2. CCSR-HRSR 09-04-2012 SPEC JOINT

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FOR-SALE HOUSING ANALYSIS Land/Lots • Interviews all indicated there is an excess supply of lots in Elk River. Most stated there has been little activity in the land market. • Lots that are selling today are typically priced from $15,000 to $25,000. These same lots were priced from $80,000 to $100,000 during the real estate boom. Lots priced around $40,000 were selling for over $125,000 back in 2005. Generally, lots that have been selling are about 70% lower than during the peak. • Bank-owned lots that have been heavily discounted have sold well. Many builders have been buying up increments of three to five lots from banks. • National builders have been able to take advantage of the discounted land more so than smaller, local builders. The majority of the lots have been sold in surrounding communities such as Otsego, Rogers, and other 1-94 communities. Smaller builders continue to face stringent financing guidelines from lenders. • The smaller builders cannot compete against the national builders on lot prices. Many local builders still have lots purchased at the peak of the market and are still trying to recoup some of the land costs. • Because of discounted land pricing, buyers are obtaining more house for their dollar than during the boom. Many lots account for only about 10% of the home's final purchase price. New Construction • There are no national builders left in Elk River; all left after the housing market crashed. All the builders in Elk River today are smaller, local contractors who are build-to-suit. Most of these builders avoid carrying many lots and have minimal lot inventory. • The national builders (such as Centex, Ryland, Lennar, and DR Horton) have been most active in the 1-94 and HWY 10 Twin Cities northwest corridor. Because national builders are able to offer concessions, financing, and seller paid closing costs, many smaller builders find it difficult to compete. • Many of the national builders have been ramping up in communities such as Otsego, Rogers, and St. Michael. Many are starting to build spec homes again as the market improves. • Interviewees commented that Elk River is not seeing new construction activity like other neighboring communities. • Even after the downturn, most purchasers of new construction tend to be move-up buyers versus first-time buyers. • Many local builders shifted their business model due the economic downturn. For those builders who weathered the housing downturn, most focused on remodeling jobs versus new construction. MAXFIELD RESEARCH INC. 74