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Recent Genesis Group Housing Update provided by Security Title
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www.TheGenesisGroup.net Page 1
Second Quarter 2009 Housing BriefingTuesday, May 19, 2009The Landmark Theatre
The Genesis Perspective
Gaining Clarity in a Gaining Clarity in a Chaotic MarketChaotic Market
www.TheGenesisGroup.net Page 2
Prior to 4Q08…Colorado Was Less Impacted
Job Growth – 4th in NationPositive In-migrationLow Unemployment
Growing Retail SpendingHome Price Appreciation
Reduction in Foreclosure ActivityNational Headlines of Stability Were True
www.TheGenesisGroup.net Page 3
We are still reading those We are still reading those same headlinessame headlines……
but the U.S. economy is but the U.S. economy is taking ittaking it’’s tolls toll
www.TheGenesisGroup.net Page 4
Job Growth by StateColorado’s Ranking Has Dropped
Source: U.S. Bureau of Labor Statistics
First Quarter 2009 Employment Growth by State
-3.7%
-3.1%
-2.5%
-3.8%
-4.1%-4.4%
-6.4%
-5.1%
+0.9%+1.2%
-1.4%
-7.0%
-6.5%
-6.0%
-5.5%
-5.0%
-4.5%
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Mic
hig
anA
rizo
naF
lori
da
Nev
ada
Idah
oS
outh
Car
olin
aO
reg
on
No
rth
Car
olin
aG
eorg
iaO
hio
Del
awar
eV
erm
ont
Rho
de
Isla
nd
Ten
ness
eeIn
dia
naC
alif
orn
iaA
laba
ma
Illin
ois
Wis
con
sin
Ken
tuck
yM
issi
ssip
piM
inn
esot
aC
onn
ectic
ut
Haw
aii
New
Jer
sey
Mas
sach
uset
tsM
ain
eW
ash
ing
ton
Co
lora
doV
irg
inia
Uta
hA
rkan
sas
Mar
ylan
dM
isso
uri
Pen
nsy
lvan
iaW
est
Vir
gin
iaN
ew Y
ork
New
Mex
ico
Iow
aM
ont
ana
New
Ham
psh
ire
Neb
rask
aK
ansa
sS
out
h D
ako
taTe
xas
Okl
aho
ma
Nor
th D
ako
taLo
uis
ian
aW
yom
ing
Ala
ska
Dis
tric
t of
Col
umb
ia
Per
cen
t Cha
nge
from
20
Co
lorad
o
www.TheGenesisGroup.net Page 5
Sources: The Genesis Group; Bureau of Labor StatisticsSource: U.S. Bureau of Labor Statistics
Reversal of FortuneDenver Metropolitan Area Wage & Salary Employment
Monthly Total Employment & Employment Change
-60-50-40-30-20-10
0102030405060708090
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net
New
Job
s in
000
-1002003004005006007008009001,0001,1001,2001,3001,4001,500
Total Em
ployment in
00
Year/Year Monthly Employment Change Total Employment
Mar 2009
-51,100
www.TheGenesisGroup.net Page 6
Sources: The Genesis Group; Bureau of Labor StatisticsSource: U.S. Bureau of Labor Statistics
Metro Denver Job Growth12 Mo thru 1Q2009 = - 0.4% (vs. -1.3% for U.S.)
Denver Metropolitan AreaJob Growth & Forecast - 12 Month Averages
50,100
-28,400
0
-6,100
12,200
56,300
44,10043,90035,400
10,700
25,400
48,600
-42,400
27,500
300
51,900
29,800
-18,800
4.2% 4.1%
3.1%
4.4%4.0% 3.9% 4.3%
-3.1%
1.9% 2.0% 2.2%
0.0%0.9% -0.4%
-2.0%
0.8%
-1.4%
0.0%
-60,000-50,000-40,000-30,000-20,000-10,000
010,00020,00030,00040,00050,00060,00070,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1stQtr
2009
2009Proj.
2010Proj.
Net
Job
Gro
wt
-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%
Percent C
hang
Net Job Growth Percent Change in Employment
12 Months Through:
www.TheGenesisGroup.net Page 7
Consumer Confidence ShatteredImprovement in 2009…Still historically at very low levels
Sources: The Genesis Group; The Conference Board
Source: The Conference BoardNote: Mountain Region Includes Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada
Consumer Confidence Index - Monthly Comparison
Apr200939.2
Apr200941.8
20
35
50
65
80
95
110
125
140
155
170
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Con
sum
er C
onfid
ence
Inde
x
U.S. Composite Index Mountain Region Index
U.S. Index is Seasonally AdjustedMountain Region Index is Unadjusted
www.TheGenesisGroup.net Page 8
Mounting Concerns…
Unemployment Retail Sales Growth Slowing
Consumer Confidence
www.TheGenesisGroup.net Page 9
Is There Any Good News?
Foreclosure Notices DownDistressed Property Sales Activity Strong
In-migrationSupply levels continue to lessen
www.TheGenesisGroup.net Page 10
Foreclosures Abating?First time this decade…
Sources: The Genesis Group; County Public Trustees; U.S. Census Bureau; Colorado State Demography Office
Source: SKLD Information Services, LLC
Seven County Metro DenverTotal Foreclosure Activity
1991 Through First Quarter 2009
5,4003,612
2,595 2,232 2,562 3,067 3,338 3,329 3,567
9,424
12,216
15,728
27,133
8,335
19,016
25,241
7,184 6,165
0
5,000
10,000
15,000
20,000
25,000
30,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2003 2004 2005 2006 2007 2008 1Q2008
1Q2009
Num
ber o
f For
eclo
sure
s
www.TheGenesisGroup.net Page 11
Foreclosures – by Price Range Lower Price Ranges First to Improve
Sources: The Genesis Group; County Public Trustees; U.S. Census Bureau; Colorado State Demography OfficeSource: SKLD Information Services, LLC
Seven County Denver Area Foreclosure Activity By Original Loan Value Price Range
First Quarter Comparisons - 2005 to 2009
28 8 548 11 8
86 25 31
491
2,89
1
1,20
7
704
134
125
119
51 5348 117
53973
8
33 41
1,51
0
442
250
1,07
8
57
516
384
55
1,88
7
737
1,27
7
90
567
96
495
2,75
8
945
1,40
9
1,01
2
417
2,21
8
1,15
4
752
135
148
158
0
500
1,000
1,500
2,000
2,500
3,000
3,500
< $100K $100K-$170K
$170K-$200K
$200K-$250K
$250K-$300K
$300K-$400K
$400K-$500K
$500K-$750K
$750K -$1M
Over $1M
For
eclo
sure
2005 1Q
2006 1Q
2007 1Q
2008 1Q
2009 1Q
www.TheGenesisGroup.net Page 12
Metro DenverAdams County – 1.4%
Denver – 1.1%Arapahoe – 0.9%
Overall Metro – 0.9%
Foreclosure RatesBy Zip Code
*Total foreclosures as a percentage of owner-occupied homes
www.TheGenesisGroup.net Page 13
The Genesis Perspective
The Current StateThe Current Stateof Housingof Housing
www.TheGenesisGroup.net Page 14
EXISTING HOME Sales Down 21%in First Quarter 2009
Sources: The Genesis Group; Metrolist, Inc. & IRES, LLC
Source: Metrolist Inc., IRES, LLC
Metropolitan Denver AreaHistorical Closing Trends of Existing Homes
1999 Through First Quarter 2009
7,4619,427
45,80148,11948,30747,183 47,197 47,326
52,460 51,83047,946 47,295
23.6% 22.3%25.2%25.3%25.0%24.8%26.0%27.1%27.4%26.7% 23.4%26.7% 77.7%76.4%
76.6%
74.8%74.7%75.0%75.2%74.0%72.9%72.6%73.3%
73.3%
0
10,000
20,000
30,000
40,000
50,000
60,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q08 1Q09
Tota
l Num
ber
of C
losi
n
Attached Closings Detached Closings
www.TheGenesisGroup.net Page 15
EXISTING HOME Inventory Down 18%5.1 Month’s Supply Overall - Lowest in 3 Years
Sources: The Genesis Group; Metrolist, Inc. & IRES, LLC
Source: Metrolist Inc., IRES, LLC
Metropolitan Denver AreaExisting Inventory Homes and Month's Supply
First Quarter Comparisons - 2000 Through 2009
5,8157,107
7,8797,273
3,983
5,929
1,1162,168
5,415
7,264
16,12215,83515,985
13,662
11,139
15,135
7,516
4,833
13,415
15,404
6.46.0
7.3
3.7
1.0
7.0
6.7
7.0
5.7
2.0
4.85.5
5.0
4.1
5.15.4
1.7
2.5
5.3
3.8
0
4,000
8,000
12,000
16,000
20,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Num
ber
of L
istin
g
0.0
2.0
4.0
6.0
8.0
10.0
Month's S
upp
Attached Inventory Detached InventoryAttached Month's Supply Detached Month's Supply
www.TheGenesisGroup.net Page 16
Sources: Hanley Wood LLC, The Genesis Group
APARTMENT Market Weakening
Source: Apartment Association of Metropolitan Denver
Absorption falls below new units added; vacancy pops up.
Metropolitan Denver AreaApartment Construction/Absorption
1,404
2,887
7,949
3,584
2,262
738
6,445
7,761
5,626
9,123
2,548
5,594
2,517
3,526
2,0331,729
5,6695,465
-2,421
4,679
197
5,432
6,355
2,752
4,058
5,8186,604
-2,904
1,728
8,123
2,7092,970
4,644
-142
8.4%
7.9%11.7%8.7%4.7%5.2%4.4%4.6%4.9%5.0% 10.9% 6.1%4.4% 7.0%7.9%10.0%3.8%
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q2009
Num
ber
of U
ni
0%
2%
4%
6%
8%
10%
12%
14%
Period E
nd Vacancy R
Units Added Units Absorbed Quarterly Vacancy Rate
www.TheGenesisGroup.net Page 17
NEW HOME Sales down 45%
Sources: Hanley Wood LLC, The Genesis GroupSource: Hanley Wood Market Intelligence
Detached Sales down 47% Attached Sales down 40%
New Production Built HousingDenver Metropolitan Area - Historical Sales Trends
1988 Through First Quarter 2009
4,222
16,889
16,577
19,432
13,641
12,112
9,5909,801
8,113
5,5473,870
3,4573,724
15,608
18,28218,759
15,704
17,784
14,002
17,543
9,500
5,001
40%39%
40%
39%35%32%
29%30%33%30%
23%6% 9%
13%19% 20%
25%23% 60%61%
60%
61%
70%67%
70%
94%
91% 87%
81%
80%
77%
77% 75%
71% 68% 65%
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 12mothru1Q09
To
tal N
um
ber
of N
ew H
om
e S
aP
ercentag
e of To
tal Sa
Detached SalesAttached Sales
www.TheGenesisGroup.net Page 18
Sources: Hanley Wood LLC, The Genesis Group
Across the Board Declines Hit the Heart of New Detached Housing Market
Source: Hanley Wood Market Intelligence
Sales down 59% in $300K - $400K price ranges
Denver Metropolitan Area - New Production Built HousingDetached Sales by Price Range
First Quarter Comparisons - 2008 vs 2009
185
16
245
137
40
195214206
34
161
3423
113110
78
2337
0
50
100
150
200
250
300
Under$200K
$200K to$250K
$250K to$300K
$300K to$350K
$350K to$400K
$400K to$500K
$500K to$600K
$600K to$700K
$700K +
Average Project Base Home Price
Num
ber
of S
ale
20082009
Sources: Hanley Wood LLC, The Genesis GroupSource: Hanley Wood Market Intelligence
Lower priced new homes compete with resale/distressed unitsbut 52% drop in $200K to $300K price ranges
Attached Sales Up in Lower Price Ranges but Falter in Higher Price Segments
Denver Metropolitan Area - New Production Built HousingAttached Sales by Price Range
First Quarter Comparisons - 2008 vs 2009
36
15
36
131
41
61
94
137
64
39
69
1631
4438
146
60
0
30
60
90
120
150
180
Under$150K
$150K to$200K
$200K to$250K
$250K to$300K
$300K to$350K
$350K to$400K
$400K to$500K
$500K to$700K
$700K +
Average Project Base Home Price
Num
ber
of S
ale
20082009
Sources: Hanley Wood LLC, The Genesis Group
New Home Inventory –SFD Restricted and SFA Jumps Up
Source: Hanley Wood Market Intelligence
SFD down 24% / SFA up 8%Sales declines push month’s supply up sharply
New Production Built HousingDenver Metropolitan Area - Historical Inventory and Month's Supply Trends
First Quarter Comparisons - 2000 Through 2009
1,186 1,108
1,3801,2531,178
1,5021,333
780 844835
2,608
1,688
2,209
1,8111,636
1,7571,639
1,144
2,826
1,307
1.2
4.02.71.91.51.30.81.61.40.7
9.3
3.3
20.0
3.73.14.0
2.9 3.1 5.3
4.5
0
500
1,000
1,500
2,000
2,500
3,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
# o
f H
om
es in
Inve
nto
0.0
4.0
8.0
12.0
16.0
20.0
24.0
Mo
nth
's Su
pp
Detached Inventory - 4th Quarter Attached Inventory - 4th QuarterDetached Month's Supply Attached Month's Supply
Other Notable Indicators..
Cancellation Rates• Stable at 23% in 1Q comparisonsTraffic UP from 3.8 visitors in 4Q08• Averaging 5.7 visitors per weekBuild-out of Finished Lots Exceptionally High• 6 year supply• Arapahoe & Northeast most vulnerable
www.TheGenesisGroup.net Page 22
Welcome to the New Market
31Century Communities
32Lennar Homes
34Shea Homes
35Pulte / Del Webb / Centex*
42Engle Homes
46Oakwood Homes
55KB Homes
73Colorado & Santa Fe Real Estate
83Richmond American Homes
109D.R. Horton Homes
2009 Top Builders
83Centex Homes
90Engle Homes
96Beazer Homes
97Ryland Homes
121Standard Pacific Homes
134Lennar Homes
145Shea Homes
171KB Homes
214Richmond American Homes
384D.R. Horton Homes
2007 Top Builders
www.TheGenesisGroup.net Page 23
Who Will Be Left Standing by Year End?Richmond American Homes
D.R. Horton HomesColorado & Santa Fe Real Estate
KB HomesOakwood Homes
Nichols PartnershipPulte/CentexShea Homes
Lennar Homes Century Communities
www.TheGenesisGroup.net Page 24
The Genesis Perspective
The Geography of The Geography of The MarketThe Market
Timing the ReboundTiming the Rebound
Douglas CountyMarket Area
North
5 Miles
Douglas Market Area
Boulder/Longmont
Market Area
NorthwestMarket Area
NortheastMarket Area
Jefferson Market Area
DenverMarket Area
ArapahoeMarket Area
Jefferson Mkt Area8% capture
1Q 2009 sales: 74Sales Down -49%
Arapahoe Mkt Area25% capture
1Q 2009 sales: 236Sales down -20%
Douglas Mkt Area23% capture
1Q 2009 sales: 219Sales down -42%
Northwest Mkt Area13% capture
1Q 2009 sales: 122Sales down -44%
Metro Denver by GeographyNew Home Sales Activity
1Q 2008 vs. 1Q 2009
Boulder/Longmont5% capture
1Q 2009 sales: 50Sales down -49%
Denver Mkt Area9% capture
1Q 2009 sales: 85Sales down -69%
Northeast Mkt Area19% capture
1Q 2009 sales: 179Sales down -46%
Overall Metro Denver Sales Activity1Q 2008 – 1,7441Q 2009 – 965
Percent Change (-44.7%)
ARAPAHOE – Two Distinct Markets
New Housing Market • New vs. Resale ratio: 1 in 8• SFA sales up 20%; Affordable at $231k with 36% price drop• SFD prices down 10% to $311k (lowest of all mkt areas
except NE) – VALUE IS SELLINGResale Market• SFD closings down 17% - but a Low 4.0 mo’s supply• Detached prices down 10%; Arap & NE most affordable• SFA very affordable at $113k with low 4.6 mo’s supplyEastern region faces high level of distress & remaining build-
out…prices falling dramatically. Rebound Late.Central region is healthier, but limited product diversification.
Rebound Early.
www.TheGenesisGroup.net Page 27
DOUGLAS – Move-up SFD Woes
New Housing Market• New vs. Resale ratio: 1 in 4• SFD hit hard – down 52%...low supply• SFA - lowest month’s supply at 5.7 mo’s• Base prices for SFD & SFA holding steadyResale Market• SFD down 29% - One of hardest hit in metro area• Supply increases to a high 7.7 mo’s SFD • Least price discounting of all market areas (-4% – 5%)
Last to fall…Move-up SFD paralysis is stifling. Less foreclosure pressures will help this area Rebound Early.
NORTHEAST – Big CorrectionsNew Housing Market• SFD sales drop dramatically (down 55%)• Most affordable new homes offered in metro Denver region• Month’s supply also low (SFA 6.8 mo’s & SFD 3.4 mo’s)• Remaining lot build-out highest in cityResale Market• Closings down but LEAST decline of all market areas • Supply drops significantly (SFD lowest supply at 3.0 mo’s) • Significant price decreases stimulating sales.• Lowest $ Housing in Metro Area - SFD @ $148,000.
Biggest surprise in the metro region. Low supplies are promising, but remaining build-out is highest in the city.
Foreclosure activity will suppress recovery. Demand will remainweak long after rebound begins. Will Rebound Late.
www.TheGenesisGroup.net Page 29
NORTHWEST – Little Competition
New Housing Market• New vs. Resale ratio: 1 to 7 • SFD supplies are low. Remaining build-out concentrated
(Anthem)• Lower priced SFD projects out-performing higher priced opportunities• Immature SFA market - vulnerable w/ high inventory levelsResale Market• While closings are down, supply levels are low• Foreclosures in check
Low remaining build-out, little price depreciation and low supplies levels make this an Early Rebound Area.
www.TheGenesisGroup.net Page 30
DENVER – SFA is Struggling
New Housing Market• New vs. Resale ratio: 1 in 19• Overall sales down 69% to just 85 units in 1Q09• SFD healthiest market in city. Low supplies/High $’s• SFA mo’s supply extraordinarily high (48 mo’s)Resale Market• Foreclosure pressure is high in SFA. • Look for further price erosion (down 20%) in SFA to
reduce inventory.
Healthy SFD markets points to opportunity today. SFA has had a dramatic reversal of fortune. Target markets have retreated and bloated inventory point to slow recovery.
SFD is today opportunity; SFA Will Rebound Late.
www.TheGenesisGroup.net Page 31
JEFFERSON – Non-starter
New Housing Market• New vs. Resale ratio: 1 to 17• SFD sales down significantly, but $’s holding• Month’s supply levels remain comparatively high at 5.2 (SFD) and 13 mo’s (SFA)
Resale Market• SFD closings & prices erode while mo’s supply levels up• SFA holding steady with pricing & mo’s supply
Limited pipeline and land availability make this area different from the rest of the region. Can’t ignore price elasticity…but
opportunities for SFD exist now. Will rebound early.
www.TheGenesisGroup.net Page 32
BOULDER / LONGMONT
New Housing Market• SFD prices UP 11%!• Sales volume down 40% and mo’s supply higher than metro averages. Glut of high priced housing.• Proves that affordability…even in under-supplied markets is critical.Resale Market• Like Douglas it looks worse statistically because it was the last to fall. Sales down 37%, inventory built up.
Prolonged recession is taking its toll on this historically immune market. Longmont has been hit particularly hard and is
responsible for weak numbers. Rebound early in most areas
www.TheGenesisGroup.net Page 33
Recognizing the Bottom
Foreclosures ImprovingInterest Rates Low
Supply Conditions ImprovingApartment Market
Stability in Home PricesJob Losses & Rising UnemploymentNew Home Sales At Record Lows
Consumer Confidence At Record Lows
www.TheGenesisGroup.net Page 34
Leading Indicators for 2009 Forecast
2009 Job Negative Job GrowthImpact of Distressed PropertiesNew Home Building Environment
fewer players…fewer replacement projects
access to creditlimited inventory \ restricted start paces
Bottom line: Demand for housing will remain largely unchanged…new housing will continue to erode
www.TheGenesisGroup.net Page 35
New Home Sales ForecastsChallenges escalate in 2009
Sources: Hanley Wood LLC, The Genesis Group
Source: The Genesis Group, Hanley Wood Market Intelligence
+42%
+29%
New Production Built HousingDenver Metropolitan Area - Historical Sales Trends and Forecast
14,002
7,000
5,000
3,500
1,744
16,88917,784 17,543
5,001
965
15,704
18,75918,282
15,608
3,7243,4573,870
5,547
8,113
9,801 9,590
12,112
13,641
19,432
16,577
9,500
38%39%40% 39%32%29%30%6% 9% 13% 19% 20% 23% 23% 25% 30% 33% 39%35% 40%39%37%0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
1988
1989
1990
1991
1992
1993
1994
1995
199619971998199920002001200220
0320
04200
5200
6200
7200
81Q081Q09
2009 F
orecas
t
2010 F
orecast
2011 F
orecast
To
tal N
ew H
om
e S
alP
ercentag
e of T
otal S
a
Detached SalesAttached Sales
www.TheGenesisGroup.net Page 36
Gaining Traction…Lessons to Learn By
Spire …buzz does mean something
New Beginnings …Oakwood’s recipe for affordability
KB Homes … Martha and Disney pack a powerful punch
Crescent Partners … Overcome the objections
Mike, Peter, Jennifer and JeffNever Quit…Attitude is Everything !!!
www.TheGenesisGroup.net Page 37
Gaining Traction…Lessons to Learn By
Green that Saves Money...it’s here to stay
Tresana …the power of lifestyle housingTaylor Morrison, Markel Homes, McStainNeighborhoods and Amber Homes
Private Builders who increased market share in 2009
Colorado & Santa Fe …the clear winner in distressed
sales and re-branding success
www.TheGenesisGroup.net Page 38
Gaining Traction…Lessons to Learn By
Richmond American Homes… Currently writing the book on how to Outwit, Outplay and
Outlast the Denver Market New Products
Balancing dirt start and inventory housing salesStrong on-site presence
CashImpairment when the market dictates
www.TheGenesisGroup.net Page 39
Second Quarter 2009 Housing BriefingTuesday, May 19, 2009The Landmark Theatre
The Genesis Perspective
Gaining Clarity in a Gaining Clarity in a Chaotic MarketChaotic Market