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BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
BFM_A Bearish View of U.S. Real Estate
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BFM_A Bearish View of U.S. Real Estate

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  • 1. U.S. Real Estate:Here is the Bearish View !
  • 2. Executive Summary• Lower household formation since 2007• Lower homeownership of the newly formed households• Homeownership rates may continue to decline• There may be an excess supply of more than 2 million unit for the next 5 years• The number of vacant homes waiting to be sold from the pre-2004 average has doubled• Distressed-driven home price declines• 7 million distressed sales are projected to take place in the next five years (on top of the 4.8 million borrowers who have already been evicted since 2008)• The market is unable to absorb the supply of distressed homes• 5 million borrowers are already in some state of delinquency (vs. 1 million before 2006)• Tight credit and constrained borrowers• Risk-averse buyers are concerned about: - Job market weakness - Further declined in home prices © 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 1
  • 3. Consumers Think Prices Could Go Down Further Sources : National Association of Realtors, FactSet, J.P. Morgan Asset Management, and Census Bureau© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 2
  • 4. Household Formation is Running Below Trend by Almost 3 Million Source: Credit Suisse© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 3
  • 5. Homeownership Rate is Still High Sources : FactSet, US Census Bureau, as of September 30,2011.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 4
  • 6. Total Homes for Sale is Still High Sources : Census, MBA, BLS, and J.P. Morgan Asset Management.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 5
  • 7. Month’s Supply of Homes is Still High Sources: FactSet, NAR, and US Census Bureau, as of November 30,2011.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 6
  • 8. US Homes/ Households Ratio is Still High Sources : Haver Analytics© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 7
  • 9. Housing Inventories are Lower But Still High Sources : Census, National Association of Realtors, and J.P. Morgan Asset Management.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 8
  • 10. Housing Inventory/Sales Ratios are Still High© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 9
  • 11. Number of Vacant Homes for Sales is Twice the Historical Norm Source: Credit Suisse, and Census Bureau.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 10
  • 12. Total Vacant Housing Units is Still High Source: Bureau of the Census.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 11
  • 13. Distressed Inventory is Very High Source: Credit Suisse, NAR.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 12
  • 14. Excess Supply – 7 Million Homes Need to be Absorbed by Investors Numbers are in millions. First-time home buyers accounts for about 23% of home sales, according to CoreLogic. Source: Credit Suisse, NAR, MIRA, and Census Bureau© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 13
  • 15. Percent of Mortgage +90 days Delinquent is Still High Sources : MBA, and J.P. Morgan Asset Management© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 14
  • 16. Delinquency Rate is Still High© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 15
  • 17. Few Homeowners Able to Refinance Sources : Equitax, Moody’s Analytics.© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 16
  • 18. Almost 1 in 10 Households in Foreclosure Or Arrears Source: Mortgage Bankers Associations, and Merril Lynch© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 17
  • 19. House Prices Declines by Year and City© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 18
  • 20. Chicago House Prices Went Down More than Average Sources : FHFA, 1996 Q1=100, NSA© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 19
  • 21. California Home Prices Went Down a Lot (As of 01/2009 so prices went down much more since then…maybe around 2000-2001 prices)© 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 20
  • 22. About Bourbon Financial Management, LLCBourbon Financial Management was formed to provide you with effective and comprehensive solutions for managing yourglobal wealth. Our disciplined and rigorous approach comes from our collective knowledge in serving large institutional clientsover many years.Our core investment belief is that asset allocation (equities, fixed income, cash, real estate…) is the single most importantdeterminant of success in any investment plan. The dominant amount of risk and return comes not from your choice ofindividual investments but from your asset class mix. Bourbon Financial Management focuses our resources on riskmanagement and asset allocation.PLEASE SHARE OUR NEWSLETTER: Our newsletter readership is not limited to our clients. Please tell those you feel maybe interested that they can subscribe to their own free copy of the newsletter at info@bourbonfm.com. Thank you. BOURBON FINANCIAL MANAGEMENT Excellence ~ Experience ~ Ethics 616 W. Fulton St., Suite 411, Chicago, IL 60661 (+1) 312-909-6539 ~ www.bourbonfm.com Member of the Financial of Planning Association and Academic Affiliate of the National Association Personal Financial Advisors. © 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 21
  • 23. Disclosures• This material was prepared by BFM, Copyright by Bourbon Financial Management, LLC. All rights reserved. BFM is a trademark of Bourbon Financial Management, LLC. No part of this publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system, transferred in any form or any means-electronic, mechanical, magnetic, manual, or otherwise-or disclose to third parties without the express written permission of Bourbon Financial Management, LLC, 616 W. Fulton #411, Chicago IL 60661. The information contained in this presentation is not written or intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal counsel. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. BFM assumes no responsibility for statements made in this publication including, but not limited to, typographical errors or omissions, or statements regarding legal, tax, securities, and financial matters. Qualified legal, tax, securities, and financial advisors should always be consulted before acting on any information concerning these fields.• All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The views expressed in this presentation are not intended to be a forecast of future events, a guarantee of future results or investment advice. The information contained herein has been prepared from sources believed to be reliable, but it is not guaranteed by Bourbon Financial Management, LLC as to its accuracy or completeness. Forecasts and predictions are inherently limited and should not be construed as a solicitation or recommendation or be used as the sole basis for any investment decision. All investments are subject to risk including the loss of principal.• The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. We believe the information obtained from third-party sources to be reliable, but neither Bourbon Financial Management, LLC nor its affiliates guarantee its accuracy, timeliness, or completeness. The views, opinions and estimates herein are as of the date of the material and are subject to change without notice at any time in reaction to shifting market conditions. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Examples provided are for illustrative purposes only and not intended to be reflective of results you should expect to attain. © 2012 Bourbon Financial Management, LLC ~ Excellence-Experience-Ethics ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 22

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