Bruce W.

McKinnon, MBA
Interest % USA : Annual % of Appreciation of Median Price of “ Existing ” Homes Associate Broker
CRS
CRS,, GRI
GRI,, ABR
ABR,, SRES
SRES,, e-PRO
PRO,, CLHMS
23.00 % Source: National Association of Realtors—Research ®
(425) 501 - 8625
“Nominal Price” Existing Home Appreciation: 1968 - 2007

22.00 % www.BruceMcKinnon.com
21.00 % Nothing down – pay what you want
20.00 % when you want = Foreclosures
Background: In order to reverse a recession in 2000,
19.00 % the FED began to drop the Federal Funds Rate (interest
18.00 % charged banks for overnight barrowing to comply with
Federal Reserve requirements). US Mortgage rates hit
17.00 % a 47 year low in June 2003. Household debt (as a % of
16.00 % income) rose to 130% in 2007 (100% a decade earlier).
Home ownership increased from 64% in 1994 to a peak
15.00 % of 69.2% in 2004 while home prices increased 124%
from 1997 to 2006. This resulted in a construction boom,
14.00 %
housing oversupply and a loosening of loan requirements
13.00 % coupled with an unprecedented volume of loans to high
risk borrowers with patchy credit histories (e.g., little or
12.00 %
no down payments, lower incomes and decreased credit
11.00 % scores from that of PRIME barrowers). Subprime
mortgages (5% of mortgage loans in 1994 - $35 billion)
10.00 % climbed to 20 % or $600 billion by 2006. The Result?
9.00 % A global financial CRISIS which burst the US Housing
9-11-2001 Bubble as new owners began to default on loans.
8.00 % NY Trade Center
Bombing Major Investments by financial institutions, foreign
7.00 % countries and corporations in historically conservative
low risk loans increased in volume from 54% in 2001
6.00 % to 75% in 2006. Subprime loan values climbed to
5.00 % $1.3 trillion in March 2007. Subprime ARM mortgages
(resetting at higher interest rates) were $400 billion in
4.00 % 2000 - $500 billion in 2008. While subprime ARM’s only
represented 6.8% of outstanding US home loans, they
3.00 %
were 43% of foreclosures that started during the 3rd
2.00 % quarter of 2007. The de-evaluation of once solid mort-
gage investments turned the global financial markets
1.00 % upside down (e.g., Bear Stearns). Given the increasing
.75 % price of oil and the increasing US national debt due to the
Iraq war and natural disasters (e.g., New Orleans), the
.50 % true negative impact of subprime lending on our economy
Nominal (not adjusted for inflation) yearly MEDIAN sale price (1/2 above—1/2 below) of existing US homes will only be measurable in the decades to come.
.25 %
Conclusion: For the first time since records were kept
0% in 1968, the median price of homes in 2007 decreased
from the year before. Given the tightening of credit due
Years ¨ 6 6 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1
8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 to the subprime catastrophe, whether it takes a year or
two to reverse this housing trend is anybody’s guess.
Period ¨ 60 1970-1979 1980-1989 1990-1999 2000-2009 2010-2019 But this chart demonstrates the historical significance of
home investments. We do know this appreciation trend
8 5 7 7 8 1 1 7 1 1 1 1 6 2 3 2 4 6 6 4 5 2 5 2 3 4 3 4 5 5 3 4 6 7 7 8 1 1 1
USA 0 0 2 3 4 1 2
will resume and that an investment in the American
“nominal” Dream is clearly more predictable then the stock market.
4 5 8 6 2 9 7 1 6 9 2 3 6 3 9 8 5 7 4 0 0 7 2 4 8 3 3 0 5 3 3 8
Annual ¨ 6 0 3 6 4 7 3 3 6 5 3 6 5 1 9 9 8 6 1 2 4 5 5 3 1 3 8 9 2 3 2 2 1 2 2 2 1 2 0 Lesson Learned
Growth % 3 1 0 2 7 7 9 -
We don’t get something for nothing.

Yearly Average % N/A 10 years — 142 % 10 years — 52 % 10 years — 45 % 8+ years — 47.8% ?? years — ?? % = 984.08 % appreciation in 39 years
Information believed to be accurate though not