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From Altos Research, a look at the 2011 housing market using real-time market analytics and leading indicators. The presentation includes a discussion of housing market volatility as normal market conditions for the next 5-10 year period.
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Altos Research
Housing Double-Dip or a Catfish?Spring 2011 Webcast
June 2, 2011
Scott SambucciVice President, Market Analytics
[email protected](415) 931 7942
WHY WE’RE HERE
Today’s 2011 Market, not 3 or 6 months ago
Inventory affects price, sometimes“The Catfish Recovery”Volatility = Profit (but only for smart
people) Measuring Affordability (sorry, next time…)
Today’s once-in-a-lifetime offer
DON’T TRADE BASED ON THIS PRESENTATION. SERIOUSLY.
Disclaimer
This material is for distribution for marketing purposes only and should not be relied upon by any person for investment or financial decisions. This material is provided for informational purposes only and does not constitute a solicitation 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 an invitation 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 may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. No representation is made that the performance presented will be achieved by any investor, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns 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 a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 2010 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Altos Research to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. This document contains general information only and is not intended to represent general or specific investment advice. The information does not take into account your financial circumstances. An assessment should be made as to whether the information is appropriate for you having regard to your objectives, financial situation and needs.
©2011 Altos Research LLC, All Rights Reserved
OUR MANDATORY COMMERCIAL(the marketing team made me do this)
• Altos Research = real-time real estate & housing market analytics
• The only national source of primary data & analytics for the active housing market Listings IntelTM:
2 million active market properties updated weekly; Historical date & portfolio matching, and active comps in 20,000 zip
codes, 250+ MSAs/CBSAs. AltosEvaluateTM Mortgage Analytics Suite Forward Valuation ModelTM: Zip code-specific forecasting
models. MSA Forecasts Models: Market forecasts for the Case-
Shiller, RadarLogic, FHFA & other third-party HPIs.
(Note: Our clients are the smartest people we know)
Copyright Altos Research | www.altosresearch.com | 12/09/2010
If you do these things, you’re our customer:
• Whole Loan Asset Portfolios• RMBS Portfolios• REO Disposition• Mortgage Origination & Servicing• Valuation & Appraisal• Equity Researchers• Risk Management• Homebuilders & Developers• Insurance
May 31, 2011: “Home prices continue on their downward spiral with no relief in sight.” says David M. Blitzer, Chairman of the Index Committee at S&P Indices.
(Source: S&P Press release)
TODAY’S ACTIVE MARKET SIGNALING IMPROVEMENTS
Price of New Listings Indicator: Leads transaction prices by 3-6 months. New sellers pricing more confidently.
• Sell into short-term strength
• Buy when the market dips later this year
• Repeat for the next 10 years
PRICE SENSITIVITY TO INVENTORY CHANGES
Jan – Oct ‘08 Jan – Oct ‘09
Jan – Oct ‘10 Jan – May ‘11
Location, Location, Location:Altos Research Mid-Cities CompositeTM
MSAs Included in Altos Research Mid-Cities CompositeTM:
Dover, DEPittsburgh, PABaltimore, MDDurham, NCCharleston, SCNaples, FLJacksonville, FL Orlando, FL Nashville, TNMemphis, TNSt. Louis, MOAustin-Round Rock, TXSan Antonio, TXAlbuquerque, NM Reno, NV Boulder, CO Ventura, CASacramento, CABoise, IDHonolulu, HI
Mid-Cities CompositeTM exhibited less downside during crash & more seasonal stability .
ALTOS RESEARCH MID-CITIES COMPOSITETM:
SIMILAR MARKET EFFECTS WITH LOWER VOLATILITY
• Inventory & Price Reductions less volatile
• Fewer sub-prime mortgages
• Mix of bubble & non-bubble markets
THE CATFISH RECOVERY
THE CATFISH RECOVERY• Volatility. The “double dip” is only the start of the
next housing cycle. • Your long-term forecast is wrong.• Traders: Expect sporadic defaults in existing
securities, but will moving from 140 to 155 LTVs matter that much?– Some prepayment risk during upswings as ST activity
accelerates.– Sell high, Buy low. No really.
• Heading into the single best time to make $ in real estate and mortgages. But only for smart people. – “The housing market never goes down.” –CDO Trader,
circa 2006
THE NORMAL MARKET IS VOLATILE.• 2009-10 rebound manufactured by homebuyer
tax credit• Weak macroeconomic fundamentals persist• Generational demand shifts• Haphazard supply levels• We’ve measured up to12% annual volatility in the
Altos 20-City Composite and 7% in the Case-Shiller – Similar volatility from pre-1990s market periods– “This time is different”
THE CONSTANT GROWTH MYTH
Source: http://cafehayek.com/site/wp-content/uploads/2011/04/Case-Shiller-updated1.jpg
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov-0
9
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep-
10
Nov-1
0
Jan-
11
Mar
-11
May
-11
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
$300,000
$320,000
$340,000
$360,000
$380,000
$400,000
$420,000
Altos % change fromlast peak/trough
Altos 20-City Composite
Apr-0
9
Jun-
09
Aug-0
9
Oct-0
9
Dec-0
9
Feb-
10
Apr-1
0
Jun-
10
Aug-1
0
Oct-1
0
Dec-1
0
Feb-
11
-8.00%-6.00%-4.00%-2.00%0.00%2.00%4.00%6.00%
132.00
136.00
140.00
144.00
148.00
SPCS20R % change from last peak/trough
SPCS20R
Altos Weekly obs.
date
Altos 20-City
Composite
Altos % change from
last peak/trough
9-Jan-09 $
357,057
29-May-09 $
400,414 12.1%
26-Feb-10 $
367,649 -8.2%
4-Jun-10 $
373,086 1.5%
14-Jan-11 $
327,782 -12.1%
20-May-11 $
356,283 8.7%
Month SPCS20R
SPCS20R % change from
last peak/trough
Apr-09 139.26
Sep-09 146.63 5.3%
Mar-10 143.34 -2.2%
Jul-10 148.89 3.9%
Mar-11 138.16 -7.2%
Jul-11 ? ?
Remember: Case-Shiller figures reported with 2-month lag. Why wait until September for what you can see today?
GOT LOCAL?
Timing Matters (…should you wish to buy low/sell high)
Four (4) selected San Jose zips: San Jose 95125 by Price Quartile:
Four (4) selected Phoenix cities: Scottsdale 85252 by Price Quartile::
Days-on-market by zip code, 5/27/11(Sample size: 7k zip codes)
PRICE REDUCTION HEAT MAP: WICHITA, KS
Did we mention location, location, location?
CASE EXAMPLE
Asset-level analysis: 1008 Pierce Street, West Sacramento, CA
1008 PIERCE ST., WEST SACRAMENTO, CA
(Please note the egregious product placement of our Listings IntelTM application)
“Comps” mean “Comp”etition
(… and here)
Listing History for 821Reuter Drive:
THE CATFISH RECOVERY MEANS…
• Volatility means profit with the right information
• Watch housing just like other asset classes (equities, interest rates, currencies, etc.).
• Take your gains, come up for air, then dive back in at each inflection point
THE CONSTANT GROWTH MYTH
Source: http://cafehayek.com/site/wp-content/uploads/2011/04/Case-Shiller-updated1.jpg
THE CATFISH RECOVERYOne more time… Remember it’s
THE ONCE-IN-A-LIFETIME OFFER
• Releasing our initial Mid-Cities Report in two weeks.– Send an email to: [email protected]
• Distressed Loan/Mortgage/RMBS:– Send us a portfolio of 25 loans or RMBS
security–We’ll run thru AltosEvaluate & Listings
IntelTM and share the results
ALTOS RESEARCH CAPITAL MARKETS
Scott SambucciVice President, Market [email protected](415) 931 7942
Andrew GoeiManager, Market [email protected]
Jeff EckenhoffManager, Market [email protected]
Ben GimpertDirector of Quantitative [email protected]
Jon SterlingDirector of [email protected]
Read more about our Housing Market insights at:
http://blog.altosresearch.com
Website: www.altosresearch.com
Appendix: Active Market Supply: CA, TX, FL, NC, AZ, GA
• Supply affects prices
• Inventory is generally higher vs. last year, but trending lower. (ST Positive for housing market)
• Similar trending across markets, but absolute levels are not always similar
• The Supply Problem, and the “Other” Supply Problem
