2010 Second QUARTER COVERING FAIRFIELD COUNTY, LITCHFIELD COUNTY AND THE CONNECTICUT SHORELINE. wpsir.com

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1 CONNECTICUT 2 Second QUARTER COVERING FAIRFIELD COUNTY, LITCHFIELD COUNTY AND THE CONNECTICUT SHORELINE wpsir.com

2 introduction REAL ESTATE MARKET WATCH Market performance for the first half of 2 was excellent relative to 29. All market indicators point to a slowly strengthening housing market. Both single family homes and condominiums are demonstrating significant improvement in unit sales, driven by government incentives, pent-up demand and low prices. Pending sales spiked in March and April as buyers rushed to take advantage of the government housing programs prior to their expiration on April 3th. Subsequent to this period of heightened activity, pending sales volume in a number of markets returned to more normalized levels, yet continues to be significantly higher than any time in the past eighteen months. showed particular market vitality during the spring selling season relative to prior periods with strong activity in most price categories and six straight months of pending sales increases. Even luxury, which has been particularly weak for the past two years, demonstrated improved performance with over thirty multi-million dollar homes pended or sold since the first of the year. William Pitt Sotheby s International Realty has been very active representing buyers and sellers in this segment. We believe the increased transaction pace of these exceptional properties bodes well for the luxury segment as we move forward. Single family home prices appear to have stabilized, in most markets, at new lower levels. While the stabilization is welcome, prices are soft when compared to prior years. On an overall basis, prices remain 2 to 3 lower than during the market peak of 25. Increased price stability is a welcome trend for both buyers and sellers as it gives all parties in the marketplace a better sense of appropriate valuations. As for condominiums, despite the pick-up in sales activity, prices are showing continued weakness as supply outpaces demand. We are cautiously optimistic about continued market improvement in the second half of the year, but recognize that housing is clearly impacted by the broader economic recovery which is still shaky. Potential homebuyers remain skittish after the financial crisis of Therefore, any hint of an economic slowdown has the potential to negatively impact the housing market recovery. We are encouraged by the current market activity, but recognize that until more buyers enter the market with confidence our local housing recovery will remain tentative. I hope you find our analysis of the second quarter results of 2 helpful as you evaluate your personal real estate holdings. As always, if we can be of assistance any time or place, please contacts us. We are here to serve you. With best regards, Paul E. Breunich President and Chief Executive Officer William Pitt Litchfield Hills Julia B. Fee Sotheby s International Realty pbreunich@wpsir.com

3 HOME SALES CONTINUE TO IMPROVE Following a very strong first quarter, pending home sales in continued their upward march throughout the second quarter of 2, posting solid month over month gains. Pending sales volume reached its highest point in over two years in June 2, up 3 from the nadir eighteen months ago in January 29. In both the Shoreline and areas, where the rush to take advantage of the government home buyer tax incentives strongly influenced buyers to step forward through April 3th, pending sales in May and June declined versus their March and April highs. It is important to note that despite this drop-off, pending and closed sales levels remain significantly higher than 29 levels, and slightly below 28 levels. Inventory levels in all markets remain about above the past two year average in response to the current pace of sales. After some mid-winter declines, inventory levels rose somewhat. This seasonal adjustment is to be expected, as we move into the traditionally strong spring and summer selling periods, where potential sellers frequently list their homes for sale. Some of the inventory increase is caused by homeowners who perceive an improvement in market conditions. Other sellers are listing because they no longer need, or can afford, the property. The elevated inventory levels continue to give buyers the upper hand in most negotiations. Consistent with the less-than-straight path of our housing recovery, the Consumer Confidence Index, a key measure of people s willingness to spend, had peaks and valleys this spring. The Consumer Confidence Index, which had been on the rise for three consecutive months, declined by ten points in June, indicating some ongoing worry about the state of the economy. 8 7 Consumer Confidence Index # Units # Units Pending Home Sales January - June 2 Jan - Feb Mar Apr May Jun Pending Home Sales The Shoreline January - June 2 Jan - Feb Mar Apr May Jun Pending Home Sales January - June 2 6 # Units Jun Jul Aug Sept Oct Nov Dec Jan- Feb Mar Apr May Jun Jan - Feb Mar Apr May Jun

4 Closed Sales 28-2 TOWN 2 nd QTR 28 Q2 2 VS Q2 28 Bethel Danbury Darien Easton Fairfield Greenwich Monroe New Canaan New Fairfield Newtown Norwalk Redding Ridgefield Rowayton Shelton Stamford Stratford Trumbull Wilton Weston Westport % 8-67% % 53% 9 49% 49% 88% % 5 57% 58% 2-29% 9 49% 3 3% % 58% 4 28% 3 The index now stands at 52.9 (985=), down from 62.7 in May. While the June decline in consumer confidence was unwelcome, consumer confidence levels continue to grow on an annualized basis. Closed sales, the result of a strong March and April selling season, continued to strengthen in the second quarter of 2. In fact, most markets had closed sales levels for the second quarter 2 that were the highest in two years. In concert with the higher sales levels came significantly improved dollar volume figures, the result of a number of high-end sales during the spring selling season. In, closed unit sales increased on average 48% versus 29, while dollar volume increased 5. Ridgefield and Rowayton demonstrated the strongest market performance improving 2 and 7, respectively. Despite the clear improvement in sales activity, unit sales levels remain about 2 below second quarter 27 levels. The Shoreline communities continued to post healthy overall sales gains of approximately 3 versus the previous year, while dollar volume improved 43%. Stonington and Madison were the strongest performers achieving 7 and 53% improvement in sales, respectively. While closed sales were excellent versus both 28 and 29, they remain below 27 levels in all Shoreline markets except Lyme and Old Lyme. After a lackluster first quarter, markets really picked up steam in the second quarter of 2, posting overall unit sales gains of 3 and dollar volume gains of 6! In some markets, unit sales improved to the magnitude of 2 to 3, as buyers took advantage of the beautiful spring weather and advantageous market conditions to purchase homes. While many of these markets have low sales volume, which magnifies market movements on a percentage basis, it is impressive to see that several of the traditionally strong markets like Sharon, Warren and Roxbury had percentage sales improvements in excess of 25. Additionally, the uniquely positive dollar volume improvement reflects several very highend sales which are crucial to this area returning to a sustained positive market direction.

5 Closed Sales 28-2 The Shoreline TOWN 2 nd QTR 28 Q2 2 VS Q2 29 Q2 2 VS Q2 28 The Shoreline Branford Chester Clinton Deep River East Lyme Essex, Ivoryton, Centerbrook Groton Guilford Killingworth Lyme, Old Lyme Madison New London Old Saybrook Stonington Waterford Westbrook % 3% -9% - 43% 38% % 33% 48% % % 43% - 93% 7% -7% -7% 38% 49% 29% - Closed Sales 28-2 TOWN 2 nd QTR 28 Q2 2 VS Q2 28 Bantam Barkhamsted Bethlehem Bridgewater Canaan Colebrook Cornwall, W. Cornwall, Cornwall Bridge Falls Village Goshen Harwinton Kent, South Kent Lakeville, Salisbury Litchfield, Milton Morris New Milford Norfolk Roxbury Sharon Warren Washington, Washington Depot, New Preston Woodbury % % -63% % % -7% % % -7% % 7% % % 7% 2 8

6 HOME PRICES APPEAR TO HAVE REACHED BOTTOM IN THE MAJORITY OF MARKETS While the severe dislocations we have experienced in the past two years requires more than two quarters of data to firmly establish pricing trends, we do believe the January through June 2 data suggests we have reached bottom for most property types. Results for the second quarter of 2 improved slightly versus the second quarter of 29, with median prices up 8%, The Shoreline up 8%, and up. The markets with stable to improving median prices far outweigh those with declines at this point in time. In addition, as we analyze the sales by price point it becomes clear that in all but the most thinly traded markets, prices are holding their own as sales volume has improved substantially. As in all broad based markets, there is a mixed bag of results, with towns such as Darien, Sharon and New London experiencing double digit improvement, while other communities continue to decline versus 29. With few exceptions, prices in all markets remain to 3 below their peak despite an improving sales picture. Price Change 28-2 TOWN 2 nd QTR 28 YOY Change YOY Change Q2 2 VS Q2 28 $46, $425, $55, 8% - Bethel 282, 294, 35, - -9% Danbury 278, 294, 33, - - Darien,395,,32,5,422,5 3 - Easton 67, 59, 85, -7% Fairfield 52, 62, 69, - - Greenwich,775,,45, 2,2,5 2 - Monroe 36, 39, 54, -8% -33% New Canaan,366,7,222,5,895, -28% New Fairfield 38, 33, 444, - Newtown 42, 475, 496, - - Norwalk 455, 43, 525, -3% Redding 649, 535, 7,25 2-9% Ridgefield 675, 662, 7, - Rowayton,275, 75,,562,5 8-8% Shelton 32, 35, 38, -9% - Stamford 625, 555, 62, 3% Stratford 25, 242,63 274, 3% -9% Trumbull 39, 392,5 45, - -3% Wilton 765, 76,,7,75-2 Weston 835, 9,,2, -7% -3 Westport,, 93,,295, 8% -

7 The biggest impact on the future direction of prices will be sales activity. At the current level of sales activity, we would expect prices to remain stable. Should we experience strong positive or negative changes in demand, prices will respond accordingly. Each individual town also has certain price segments that are very active, generally the lower price points. Prices are the most stable in these markets, albeit at low levels. As we move up the price ladder and activity thins, there is just not enough reliable data to accurately determine whether we are at bottom or not. Sellers who have adjusted their prices to reflect current market conditions should expect to achieve close to their asking price. However, in markets that are thinly traded where sellers have not adjusted expectations, we would expect further downward pressure. In all price categories, buyers are very conservative, assessing their options and negotiating aggressively. No pricing discussion would be complete without mentioning that short sales and foreclosure continue to have a negative impact on home prices. In many markets, individual sellers are competing with banks for the limited buyers. With banks utilizing a price to sell strategy, homeowners are being forced to meet or exceed these low levels in order to sell. {...prices are holding their own as sales volume has improved substantially. { Price Change 28-2 The Shoreline TOWN 2 nd QTR 28 YOY Change YOY Change Q2 2 VS Q2 28 The Shoreline $326, $32, $375, -3% Branford 28,25 337,5 358, -7% -2 Chester 45,5 35, 333, 29% 2 Clinton 267,5 297, 33, - -9% Deep River 34,5 273, 36, - Essex, Ivoryton, Centerbrook 348,75 383,3 445, -9% -2 Groton 55, 72,5 22, - -27% Guilford 442, 435, 427, Killingworth 38, 375, 464,55-8% East Lyme 357,5 462, 495, -23% -28% Lyme, Old Lyme 39, 425, 47,5-8% -7% Madison 47, 42, 487,5-3% -7% New London 72,5 49, 8, - Old Saybrook 37,5 38, 375, -9% -8% Stonington 35, 388,95 27,25-2 3% Waterford 253,75 23,5 28, - Westbrook 32,5 37, 384,5 - -9%

8 Price Change 28-2 TOWN 2 nd QTR 28 YOY Change YOY Change Q2 2 VS Q2 28 $237,9 $234,25 $27, - Bantam 23, No Closed Sales No Closed Sales Barkhamsted 259, 249, 249,95 Bethlehem 323, 29, 38, Bridgewater 265, No closed sales No closed sales Canaan 225, 62,5 No closed sales 38% Colebrook 26,5 332, 25, -38% Cornwall, W. Cornwall, Cornwall Bridge 55, 32, 65, 6-2 Falls Village 4,25 92, 587,5-3 Goshen 257,25 492,5 34,5-48% -2 Harwinton 223, 2, 9, 7% Kent, South Kent 49, 37, 422, 3 Lakeville, Salisbury 4, 57, 467,5-3 - Litchfield, Milton 243, 26, 359, -7% -3 Morris 4,5 257, 9, 5-5 New Milford 36,7 3, 332, - -8% Norfolk,565, 69,25 575, 82 7 Roxbury 876, 45,25 475, 9 8 Sharon 542,5 98,25 52, 7 Warren 355, 34,45 64, 7% -4 Washington, Washington Depot, New Preston 3, 465, 356,75-33% -3% Woodbury 362,5 376, 48, Of all segments of the real estate market, new construction has been hardest hit during this downturn. With most new construction concentrated in the higher price ranges, it has mirrored the luxury segment performance, though at even more depressed levels. While buyers value new construction, in this market they have often been unwilling or unable to pay the premium associated with new construction offerings. As a result, these homes have languished on the market or have been rented. Happily, we are beginning to see some early signs of improvement in new construction as the housing market recovers. NEW CONSTRUCTION BEGINS TO IMPROVE There are now increasing numbers of able buyers in the market, and builders are starting to adjust their pricing expectations to be more in sync with marketplace realities. Because of the small sales levels for new construction, we cannot accurately gauge price changes, but can say with confidence there remains significant downward pricing pressure on new construction, as inventory levels remain elevated and demand is weak. Because a significant number of newly constructed properties have been rented over the past two years, as market conditions improve we expect inventory to increase as builders bring these homes back on the market.

9 SALES CONTINUE TO STRENGTHEN IN THE ENTRY AND MID-PRICE RANGE In the second quarter of 2, the entry to mid-price segments continued to drive market activity. Of particular note is that the entry segment in both and Litchfield County, while clearly still dominant, is representing a decreasing percentage of total sales, while the next price tier is slowly gaining in importance. This is a very positive development for the marketplace that we anticipate to continue as housing recovers. In homes priced up to $,5, account continue to account for the lion s share of the market, fully 9 of single family home sales. Within this price band there has been a shift in the relative importance of homes priced up to $799, versus the next higher pricing tier. In the second quarter of 2 homes at the entry pricing tier, values up to $799,, declined in terms of percentage of the market to represent 7 percent of all unit sales versus 77% in the second quarter of 29. The next pricing tier higher, homes priced between $8, and $,499,, gained in relative importance to account for 9% of sales. In homes priced below $,, account for 9 of all sales at this time, down from 98% last quarter. experienced much of the same upwards sales migration as experienced. In the Shoreline homes where we have not seen any real shift in price point activity, homes priced up to $75, account for 93% of activity. Luxury continues to be soft, accounting for to of total sales. Despite this sobering figure, luxury achieved some of the strongest sales growth of the quarter and we have had some notable sales of very high-end homes this spring. The profile of homes successfully transacted continues to be one-of-a-kind, special properties that are rarely available. There was some outstanding news for home buyers and sellers of high cost homes. The jumbo loan market is much improved, with more banks now offering big loans as well as cutting rates even for fixed thirty-year products. We anticipate the stronger jumbo loan market will help drive activity in the higher price points going forward. In the active market segments, prices are stable to slightly improved, as there is greater equilibrium between buyer and seller. In the entry segments, up to a quarter of all homes available for sale have gone to contract. We have seen a significant improvement in market conditions for homes in the entry to mid-price range. In addition, properties in this price category are selling almost 3 more quickly than their counterparts in higher price categories, and good houses in desirable locations are commonly receiving multiple offers in this time frame. PRICE TIER - $799,999 $8, -,499,999 $,5, - 2,999,999 $3,, - 4,999,999 $5,,+ PRICE TIER - $399,999 $4, - 749,999 $75, -,499,999 $,5,+ PRICE TIER $ - $499,999 $5, - 999,999 $,, - 2,499,999 $2,5,+ Percent of Sales 7 9% 7% > Percent of Sales 6 28% Percent of Sales 87% 8% Closed Sales By Price Point - Percent of Sales Sales 77% Closed Sales Change % Median Price Change - 8% Closed Sales By Price Point - The Shoreline Percent of Sales Sales 6 29% Closed Sales By Price Point - Percent of Sales Sales 9 7% Closed Sales Change 3 29% 9% 5 Closed Sales Change Median Price Change Q2 2 VS Q2 TR 29 - Median Price Change -9% Percent Under Contract 2 2 Percent Under Contract 2 7% Percent Under Contract 3% Percent Under Percent Under Contract Contract QTR 29 9% 3% 9% 3% Days on Market Percent Under Contract Days Days on on Contract Market Market QTR % 22 4 Percent Under Percent Under Contract Days Days on on Contract 2 Market QTR QTR 29 Market 29 7%

10 THE CONDOMINIUM MARKET SLOWLY GAINS TRACTION As the condominium market gradually recovers from an extended period of weakness, sales and other market indicators continued to improve throughout the second quarter of 2. Like single family homes, condominium sales responded positively to the government tax incentives with very strong March and April pending sales figures. As a result, closed sales for June 2 in Litchfield County, The Shoreline and were the highest in over two years. Versus the second quarter 29, closed sales in the second quarter of 2 rose between 3 and 5. Pending sales, the best forward indicator of market health, are up 6 from one year ago in and have attained their highest levels in three years. In the Shoreline communities, after a fourth quarter of 29 dip, pending sales improved substantially, yet remain below last year s levels. In, pending sales have improved for three straight quarters and are higher than the same period last year. Despite the pick-up, it should be noted that pending sales are still relatively weak in - lower than 27. { Condominiums Face the Same Challenges as Single Family Homes { # Units # Units Condo and Co-Op Pending Sales 2nd Quarter 29-2nd Quarter 2 Q2 29 Q2 29 Q3 29 Q4 29 Q 2 Q2 2 Condo and Co-Op Pending Sales Shoreline 2nd Quarter 29-2nd Quarter 2 Q3 29 Q4 29 Q 2 Q2 2 The factors, which we have reported for some time now as holding back the condominium market, continue to weigh down sales activity. Particularly for the more expensive condominiums, the fact that the traditional buyer pool, people down-sizing, cannot sell their homes remains a significant impediment. There is increased optimism; agents report their condominium listings being shown more frequently than in prior months, but many buyers have to sell before they buy. # Units Condo and Co-Op Pending Sales 2nd Quarter 29-2nd Quarter 2 Q2 29 Q3 29 Q4 29 Q 2 Q2 2

11 Inventory levels in all markets are slowly declining, as properties are sold and there is an unspoken moratorium on new construction. Months Supply of Inventory (MSI), a useful expression of how long it would take to sell the current market inventory at the present rate of sales, has improved substantially. If we can stay the course, now has nine months of condominium inventory, The Shoreline twelve months, and twenty seven months. Despite the positive reduction in inventory levels, the market remains in disequilibrium because of relatively weak demand. Prices continue to experience downward pressure, which we expect to continue for some time until there is greater market equilibrium. Condominium Closed Sales Closed Sales Closed Sales Closed Sales % Change Median Price % Change Inventory Level Change Total % $275,625 $255,9 8% Condominium Closed Sales The Shoreline Closed Sales Closed Sales Closed Sales % Change Median Price % Change Inventory Level Change Total $64,9 $66, - -8% Condominium Closed Sales Closed Sales Closed Sales Closed Sales % Change Median Price % Change Inventory Level Change Total % $26,25 $32,5 - -9%

12 where we are headed... Listed exclusively by William Pitt Sotheby s International Realty Norwalk Brokerage With the strong first and second quarter 2 sales results, we feel confident that the Connecticut real estate market will continue to slowly strengthen as we move forward this year. We recognize that, like the overall economy, the housing recovery will not be a straight line and the next 24 months will be rocky. Our optimism is tempered with caution for several reasons. As we go to press, mortgage rates have, for the third week in a row, hit new generational 3-year lows. While borrowing costs have tumbled, this has not stimulated demand to any noticeable degree. In our current economic environment, low interest rates are not enough to spur home purchases independent of other factors, such as a confident consumer and a healthy economy that fuels job growth and household formation. Despite some significant headwinds, we are very encouraged that transactions are now moving steadily into the higher price categories, supporting our view that the housing recovery will be a bottom up recovery. Improving sales in the higher price categories are a function of both greater availability of jumbo mortgage financing and a sense among affluent buyers that now is a smart time to buy. Prices remain low, and despite some hints of improvement, we do not have sustained appreciation. We believe that the backlog of foreclosed and short-sale properties, coupled with the reduced buyer pool, will keep a lid on prices for the foreseeable future. At William Pitt Sotheby s International Realty, our view is that this market represents an unprecedented opportunity for both buyers and sellers. Inventory is terrific and in all price points there are wonderful homes available for sale in highly desirable areas. No matter what the motivation to move, we believe home buyers and sellers alike can take advantage of these unique market conditions. Information Sources: Case-Schiller reports, Various MLS services, National Association of Realtors, Connecticut Economic Digest, local mortgage brokers, Realty Trac, CMLS, CT-MLS,NCMLS, DARMLS. While information is believed true, no guaranty is made for accuracy. Cover art: *Summer in Devon used with permission.