Transcript Slide 1

U.S. Real Estate Market Conditions:
The Good, the Bad, and the Ugly
Mid-Year Meetings
The Counselors of Real Estate
Seattle
May 2010
Stan Humphries, PhD
Chief Economist
[email protected]
206.470.7127
Current Market Performance
2
The Zillow Home Value Index: Comparison with Case-Shiller
•
Case-Shiller only includes
homes that have sold at
least twice (and excludes all
new construction)
•
Case-Shiller includes
foreclosure re-sales even
though these are
substantially different than
non-distressed sales.
•
ZHVI looks at all home
values, regardless of what
has sold or not.
•
ZHVI does not include
foreclosure re-sales.
Peak-to-Current Change
ZHVI: -23%
Case-Shiller: -28%
3
Home values in the United States
Source: Zillow.com
4
Foreclosures in the United States
Source: Zillow.com
5
Comparing the top metros
Zillow Home Value Index
Annual Appreciation
Region
March 2010
Sparkline is prior one year
trend; red bar is minimum
Tentative bottom?
Moment in the sun
Better, then flat
Better, then worse
United States
Denver Metro
Los Angeles Metro
Philadelphia Metro
San Diego Metro
San Francisco Metro
Atlanta Metro
Baltimore Metro
Boston Metro
New York Metro
Pittsburgh Metro
San Jose Metro
Washington Metro
Las Vegas Metro
Miami-Fort Lauderdale Metro
Phoenix Metro
Riverside Metro
Charlotte Metro
Chicago Metro
Detroit Metro
Minneapolis-St Paul Metro
Portland Metro
Seattle Metro
Tampa Metro
$183,700
$212,900
$415,300
$209,000
$364,800
$515,300
$142,600
$240,100
$315,100
$366,300
$105,400
$561,700
$322,500
$131,300
$160,700
$141,100
$188,900
$147,500
$191,100
$87,300
$184,500
$231,200
$291,900
$118,000
-3.8%
2.3%
3.3%
-0.3%
3.7%
3.4%
-6.4%
-5.0%
0.7%
-2.3%
-4.2%
-0.2%
-0.4%
-18.2%
-9.8%
-13.9%
-8.3%
-5.3%
-9.1%
-18.8%
-4.5%
-6.9%
-5.9%
-12.1%
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Change from
February
2010
Change
from Peak
-0.3%
0.1%
0.3%
0.0%
0.4%
0.3%
-1.5%
-0.9%
-0.4%
-0.3%
-0.6%
-0.1%
-0.1%
-0.5%
-0.8%
-1.2%
-0.1%
-0.7%
-1.0%
-2.4%
-0.6%
-1.1%
-0.8%
-1.3%
-23%
-9%
-31%
-11%
-32%
-27%
-22%
-19%
-21%
-20%
-6%
-24%
-26%
-57%
-48%
-50%
-53%
-11%
-29%
-46%
-25%
-22%
-23%
-45%
Percent of All Homes
Foreclosed In March
Sparkline is prior one year
trend; red bar is maximum
0.11%
0.17%
0.13%
0.02%
0.15%
0.14%
0.08%
0.01%
0.05%
0.11%
0.12%
0.33%
0.44%
0.31%
0.12%
0.12%
0.10%
0.08%
Source: Zillow.com
Markets which have stopped falling – will it last?
Source: Zillow.com
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Markets which touched a bottom and then weakened
Source: Zillow.com
8
Hard-hit markets where improvement has stalled
Source: Zillow.com
9
Markets which were improving (or getting less bad) but have weakened
Source: Zillow.com
10
A look at the magnitude of the housing recession
The magnitude and breadth
of current housing recession
is unprecedented in the
post-Depression era
Metro
Peak-to-Current
Fall in Home
Values
Last Time Home
Values Were At
Current Level
Merced, CA
Stockton, CA
Modesto, CA
Madera, CA
Vallejo, CA
Las Vegas, NV
El Centro, CA
Salinas, CA
Port St. Lucie, FL
Riverside, CA
Bakersfield, CA
Orlando, FL
Sarasota, FL
Naples, FL
Bend, OR
Phoenix, AZ
Reno, NV
Melbourne, FL
Vero Beach, FL
Fresno, CA
Miami-Fort Lauderdale, FL
Detroit, MI
-69.5%
-61.8%
-61.4%
-59.4%
-57.2%
-57.0%
-54.5%
-54.5%
-53.7%
-53.2%
-52.7%
-51.9%
-51.1%
-51.1%
-51.0%
-50.4%
-49.9%
-49.6%
-49.4%
-48.4%
-48.0%
-47.1%
2000-04
2000-10
2001-01
2002-02
2000-10
2000-10
2001-12
2000-09
2002-07
2002-12
2003-09
2002-04
2002-07
2003-02
2002-06
2002-05
2002-10
2003-04
2002-10
2003-05
2003-04
1996-02
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Source: Zillow.com
Phoenix foreclosures
Source: Zillow.com
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Las Vegas foreclosures
Source: Zillow.com
13
Stockton foreclosures
Source: Zillow.com
14
Continuing Challenges for Housing Market
15
America is flush with empty homes
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Current inventory level of for-sale homes is very high
•
We made some good
progress reducing
inventory levels last
fall with tax credits
•
Did not work as well
this year
•
April: Nearly twice
as many homes
added to market as
were sold in month
•
Inventory levels
back to July 2009
levels
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Pent-up supply?
7% of homeowners
(5.3 million) want
to sell if they see
signs of
improvement
Lots of “shadow inventory” in the wings
• 7.3 million mortgages either in foreclosure or
delinquent as of March 2010.
• Accounting for shadow inventory, there was 45% more
supply than indicated in official NAR inventory numbers
as of Sept 2009.
• This discrepancy is growing over time meaning that,
while official inventory has been falling, real inventory
is essentially unchanged.
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In Foreclosure
30-90 Days Delinquent
> 90 Days Delinquent
Pct
Mortgages
4.63% 2,407,600.00
4.47% 2,324,400.00
4.91% 2,553,200.00
Source: Mortgage Bankers Association; First
American/Corelogic
Negative equity among the largest metro markets
Source: Zillow.com
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Negative equity + unemployment = more foreclosures
•
•
•
•
Negative equity can only
be worked down by
sales/foreclosures, price
appreciation or paying
down mortgage balances
We don’t expect much
price appreciation nearterm
Unemployment forecasted
to remain above 8%
through end of 2012
Result: 3+ years of high
unemployment visited on
homeowners who can’t
easily sell or refinance
their mortgages
Metro
Percent Single-Family
Unemployment
Homes With Mortgages in
Rate
Negative Equity
(March 2010)
(March 2010)
USA
23.3%
Las Vegas Metro, NV
80.6%
Orlando Metro, FL
74.8%
Phoenix Metro, AZ
64.6%
Reno Metro, NV
64.4%
Modesto Metro, CA
60.7%
Merced Metro, CA
58.8%
Lakeland Metro, FL
58.5%
Fort Meyers Metro, FL
58.2%
Stockton Metro, CA
57.7%
Port St. Lucie Metro, FL
56.2%
El Centro Metro, CA
54.9%
Vallejo Metro, CA
54.7%
Tampa Metro, FL
53.1%
Riverside Metro, CA
51.2%
Jacksonville Metro, FL
49.1%
Sarasota Metro, FL
47.8%
Madera Metro, CA
46.4%
Melbourne Metro, FL
45.6%
Bakersfield Metro, CA
45.6%
Vero Beach Metro, FL
45.2%
Miami-Fort Lauderdale Metro, FL
44.3%
10.2%
13.8%
12.1%
8.9%
13.2%
19.2%
22.1%
13.0%
13.5%
18.4%
14.0%
27.0%
13.0%
12.7%
15.0%
11.9%
12.7%
17.5%
12.2%
18.3%
13.9%
11.5%
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When will mortgage rates rise?
•
Mortgage rates
are currently
helping the
market
•
We’d been
expecting
mortgage rates to
be in the upper
5% range by end
of year.
•
Greece, Portugal,
North Korea and
complete lack of
inflation pressure
have helped keep
interest rates low.
Source: Zillow.com; see real-time rates and historical charts at
http://www.zillow.com/Mortgage_Rates/
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Mortgages continue to reset and recast
•
Alt-A resets and
Option ARM recasts
have been a concern
•
Alt-A: Less
worrisome now with
low mortgage rate
environment
•
Option ARM: Default
rates have already
been high in this
product so fewer
that will have to
recast
Source: Deutsche Bank Global Markets Research
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Conclusions
• Home values will continue to fall until Q3 2010.
• A likely total peak-to-trough decline of 26-28%.
• Further declines driven by foreclosures (themselves driven
by negative equity and unemployment), an already high
supply of for-sale homes, high overall vacancy rates, pentup supply, and weaker demand after the homebuyer tax
credits lapse due to demand-shifting.
• Very anemic appreciation after bottom is reached; may not
appreciate at all in real terms for next 3-5 years.
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