 7.31
102 Mobile, AL 2,536 1.42 70 44.83* 16.92*
103 Richmond, VA 7,177 1.41 71 39.12 682.66
104 Albuquerque, NM 4,970 1.41 71 84.90* 124.38*
105 York-Hanover, PA 2,448 1.41 71 50.09 603.45
106 Manchester-Nashua, NH 2,270 1.40 71 1.79 301.06
107 Fort Wayne, IN 2,486 1.40 72 -24.37 -6.51
108 Baltimore-Towson, MD 15,064 1.36 73 27.92 88.72
109 San Antonio, TX 9,934 1.31 76 23.66 29.91
110 Boston-Cambridge-Quincy, MA-NH 23,828 1.31 76 -19.43 126.27
111 Houston-Sugar Land-Baytown, TX 28,338 1.30 77 -11.39 13.71
112 New Orleans-Metairie-Kenner, LA 5,741 1.30 77 31.28 147.88
Philadelphia-Camden-Wilmington, PA-NJ-
113 DE-MD 31,020 1.30 77 14.75 101.14
114 Olympia, WA 1,300 1.29 77 16.49 111.73
115 Boulder, CO 1,596 1.29 77 27.88 42.63
116 Reading, PA 2,065 1.29 78 31.36 199.28
117 Austin-Round Rock, TX 8,002 1.25 80 39.48 54.60
118 Hagerstown-Martinsburg, MD-WV 1,394 1.23 81 56.28 155.78
119 Augusta-Richmond County, GA-SC 2,778 1.23 81 12.52 42.17
120 Anchorage, AK 1,710 1.22 82 15.54 71.00
121 Providence-New Bedford-Fall River, RI-MA 8,236 1.22 82 -17.24 144.32
122 Springfield, MA 3,439 1.21 82 -20.60 74.57
123 Greensboro-High Point, NC 3,782 1.21 83 -3.89 22.39
124 Bremerton-Silverdale, WA 1,221 1.21 83 19.35 89.01
125 Springfield, MO 2,218 1.21 83 14.15† 98.21†
126 Killeen-Temple-Fort Hood, TX 1,748 1.20 83 33.23 146.20
127 Montgomery, AL 1,866 1.19 84 112.77* 318.39*
128 Honolulu, HI 3,985 1.19 84 141.96 672.29
129 Louisville/Jefferson County, KY-IN 6,302 1.15 87 47.07 97.12
130 Winston-Salem, NC 2,375 1.15 87 -2.98 23.50
New York-Northern New Jersey-Long Island,
131 NY-NJ-PA 84,054 1.14 88 7.19 68.09
132 Knoxville, TN 3,517 1.14 88 -0.71†† 94.52††
133 Norwich-New London, CT 1,326 1.14 88 -12.24 55.63
134 Madison, WI 2,790 1.13 88 118.14* 209.31*
135 Barnstable Town, MA 1,749 1.12 89 -16.67 130.43
136 Des Moines-West Des Moines, IA 2,643 1.12 89 28.99 74.46
137 Hartford-West Hartford-East Hartford, CT 5,502 1.12 89 -12.74 48.78
138 Allentown-Bethlehem-Easton, PA-NJ 3,628 1.09 92 52.50* 255.69*
139 Columbus, GA-AL 1,394 1.09 92 19.35 84.15
140 Appleton, WI 973 1.08 93 82.55* 62.71*
141 Jackson, MS 2,347 1.07 94 198.98* 240.64*
142 Davenport-Moline-Rock Island, IA-IL 1,742 1.06 95 37.06 97.95
143 Fort Smith, AR-OK 1,296 1.05 95 24.02 120.78
144 Raleigh-Cary, NC 4,300 1.01 99 -3.24 11.28
145 Roanoke, VA 1,359 0.97 103 351.50* 1,537.35*
146 Poughkeepsie-Newburgh-Middletown, NY 2,394 0.97 103 -15.29 263.28
147 Clarksville, TN-KY 1,048 0.96 104 -0.66†† 70.41††
148 McAllen-Edinburg-Mission, TX 2,379 0.96 104 20.03 674.92
149 Amarillo, TX 907 0.92 108 6.83 29.02
150 Waco, TX 817 0.89 112 2.25 54.15
151 Huntsville, AL 1,469 0.88 114 78.06* 1,832.89*
152 Oklahoma City, OK 4,582 0.88 114 -7.94 13.25
153 Laredo, TX 608 0.88 114 48.29 221.69
154 Wichita, KS 2,196 0.85 118 29.33 231.72
155 Topeka, KS 860 0.83 120 63.81 246.77
156 Pittsburgh, PA 9,220 0.83 120 -7.92 129.13
157 Baton Rouge, LA 2,650 0.83 121 139.39* 223.17*
158 Corpus Christi, TX 1,383 0.79 127 8.05 54.01
159 Springfield, IL 745 0.77 129 -17.86 -3.87
160 El Paso, TX 1,905 0.75 133 35.30 51.79
161 Sioux Falls, SD 671 0.73 136 101.50* 11,083.33*
162 Lancaster, PA 1,410 0.73 137 21.34 308.70*
163 Shreveport-Bossier City, LA 1,227 0.71 140 101.81 361.28
164 Yakima, WA 583 0.70 142 24.57 4.86
165 Peoria, IL 1,128 0.69 144 -25.00 4.06
166 Rochester, NY 2,602 0.59 170 -31.97 -23.65
167 Cedar Rapids, IA 631 0.57 176 -4.97 24.21
168 Champaign-Urbana, IL 542 0.56 180 26.05 45.31
169 Erie, PA 646 0.55 183 15.56 80.45
170 Lafayette, LA 604 0.55 183 112.68* 268.29*
171 Durham, NC 1,160 0.54 184 -44.39 -27.55
172 Harrisburg-Carlisle, PA 1,253 0.54 184 52.06* 99.21*
173 Duluth, MN-WI 733 0.54 187 -10.17 42.61
174 Buffalo-Niagara Falls, NY 2,780 0.53 187 -27.64 25.51
175 Portland-South Portland-Biddeford, ME 1,334 0.52 191 -1.98 532.23
176 Omaha-Council Bluffs, NE-IA 1,827 0.52 192 -30.08 -39.44
177 Spartanburg, SC 618 0.51 195 -41.31 69.78
178 Binghamton, NY 566 0.51 195 20.17 319.26
179 Evansville, IN-KY 811 0.51 197 -32.98 4.11
180 Gulfport-Biloxi, MS 539 0.50 199 783.61* 3,070.59*
181 Spokane, WA 979 0.50 199 -14.57 -2.97
182 Scranton--Wilkes-Barre, PA 1,276 0.49 202 -21.23 85.74
183 Lexington-Fayette, KY 889 0.44 228 -10.02 91.59
184 Wilmington, NC 800 0.41 245 -32.09 19.94
185 Beaumont-Port Arthur, TX 649 0.40 248 -19.48 -33.64
186 Longview, TX 335 0.40 253 90.34 1,016.67
187 Kingsport-Bristol-Bristol, TN-VA 537 0.37 271 9.82†† 208.62††
188 Huntington-Ashland, WV-KY-OH 484 0.37 273 56.13 146.94
189 Hickory-Lenoir-Morganton, NC 527 0.34 298 -43.88 -40.99
190 Albany-Schenectady-Troy, NY 1,220 0.32 311 -49.50 26.29
191 Lubbock, TX 378 0.32 312 -7.35 800.00
192 Lynchburg, VA 325 0.30 332 269.32* 884.85*
193 Houma-Bayou Cane-Thibodaux, LA 225 0.28 363 378.72* 650.00*
194 Kennewick-Richland-Pasco, WA 230 0.27 372 -61.67 -64.72
195 Asheville, NC 455 0.23 439 -39.66 -33.19
196 Tuscaloosa, AL 212 0.22 448 130.43* 631.03*
197 College Station-Bryan, TX 167 0.19 519 7.05 -10.22
198 Fayetteville, NC 289 0.19 522 -76.47 -79.87
199 Syracuse, NY 526 0.18 543 -48.83 44.11
200 Charleston, WV 226 0.16 643 43.04 58.04
201 Lincoln, NE 140 0.11 880 -80.11 -80.23
202 Utica-Rome, NY 70 0.05 1,943 -51.39 0.00
203 Burlington-South Burlington, VT 45 0.05 1,972 9.76 246.15
*Actual increase may not be as high due to data collection changes or improvements
**Collection of records classified as NOD began in August 2009 because of change in state law
† Collection of some records previously classified as NOD in this MSA was discontinued starting in January 2009
†† Collection of some records previously classified as NOD in this MSA was discontinued starting in September 2008
About RealtyTrac Inc.

RealtyTrac (www.realtytrac.com) is the leading online marketplace of foreclosure properties, with more than 1.5
million default, auction and bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan
and home sales data. Hosting more than 3 million unique monthly visitors, RealtyTrac provides innovative
technology solutions and practical education resources to facilitate buying, selling and investing in real estate.
RealtyTrac’s foreclosure data has also been used by the Federal Reserve, FBI, U.S. Senate Joint Economic Committee
and Banking Committee, U.S. Treasury Department, and numerous state housing and banking departments to help
evaluate foreclosure trends and address policy issues related to foreclosures.
No Fear in the New Year

By Jon Gordon (www.jongordon.com)
I enjoy this website and the newsletters Jon Gordon periodically sends out. I can also relate to this story after some
similar crap happened to me in 2006 after telling the truth in the newspaper about where the economy and housing
market was heading. Enjoy.
Nine years ago I looked out into the Atlantic Ocean on New Year’s Day with fear in my heart and uncertainty in my
life. I had been fired from a "dot.com" company two weeks earlier with only two weeks of severance, no insurance for
my two young children and only two months of savings in the bank. My wife and I had just invested every dollar we
had and even took out a second mortgage on our home and $20,000 on a credit card to open what would be the first
Moe's Southwest Grill in Florida. The restaurant was set to open January 13th and we had no earthly idea how we
would pay our home mortgage and other bills since I planned on keeping my salary and job while my managers built
the restaurant business. Now, it was New Years Day and I had no job, no salary and a restaurant opening that at worst
would fail miserably or at best take a year to be profitable.
I thought of all this as I prepared to jump into the icy cold water-to take a symbolic plunge that this would be the year
of NO FEAR. Regardless of the circumstances I was facing, this would be the year where I would trust and go for it.
This would be the year I would be bold in actions and faith and humble in spirit. No longer could I do it alone. Now I
needed a miracle and I decided to act as if my future depended on me and pray like it depended on God.
By jumping into the ocean I was declaring that no longer will I allow fear to cut off the flow of abundant and positive
energy in my life. No longer will I allow fear to paralyze me. Instead of fear I would trust.
Now, nine years later, as I write this I am preparing to jump into the ocean once again on New Year’s Day. It has
become my yearly ritual - to remind myself to follow my passion, live life to the fullest, surrender and to stay
one step ahead of the fear that hovers around me.
And as I take my leap into the ocean I want to invite you to jump in with me. Perhaps not in the ocean but in the
depths of your mind. This jump doesn't necessarily require water but rather a leap of faith in your belief system and a
shift in your mindset. The antidote to fear is trust and it is only a thought away.
No one is going to push you over the chasm of struggle to the life that you want. God will nudge you but you must
take the leap. You must make this jump in your mind and then with your actions. You must make this jump with trust,
determination and faith. After all, they don't call it a leap of fear. They call it a "leap of faith" for a reason.
You will always feel fear. Everyone will. But your trust must be bigger than your fear. The bigger your trust the
smaller your fear becomes. And the more you trust the more you become a conduit for miracles. I know. A
consulting project presented itself out the blue and we were able to pay our mortgage. A check came in the mail, the
right opportunities came our way and somehow, some way my family and I were carried.
I know that 2009 was not a great year for many people but I believe New Year’s Day represents a fresh start and it
presents a new opportunity to create the life you were born to live. All you have to do is jump in with all that you are
and all that you wish to become.
Here's to an amazing 2010!
What the Deflationists Are Missing
I have written a ton on whether we will see inflation or deflation creep its way into our economy in the future. Here
are two different perspectives by very smart individuals.
An interesting article by Ambrose Evans-Pritchard came my way the other morning. It’s worth a read, if for no other
reason than that he paints an appropriately dark picture of the current state of the U.S. economy. You can read it here:
http://tinyurl.com/y93go5c
While I very much share Mr. Evans-Pritchard’s view that the global economy is far from out of the woods, our views
diverge in that he sees devastating deflation speeding our way down the tunnel. Readers of any duration know that we
here at Casey Research see devastating inflation.
While we could both be right, with deflation first and inflation later, I’m not so convinced.
For starters, there is already a massive inflation operation being run by the Fed, evidenced in a historic spike in the
monetary base over the last two years.
And the Obama administration is far from done.
The Democrats’ reinvigorated focus on jobs – the single most important factor in this November’s elections – will
soon translate into a flurry of new initiatives designed to put people back to work, most of it funded at taxpayer
expense.
To believe in the deflationary case would seem to require believing that Obama and his minions are ready to forgo
any further political aspirations by collectively putting their feet up on their desks for the balance of their sole term at
the apex of global power.
Given Obama’s meteoric rise to power – evidence that he possesses a certain drive and competence in the game of
politics – that seems highly unlikely. And so it seems safe to assume we’ll soon witness a redoubling of his efforts to
keep interest rates down… to make it easy and cheap for strapped consumers and businesses to keep borrowing… and
to otherwise flood the economy with money.
In a deflation, the value of the money increases – which is actually a pretty desirable thing, if you ask me. Inflation,
by contrast, means that pretty much everything you own in the local currency steadily loses value – forcing investors
into a perpetual game of catch-up. It’s hard for me to calculate how the government can dramatically increase the
money supply and yet have each of the currency units become increasingly more valuable over a sustained period of
time.
Arguing against that point, Evans-Pritchard makes the case that the U.S. government is making much the same
mistakes that were made in the first part of the Great Depression, i.e., being overly tight with the money. And that the
velocity of money is falling.
There are a couple of key differences between now and then, however. First, the Fed didn’t actually know what the
money supply was back then. They literally had no monitoring tools in place, mostly because no one thought it was
important enough to track. Second, they didn’t have fiat monetary powers. Today, neither of those factors apply.
Everyone knows what the money supply of the U.S. is and watches it keenly. Including our foreign creditors. And so
it is not surprising to see the Fed publicly talking about tightening up a bit. But it’s just talk at this point.
With the economy continuing to struggle, the only reasonable assumption that can be made is that the Fed – in
cahoots with the entirely politicized Treasury – will keep shoveling money onto the economic embers, and continue to
do so until economic activity again flares up.
That will, of course, require increasing the quantity of money that actually makes it into the economy – but that
should be child’s play for Team Obama – with direct hiring and spending, continuing to buy mortgages and other
loans to suppress interest rates, forgiving the bad debts of banks, or changing accounting rules so that banks can
postpone reckoning day. And that’s just for starters, all of it packaged nicely in the name of the public good.
And once the money starts to flow, there will be a pick-up in economic activity, which will beget yet more money
moving around. At first, this money will be a palliative for the economic worries, but then comes the inflation – a
small trade-off, the politicians will decide, if it buys them enough of a recovery to make it through the November
elections and get the president the second term you know he so strongly desires.
There is something else that I think the deflationists are missing, and that has to do with confidence in the currency. If
the U.S.’s many creditors come to agree with our point of view – that the dollar is being led to the altar as a sacrificial
lamb to political expediency – then they’ll further reduce their purchases of our Treasuries and start trading their
dollars for stronger currencies and tangible assets, including precious metals.
At that point, interest rates will have to begin rising to attract new buyers. As you can see in the chart of long-term
Treasury bond rates, a significant move off recent lows has already occurred, and rates are looking poised for a
breakout to the upside.
Of course, the higher those rates ratchet, the

more it will cost the U.S. government to carry its massive debt. While rising rates will continue to drive demand to the
short end, suppressing those rates, in time the sheer quantity of paper that will have to be rolled over, and the rising
tide of inflation, assures that short-term rates will have to rise too. At that point, the train begins to leave the track.
As the train wreck approaches, the government is going to have to find creative new ways to fund its social contract
with impatient voters. Perhaps, for instance, pegging everyday fines and assessments to the amount of income a
person makes. Executed brashly, such policies might even allow the government to charge a person of means, say,
$290,000 for a speeding violation.
I know what you’re thinking: C’mon, let’s be realistic – that could never happen. Think again…
Source:www.caseyresearch.com
Disclaimer
The research done to gather the data in The Charleston Market Report involves examining thousands of listings. With
this much data inaccuracies will occur. Care is taken in gathering and processing the data and information within this
report is deemed reliable. IT IS NOT GUARANTEED. The real estate market is cyclical and will have its ups and
downs. Past performance cannot determine future performance. The purpose of the Charleston Market Report is to
educate you on current and consistent market conditions by reporting leading market indicators with the support of
traditional real estate data.
This information is offered with the understanding that the author is not engaged in rendering legal, tax or other
professional services. If legal, tax or other expert assistance is required, the services of a competent professional are
recommended. This is a personal newsletter reflecting the opinions of its author. It is not a production of my
employer. Statements on this site do not represent the views or policies of anyone other than myself.
Investing in real estate is not a get-rich-quick scheme nor is there any guarantee you will make a profit. Every effort
has been made to make this report as complete and accurate as possible. However, there may be mistakes. Therefore,
this report should be used only as a general guide and not as the ultimate source for making money in real estate.

January 2010 Charleston Market Report

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January 2010 Charleston Market Report

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January 2010 Issue

Charleston, SC Real Estate

How to interpret the market momentum charts.

Trend:The general direction (up or down) in which a Leading Indicator is moving.

Market Momentum:Measures whether the trend is getting stronger or weaker.

Existing Home Sales

Above "0" Line: Favorable market conditions.

Recession NASDAQ Correction

Mar 1990- Feb 1991

Price Range Percentage of Sales

A much more detailed breakdown of sales is below.

# Total Listings: 7,978 Average Price: $255,486 Median Price: $183,000

New Building Permits

Above "0" Line: Favorable market conditions.

NASDAQ Correction Top of the real

Dec. 2009 = -20

Below "0" Line: Unfavorable market conditions.

Vital Sign Market Momentum Chart

Above "0" Line: Favorable market conditions.

Below "0" Line: Unfavorable market conditions.

Single Family Detached

Single Family Attached

If you want his newsletter you can email him at dholmes@carolinaone.com.

Office Market Ends Decade on a Soft Note

Office Trends Report – Q4 2009

Industrial Trends Report Q4 2009

The FDIC is Broke

Top 20 Cities are from California, Florida, Nevada and Arizona;

Utah, Illinois, Oregon, Idaho Cities Indicate Foreclosure Problem is Spreading

Charleston, SC ranked #64 out of 203 MSAs.

Top 10 metro foreclosure rates

2009 U.S. Metro Foreclosure Market Data

About RealtyTrac Inc.

No Fear in the New Year

Here's to an amazing 2010!

What the Deflationists Are Missing

Of course, the higher those rates ratchet, the

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