Above is another data point pointing to further weakness in residential housing. The run-up in years past surrounding housing prices is a direct result from the manipulation in interest rates. Homes are sold today only on payments - not value! If the cost of the payment goes up, then you delay your purchase or the price has to come down. It is a sad relationship we are faced with. In many cities, home prices are 20% to 30% above their long-term trends. All assets eventually revert to average. The reversion process from above trend to below trend is quite painful. The demographics is the US and Europe do not help and in fact will most likely exacerbate the price adjustment. Just remember, when price begins to reflect true reality, it never adjusts like the landing of a 747 jet. Adjustments are always swift and jarring. Real Estate is an illiquid asset which is subject to major gaps in price.

Sincerely,

P. Franklin, Jr., CEO

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