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Altos Research Fall 2010 Webcast Slides - When Does the Housing Recovery Start.pdf

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A look at where the 2011 Housing Market is expected to go, along with a discussion about the housing market and policies impacting its recovery.

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Altos Research Fall 2010 Webcast Slides - When Does the Housing Recovery Start.pdf

  1. 1. Presented by:Scott SambucciVice President, Market Analytics Copyright Altos Research | www.altosresearch.com | 12/09/2010
  2. 2. This material is for distribution for marketing purposes only and should not be relied upon by any person forinvestment or financial decisions. This material is provided for informational purposes only and does not constitute asolicitation in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover,it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor aninvitation to respond to it by making an offer to enter into an investment agreement.This material may contain “forward-looking” information that is not purely historical in nature. Such information mayinclude, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfoliocomposition. No representation is made that the performance presented will be achieved by any investor, or thatevery assumption made in achieving, calculating or presenting either the forward-looking information or thehistorical performance information herein has been considered or stated in preparing this material. Any changes toassumptions that may have been made in preparing this material could have a material impact on the investmentreturns that are presented herein by way of example.This material is not intended to be relied upon as a forecast, research or investment advice, and is not arecommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinionsexpressed are as of November 2010 and may change as subsequent conditions vary. The information and opinionscontained in this material are derived from proprietary and nonproprietary sources deemed by Altos Research to bereliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that anyforecasts made will come to pass. This document contains general information only and is not intended to representgeneral or specific investment advice. The information does not take into account your financial circumstances. Anassessment should be made as to whether the information is appropriate for you having regard to your objectives,financial situation and needs. ©2010 Altos Research LLC, All Rights Reserved Copyright Altos Research | www.altosresearch.com | 12/09/2010
  3. 3.  What to expect in 2011 and why Implications of Dodd-Frank, GSEs, Mortgages & Taxes, QE2, Robo-signing Impacts on RMBS & Whole Loans Home Prices vs. Home Values Copyright Altos Research | www.altosresearch.com | 12/09/2010
  4. 4.  180+ Metropolitan Statistical Areas (and growing every month) covering 20,000+ zip codes 2 million active listings updated every week Market Analytics & Leading Indicators available by zip code, city, county, MSA, state and nationally All data & market analytics for each geography (zip, city, metro) independently calculated Copyright Altos Research | www.altosresearch.com | 12/09/2010
  5. 5.  0-12 month Forecasting  This list in a partial list of market  Median Price stats published weekly, with over  Price of New Listings  Price of Listings Absorbed 400 coincidental & leading  Market Action Index indicators available  List-to-Sale Ratios  Altos Research also provides 6-18 month forecasting market analytics based on  Percent Price Decreased/Increase  Magnitude Price Decreased/Increase Property Characteristics:  Inventory  Square Footage  Percent Relisted  # Beds/Baths  Days-on-market (mean and median)  Lot Size & Age  Tic/Trend/Peakiness/Troughiness  Price per Bedroom/Bathroom 12-24 month forecasting  Price per Square Foot (mean &  Year-over-Year Price median)  Year-over-Year Inventory  Year-over-Year Percent Price Decreased  Year-over-Year Days-on-Market Copyright Altos Research | www.altosresearch.com | 12/09/2010
  6. 6.  Whole Loan Asset Portfolios RMBS Portfolios REO Disposition Mortgage Origination & Servicing Valuation & Appraisal Equity Researchers Risk Management Homebuilders & Developers Insurance Copyright Altos Research | www.altosresearch.com | 12/09/2010
  7. 7. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  8. 8. Correlation with 4-month lead = 0.705 % change Ask Price % change CSXR3.00%2.00%1.00%0.00%-1.00%-2.00%-3.00%-4.00% Copyright Altos Research | www.altosresearch.com | 12/09/2010
  9. 9. We’ll get some type of seasonal bounce – we always do. The size and scope will likely be small as compared to 2009, but it will be a breatherCopyright Altos Research | www.altosresearch.com | 12/09/2010
  10. 10. • Tax credit stimulated demand temporarily  Fewer sellers required price reductions to sell.• Sellers are feeling distressed again  Price Reductions on the rise and nearly back to crash levels. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  11. 11. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  12. 12. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  13. 13.  Robo-signing QE2 Dodd-Frank Mortgage Rates Mortgage Interest Rate deduction Copyright Altos Research | www.altosresearch.com | 12/09/2010
  14. 14.  Banks were selling into market strength seen from Homebuyer Tax Credit Market picked up, and banks increased the rate of foreclosures to get assets through the pipeline Copyright Altos Research | www.altosresearch.com | 12/09/2010
  15. 15.  Difficult to see effects Baked into prices? Home Price Inflation - A Counterfactual argument (Note: See Altos Research White Paper: “QE2 & the Housing Market”) Copyright Altos Research | www.altosresearch.com | 12/09/2010
  16. 16.  In 2004 alone, Fannie Mae and Freddie Mac purchased $175,000,000,000 in subprime mortgage securities, which accounted for 44 percent of the market that year, and from 2005 through 2007, Fannie Mae and Freddie Mac purchased approximately $1,000,000,000,000 in subprime and Alt-A loans, while Fannie Mae’s acquisitions of mortgages with less than 10 percent down payments almost tripled. The conservatorship for Fannie Mae and Freddie Mac has potentially exposed taxpayers to upwards of $5,300,000,000,000 worth of risk. The hybrid public-private status of Fannie Mae and Freddie Mac is untenable and must be resolved to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive, or abusive. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  17. 17.  Would lead to an increasing 3.5% down payment mortgages as FHA market share rises Any significant downward shift in prices will lead to negative equity situations. Would force government to further bolster the market until we reach the Keynesian endpoint in 201?, 202?, 203? No political will to seek ST pain of alternative Copyright Altos Research | www.altosresearch.com | 12/09/2010
  18. 18.  2009-10:Definitely helped the market, but was temporarily. Diminishing effect in ‘10 vs. ‘09. May make sense to re-introduce in 2012 or ‘13 Mortgage interest deduction: appears here to stay. (See NAR/MBAA uproar, Deficit reduction committee) Unequivacally shows that tax credits do impact markets Copyright Altos Research | www.altosresearch.com | 12/09/2010
  19. 19. 360,000 340,000 320,000 A 300,000 280,000 B C (Projected) 260,000 240,000 220,000 200,000 (A) 2008 Trough to Peak = 20% increase (B) 2010 Trough to Peak = 30% increase (C) Assuming a 25% rise in Spring 2011, that will bring inventory back to crash levels Higher inventory Downward price pressure Copyright Altos Research | www.altosresearch.com | 12/09/2010
  20. 20.  Not just the number of homes, but the quality of homes Bifurcated Market - Don’t confuse price with value. Prices will fall not only because of demand weakness but the available stock This might also case a quick jump in perceived home values because of cash infused to asset Copyright Altos Research | www.altosresearch.com | 12/09/2010
  21. 21. • Investors and speculators provide liquidity to the market.• Motor oil between Bank REOs and “regular” buyers (i.e. first-time home buyers)• First-time homebuyers with 3.5% down typically don’t have cash sitting around to fix the roof and re-install stripped copper pipes• Investors worked us out of the S&L crisis and can pull us out now Copyright Altos Research | www.altosresearch.com | 12/09/2010
  22. 22.  Even 2.0-2.5% GDP growth is growth More people should have jobs in Dec ‘11 than Dec ‘10 Even the hint of higher mortgage rates may scare a few buyers into the market. (See Congressional Tax Debate) Mortgage rate increases still put them at historical lows The good news is that we know more bad news is here Copyright Altos Research | www.altosresearch.com | 12/09/2010
  23. 23.  Nationally, prices will be lower by 5-10% Some seasonal bounce in Q1, Q2. Bounce will likely be more like 2008, 2010 2011 will mean lower prices because of:  Rising Inventory  Quality of Inventory  Less Demand (homeownership rates, consumer exhaustion, consumer trepidation) The Contrarian Argument - There’s nothing but bad news out there, so that must mean we’re hitting the trough Copyright Altos Research | www.altosresearch.com | 12/09/2010
  24. 24. • All markets are not equal• Do your research: “one-size-fits-all” model will lead your astray• Wide Distribution of 4- and 12-week price changes over 20,000 zip codes in the Altos Research Market Analytics Platform Copyright Altos Research | www.altosresearch.com | 12/09/2010
  25. 25. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  26. 26. BPO based on June comps $184,000 Altos real-time market dataPhoenix 85057 Home Prices Altos Forecast Copyright Altos Research | www.altosresearch.com | 12/09/2010
  27. 27.  Not yet. But it won’t be down forever. 2011: Expect 5-10% downside 2012-2014ish  Stabilize and slowly rise as unemployment lags (see Bernanke, “60 minutes” interview)  Mix of elevated unemployment, high inventory, and low quality will keep prices low even as transactions pick up over time  Good for getting in as long as you don’t need to get out Copyright Altos Research | www.altosresearch.com | 12/09/2010
  28. 28. Submit list of loans,property addresses orunderlying asset zipcodes to AltosResearch Altos Research Housing Market Data Platform yields real-time market analytics and leading indicators for each zip code submitted. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  29. 29. All data files available for download as .CSV file for easyintegration into any spreadsheet model or databaseapplication. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  30. 30. Copyright Altos Research | www.altosresearch.com | 12/09/2010
  31. 31. MORE GOOD READS: OUR MARKET ANALYTICS TEAM: Two (2) White papers Scott Sambucci, Vice President now available: scott@altosresearch.com (415) 931 7942  “Leading Indicators of Home Prices” Andrew Goei, Manager  “QE2 & the Housing andrew@altosresearch.com Market” (650) 603-0805 Jeff Eckenhoff, Manager Today’s Presentation jeff@altosresearch.com (650) 603-0905 Slides Copyright Altos Research | www.altosresearch.com | 12/09/2010

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