September was another good reporting period. However, the final quarter of the year, October-December,
which will give us the direction for 2006. This is because most of our negative trends originated in
September, i.e. two major hurricanes Katrina & Rita, escalating fuel & energy costs, higher interest rates, and
declining consumer confidence.

However, our market is so strong that we may only slow to a “flat” market rather than into a decline.
September was very strong with detached single family closing 5,603 units or a double-digit 12.9% increase
over the same year ago period. Condos and townhomes closed 916 units or a strong double-digit increase of
24.3% over September 2004.

For the first three-quarters of 2005, single family detached is up over 10% from the same year ago period,
while condos and townhomes are up 23%. As you can see, our growth has been great, but is it strong enough
to offset the September negatives?

There are a few indicators that can be looked at to see if a slow down in the market has started in September.
The last downturn we had was in September-October 2001 or after “9/11”. During this same period we
experienced a large increase in withdrawn listings or the consumer losing confidence and deciding not to
move.

If you review the withdrawn listings chart you can see the large spread in 2001 versus 2000 from the large
increase in withdrawn listings. What sticks out even more is the large increase in September and even
August (remember energy prices and interest rates were going up before the hurricanes) over 2004.
Going through the numbers this was the only negative trend I could see, as everything else was positive.
Expired listings declined again in September for all single-family. There were 3,654 expired listings for
detached single family versus 3,919 a year ago, and condos and townhomes has 853 expired listings versus
908 for September 2004. This was the ninth consecutive decline for all single family expired listings.
The average sale price for detached single family in September was $257,314. This is down $3M from
August, but still up a significant 7.7% over the same year ago period. The combination of high energy and
housing prices does not bode well for interest rates. We have experienced six consecutive weeks of higher
interest rates (September & the first two weeks of October) and if energy prices do not drop back down we
will probably have more increases.

Days-on-market for all single family was 75.6 in September, compared to 77.1 a year ago.
Our next report will be one of the most important periods to report on. If we are up in the last quarter, then
2006 should be better than expected.

Thank you,
 

Steve Palm
Smart Numbers

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