We are pleased to provide you with our 2012 First Quarter Report for Western North Carolina. We believe it to be among the most thorough in the region. The analyzed region includes Buncombe, Haywood, Henderson, Madison, Polk, Rutherford, and Transylvania counties. Developing this analysis and facilitating its use for informed decision making is a responsibility of our company we enthusiastically embrace. The real estate markets are mending, albeit unevenly. In many price ranges and in some locations we’ve seen double digit increases in the number of homes sold when compared with Q1 2011.” — Neal Hanks Market fundamentals look increasingly healthy...

Record affordability and sustained job gains are boosting buyers confidence. This year we have experienced rising demand for both rental and owner-occupied properties. Investors and first-time buyers are fueling the first hints of a return to a balanced market in the lowest price ranges. As increased sales of higher priced homes continue, inventory levels are dropping rapidly from recorded highs. Prices are showing signs of stabilizing in many but not all areas. As housing prices touch bottom we are expecting pricing fluctuations as markets find a new equilibrium. As neighborhoods and specific price points improve others may continue to suffer from downward price...

pressure. Average days on market, a trailing indicator, will become increasingly misleading as properties which have languished on the market are finally sold. Detailed neighborhood analysis will become critical for informed decision making. 2012 Q1 homes sold per month dropped slightly when compared to 2011 Q4. However, based on pending sales in Q1 we expect an increase in annualized monthly sales. We’ve discussed the significance of shadow inventory on pricing and supply trends in the local housing markets, but little focus has been given to the other side of the same coin — “shadow demand”. Since the downturn began in 2006, the economic climate has slowed the formation...

of new households. “In the years before the financial crisis, a three million annual increase in the general population would have produced around one million new households. But with record young adults living with parents the last four years we’ve seen households formed at half the usual pace.” (US Census Bureau, Harvard JCHS; 2011) . New households are formed in both rental and owner-occupied properties. Many factors influence the percentage of each, but housing affordability and the job market are strong determinants. If housing affordability remains high and employment accelerates, it is believed that owner-occupied households will grow at an above-trend pace...

The National Association of Home Builders (NAHB) Housing Opportunity Index released in February indicated that nationally, 75.9 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the national median income of $64,200, the highest percentage recorded in the 20-year history of the index. Locally, the index is just a few points lower at 73.2%.