U.S. Housing Trends in 2014: The Good, Bad and Ugly

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This presentation was given by RealtyTrac Vice President Daren Blomquist at the annual meeting of the Mississippi Home Corporation, and covers a wide array of housing topics, from home sales and prices, foreclosure trends, nonperforming loan sales, home equity, institutional investors and other cash buyers, vacant and abandoned foreclosures and boomerang buyers.

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U.S. Housing Trends in 2014: The Good, Bad and Ugly

  1. 1. U.S. HOUSING TRENDS THE GOOD, THE BAD, THE UGLY © 2013 Renwood RealtyTrac LLC WELCOME
  2. 2. WHAT WE’LL COVER TODAY • A brief bit on RealtyTrac • Home sales and prices overview • Cutting back on the f-word • Ghost inventory of NPLs • Double-edged home equity • Institutional investors & cash buyers • Monsters of housing market • Boomerang buyers © 2013 Renwood RealtyTrac LLC
  3. 3. REALTYTRAC DATA PRIMER Economic Neighborhood & Local MLS Sales & Loan Valuation & Prop Details Foreclosure © 2013 Renwood RealtyTrac LLC
  4. 4. REALTYTRAC DATA PRIMER County-Level Public Documents • Pre-foreclosure, foreclosure auction and REO • Sales & Loan • Valuation and property characteristics MLS • Listing status, price and other info • Property description and more characteristics Publicly available datasets • Neighborhood features, amenities, red flags • Macro housing and economic metrics © 2013 Renwood RealtyTrac LLC
  5. 5. AN OVERVIEW OF HOME SALES AND PRICE TRENDS © 2013 Renwood RealtyTrac LLC
  6. 6. U.S. HOME SALES © 2013 Renwood RealtyTrac LLC
  7. 7. BUCKING THE NATIONAL TREND © 2013 Renwood RealtyTrac LLC
  8. 8. U.S. HOME PRICES
  9. 9. AN EXTREME MARKET © 2013 Renwood RealtyTrac LLC
  10. 10. AN EXTREME MARKET © 2013 Renwood RealtyTrac LLC
  11. 11. MARKETS WITH STRONGEST AND WEAKEST HOME PRICE GAINS © 2013 Renwood RealtyTrac LLC Fastest appreciation tends to be in markets where foreclosures were cleared fastest.
  12. 12. STUBBORNLY HIGH DISTRESSED SALES © 2013 Renwood RealtyTrac LLC Bank-owned sales and foreclosure auction sales rose even as short sales declined in 2013.
  13. 13. STUBBORNLY HIGH DISTRESSED SALES © 2013 Renwood RealtyTrac LLC Total short sales and distressed sales accounted for 18percent of all U.S. residential sales in Jan 2014
  14. 14. CUTTING BACK ON OUR USE OF THE F-WORD © 2013 Renwood RealtyTrac LLC
  15. 15. U.S. FORECLOSURE ACTIVITY OVERVIEW © 2013 Renwood RealtyTrac LLC Total U.S. properties with foreclosure filings in 2013 at lowest level since 2007
  16. 16. U.S. FORECLOSURE ACTIVITY OVERVIEW © 2013 Renwood RealtyTrac LLC U.S. foreclosure starts at lowest level since 2006
  17. 17. THE (JUDICIAL) FORECLOSURE AUCTION PROBLEM © 2013 Renwood RealtyTrac LLC Increased 13 percent in 2013 after increasing 14 percent in 2012.
  18. 18. STATES WITH INCREASING F-BOMBS © 2013 Renwood RealtyTrac LLC Most are judicial foreclosure states or non-judicial win legislative intervention.
  19. 19. PIG MOVING THROUGH THE PYTHON © 2013 Renwood RealtyTrac LLC Foreclosure starts jumped to a 43-month high in January
  20. 20. PIG MOVING THROUGH THE PYTHON © 2013 Renwood RealtyTrac LLC Scheduled foreclosure auctions rose to 39-month high in January
  21. 21. PIG MOVING THROUGH PYTHON © 2013 Renwood RealtyTrac LLC Bank repossessions jumped to 39-month high in January
  22. 22. THE ROOT OF THE PROBLEM: LENGTHENING TIMELINES © 2013 Renwood RealtyTrac LLC Average time to foreclose up to 564 days nationwide.
  23. 23. A SYMPTOM OF THE PROBLEM: LONGER TIME TO SELL © 2013 Renwood RealtyTrac LLC Jump in time to sell bank- owned properties at end of 2013 indicates banks working through older inventory.
  24. 24. TIMELINES SOARING EVEN IN NON-JUDICIAL STATES © 2013 Renwood RealtyTrac LLC
  25. 25. EARLY EVIDENCE OF A BACKLOG EVEN IN SOME NON-JUDICIALS © 2013 Renwood RealtyTrac LLC Increase follows 17 straight months of decreases in foreclosure starts
  26. 26. GOOD NEWS: NOT NEW DISTRESS © 2013 Renwood RealtyTrac LLC
  27. 27. THE ROOT OF THE PROBLEM PART 2: BAD BUBBLE LOANS © 2013 Renwood RealtyTrac LLC Majority of homes in foreclosure purchased from 2004 to 2008.
  28. 28. A MARKET NEARLY BACK TO NORMAL © 2013 Renwood RealtyTrac LLC Averaged 2,400 foreclosure filings a month in 2013 compared to 1,500 a month in 2006.
  29. 29. TAKEAWAYS FROM HOUSING OVERVIEW • Housing market is clearly in recovery mode – Sales volume rising with greater demand – Home prices have hit bottom and have substantially bounced off that bottom in most markets – The worst of the foreclosure crisis is behind us • But housing still has a nagging cough that indicates there are still some problems – Slowing sales in some states – Persistently high share of distressed sales – Rebounding foreclosure activity in some states – Average times to foreclose continue to lengthen © 2013 Renwood RealtyTrac LLC
  30. 30. GHOST INVENTORY OF NPLS
  31. 31. GHOST INVENTORY GROWING WHILE REO INVENTORY SHRINKS © 2013 Renwood RealtyTrac LLC
  32. 32. GHOST INVENTORY IN DOLLARS © 2013 Renwood RealtyTrac LLC
  33. 33. GHOST INVENTORY DISCOUNTS © 2013 Renwood RealtyTrac LLC
  34. 34. STATES WITH MOST GHOST INVENTORY © 2013 Renwood RealtyTrac LLC
  35. 35. IMPLICATIONS OF GHOST INVENTORY • Potentially hundreds of thousands of distressed loans that were diverted from foreclosure but could potentially end up as foreclosures down the road. – FHA program requires new owners to wait at least six months before foreclosing • This is making foreclosures look better but the underlying distressed is more serious than the foreclosure numbers alone would indicate. • Highest instance in states with an already substantial backlog of foreclosures that are being worked through – That could mean a long road back to for these states © 2013 Renwood RealtyTrac LLC
  36. 36. THE DOUBLE-EDGED SWORD OF HOME EQUITY © 2013 Renwood RealtyTrac LLC
  37. 37. NEGATIVE EQUITY STILL CUTTING DEEPLY © 2013 Renwood RealtyTrac LLC
  38. 38. BUT NEGATIVE EQUITY BLADE GROWING DULLER © 2013 Renwood RealtyTrac LLC 19 percent of homeowners with a mortgage underwater at end of 2013, down from 29 percent at peak of negative equity.
  39. 39. HOMEOWNERS WHO PURCHASED IN 2004 TO 2008 WORST OFF © 2013 Renwood RealtyTrac LLC Only homeowners who have owned 15+ years have enough equity, on average, to justify an equity sale.
  40. 40. MARKETS WITH MOST DEEPLY UNDERWATER HOMES © 2013 Renwood RealtyTrac LLC
  41. 41. MARKETS WITH MOST EQUITY RICH HOMEOWNERS © 2013 Renwood RealtyTrac LLC
  42. 42. IMPLICATIONS OF DOUBLE-EDGED EQUITY • Negative equity and low equity homes have been held off the market for several years, creating potential pent-up supply • Some of the negative equity is deeply entrenched and will take years or even decades to recover – Short sales are probably best option for these deeply entrenched homeowners, or some sort of principal balance reduction – But short sales are falling out of favor with banks and borrowers – Remains to be seen the stance toward principal balance reduction • Millions of previously underwater homeowners regained equity in 2013, and that could translate into a sizable increase in homes listed for sale in 2014 © 2013 Renwood RealtyTrac LLC
  43. 43. INSTITUTIONAL INVESTORS & CASH BUYERS © 2013 Renwood RealtyTrac LLC
  44. 44. U.S. HISTORICAL OVERVIEW © 2013 Renwood RealtyTrac LLC All-cash purchases reach a recent high of 44percent of all U.S. residential sales in January 2014.
  45. 45. TOP MARKETS FOR ALL-CASH BUYERS © 2013 Renwood RealtyTrac LLC 29 percent of all U.S. residential sales in 2013 were all-cash, up from 19 percent in 2012.
  46. 46. TOP MARKETS FOR INSTITUTIONAL INVESTORS © 2013 Renwood RealtyTrac LLC 7.3 percent of all U.S. residential property sales in 2013 were made by institutional investors, up from 5.8 percent in 2012 and 5.1 percent in 2011.
  47. 47. DRAMATIC DROP IN JANUARY © 2013 Renwood RealtyTrac LLC Dropped to 5.2 percent of all residential sales, lowest level since March 2012
  48. 48. SHIFTING TO NEW MARKETS © 2013 Renwood RealtyTrac LLC
  49. 49. SPURRING A SURGE IN FORECLOSURE AUCTION SALES © 2013 Renwood RealtyTrac LLC Foreclosure auction sales hit 1.5 percent of all U.S. residential sales in January, highest since we began tracking.
  50. 50. TOP MARKETS FOR FORECLOSURE AUCTION SALES © 2013 Renwood RealtyTrac LLC 1 percent of all U.S. residential sales in 2013 were foreclosure auction sales, up from 0.5 percent in 2012 and 2011.
  51. 51. DEEPER INSTITUTIONAL INVESTOR INSIGHTS © 2013 Renwood RealtyTrac LLC
  52. 52. INSIGHT INTO REAL INVESTORS OVERALL © 2013 Renwood RealtyTrac LLC
  53. 53. INSIGHT INTO REAL ESTATE INVESTORS OVERALL © 2013 Renwood RealtyTrac LLC Investors owning 100 or more single-family homes account for 5 percent of total single-family homes
  54. 54. DISTRESS AND INVESTOR PURCHASES DIVERGE © 2013 Renwood RealtyTrac LLC Investors have purchased more than 366,000 single family homes since January 2011.
  55. 55. SFR PURCHASES BY PRICE RANGE © 2013 Renwood RealtyTrac LLC Homes priced under $200k account or 56 percent of all purchases.
  56. 56. BREAKDOWN BY PROPERTY SITUATION © 2013 Renwood RealtyTrac LLC Majority of purchases distressed but nearly one- third non-distressed
  57. 57. HOME PRICE APPRECIATION BUTTRESSING SFR STRATEGY © 2013 Renwood RealtyTrac LLC HPA a solid safety net institutional investors.
  58. 58. DIFFERENT DISPOSITION STRATEGIES EVIDENT © 2013 Renwood RealtyTrac LLC Despite solid HPA, major SFR players are not pressing the sell button.
  59. 59. SOME ON-THE-GROUND STATS FOR SFR © 2013 Renwood RealtyTrac LLC From Pintar Investments in 74 cities in CA, NV and GA Expense Ratio Rent GrossYield Mean 40.0% $1,719 9.1% StdDev 6.6% $723 1.6% Max 58.3% $7,050 13.8% Min 11.2% $1,175 6.7%
  60. 60. TOP MARKETS FOR BUYING SINGLE FAMILY RENTALS © 2013 Renwood RealtyTrac LLC State CountyName Median Value All Sales 3BR Rent 40 Percentile Annual Rent Gross Yield PA Philadelphia County $70,267 $1,414 16,968 24% FL Duval County $93,450 $1,233 14,796 16% TN Shelby County $81,633 $1,066 12,792 16% OH Cuyahoga County $79,878 $1,005 12,060 15% FL Pasco County $105,317 $1,269 15,228 14% OH Montgomery County $79,500 $953 11,436 14% MI Macomb County $96,279 $1,124 13,488 14% GA Dekalb County $103,648 $1,187 14,244 14% MI Wayne County $100,000 $1,124 13,488 13% FL Brevard County $107,317 $1,193 14,316 13% OH Summit County $88,050 $965 11,580 13% FL Volusia County $110,332 $1,199 14,388 13% OH Hamilton County $95,212 $1,018 12,216 13% WI Milwaukee County $98,309 $1,036 12,432 13% NV Clark County $150,000 $1,530 18,360 12% FL Hillsborough County $124,933 $1,269 15,228 12% FL Polk County $110,517 $1,094 13,128 12% FL Orange County $132,500 $1,311 15,732 12% FL Miami-Dade County $166,000 $1,600 19,200 12% GA Gwinnett County $123,800 $1,187 14,244 12%
  61. 61. IMPACT OF INSTITUTIONAL INVESTORS: CASE STUDY NO. 1 © 2013 Renwood RealtyTrac LLC In smaller market HPA rises and falls with share of institutional investors
  62. 62. IMPACT OF INSTITUTIONAL INVESTORS CASE STUDY NO. 2 © 2013 Renwood RealtyTrac LLC HPA reaches double-digits in Sept 2012, coinciding with institutional investor share reaching 20 percent.
  63. 63. IMPACT OF INSTITUTIONAL INVESTORS CASE STUDY NO. 3 © 2013 Renwood RealtyTrac LLC HPA peaks in April 2013 and has gradually slowed since, coinciding with pull back in institutional investor share after 13 straight months on the increase
  64. 64. TAKEAWAYS FROM INSTITUTIONAL INVESTOR INSIGHTS • Institutional investors have helped to accelerate recovery • Institutional investors at this point are showing no signs of unloading inventory en masse • Early signs of institutional investors slowing their pace of purchasing – In markets where this has been happening for some time there is no indication that the bottom is falling out of the market, although it certainly is having a cooling effect © 2013 Renwood RealtyTrac LLC
  65. 65. MONSTERS OF THE HOUSING MARKET © 2013 Renwood RealtyTrac
  66. 66. THE PROBLEM & OPPORTUNITY OF ZOMBIE FORECLOSURES • The problem – More than 150,000 vacant homes nationwide, 20 percent of all homes in the foreclosure process – Homeowners often don’t realize they still own the property and are responsible for taxes etc. • The opportunity – Homeowners who have exhibited a desire to let go of the property – Lenders who don’t want to foreclose © 2013 Renwood RealtyTrac LLC
  67. 67. ZOMBIE FORECLOSURES © 2013 Renwood RealtyTrac LLC
  68. 68. METROS WITH MOST ZOMBIE FORECLOSURES © 2013 Renwood RealtyTrac LLC
  69. 69. ZOMBIE FORECLOSURES BY YEAR BUILT © 2013 Renwood RealtyTrac LLC One-third of owner-vacated foreclosures built between 1970 and 1990.
  70. 70. THE PROBLEM & OPPORTUNITY OF OCCUPIED REOS • The problem – 50 percent of foreclosed homes (REO) are still occupied by the former homeowner (approx. 250,000) – Properties are not being re-sold and re-integrated into the market, creating shadow inventory • The opportunity – Homeowners are motivated to stay in property – Lenders want to dispose of property or at least get it performing in some way © 2013 Renwood RealtyTrac LLC
  71. 71. OCCUPIED REOS © 2013 Renwood RealtyTrac LLC
  72. 72. WILL BOOMERANG BUYERS SAVE US? © 2013 Renwood RealtyTrac
  73. 73. BOOMERANG BUYERS BOOMERANGING MORE QUICKLY • The News – HUD just recently changed its guidelines to allow some homeowners who have gone through foreclosure, short sale or bankruptcy to qualify for FHA financing. – Now these homeowners can qualify for FHA financing as soon as 12 months after the “last event” – This is down from a minimum of 36 months • The Promise – Millions more homeowners who may qualify to purchase again, sooner
  74. 74. BOOMERANG BUYERS BOOMERANGING MORE QUICKLY © 2013 Renwood RealtyTrac LLC 4.6 million completed foreclosures and short sales from 2007 to 2010. Additional 2.4 million completed foreclosures and short sales in 2011 and 2012
  75. 75. LEVERAGING DISTRESSED MARKET TRENDS WITH REALTYTRAC • Standard and Customized Reports • 800.913.0439 • http://data.realtytrac.com/ • Back to Reality with Buy to Rent White Paper – Jointly authored with Pintar Investment Company – Download free at www.realtytrac.com/sfr • Investor Insight Report – Detailed breakdown by investor, property type, financing etc. – 949.502.8300 Ext. 158 © 2013 Renwood RealtyTrac LLC
  76. 76. INVESTOR INTEREST © 2013 Renwood RealtyTrac LLC • Multi-Market Report – Identify target markets with our 300 metro area comparison report • Investor Activity Report - Understand your competition with investor activity including purchase count, value breakdown, and more • Local Insights – Empower “Pre-diligence” with local market trends, demographics, schools, crime, and local hazards • Match-and-Append - Retrieve data on a portfolio of properties, selecting the metrics to be appended to your property list • MEGA Property Query – Retrieve a list of properties that meet your criteria, including all stages of the foreclosure process • Custom Reports – Let the RealtyTrac reporting team create custom reports at state, county, metro, city, or ZIP code level
  77. 77. DAREN BLOMQUIST VICE PRESIDENT, REALTYTRAC DAREN.BLOMQUIST@REALTYTRAC.COM © 2013 Renwood RealtyTrac LLC THANK YOU!

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