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

Presented by:

Scott Sambucci Vice President, Market Analytics

Copyright Altos Research | www.altosresearch.com | 12/09/2010

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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


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


0-12 month Forecasting Median Price Price of New Listings Price of Listings Absorbed Market Action Index List-to-Sale Ratios

6-18 month forecasting Percent Price Decreased/Increase Magnitude Price Decreased/Increase Inventory Percent Relisted Days-on-market (mean and median) Tic/Trend/Peakiness/Troughiness

12-24 month forecasting Year-over-Year Price Year-over-Year Inventory Year-over-Year Percent Price Decreased Year-over-Year Days-on-Market

This list in a partial list of market stats published weekly, with over 400 coincidental & leading indicators available

Altos Research also provides market analytics based on Property Characteristics: Square Footage # Beds/Baths Lot Size & Age Price per Bedroom/Bathroom Price per Square Foot (mean &

median)


Whole Loan Asset Portfolios RMBS Portfolios REO Disposition Mortgage Origination & Servicing Valuation & Appraisal Equity Researchers Risk Management Homebuilders & Developers Insurance




-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

% change Ask Price % change CSXR

Correlation with 4-month lead = 0.705


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 breather


• 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.



Robo-signing QE2 Dodd-Frank Mortgage Rates Mortgage Interest

Rate deduction


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


Difficult to see effects Baked into prices? Home Price Inflation - A Counterfactual

argument

(Note: See Altos Research White Paper: “QE2 & the Housing Market”)


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.


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


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


(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


200,000

220,000

240,000

260,000

280,000

300,000

320,000

340,000

360,000

(Projected)

A

B C

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


• 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


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


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


• 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



Phoenix 85057 Home Prices Altos Forecast

BPO based on June comps $184,000

Altos real-time market data


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


Submit list of loans, property addresses or underlying asset zip codes to Altos Research

Altos Research Housing Market Data Platform yields real-time market analytics and leading indicators for each zip code submitted.


All data files available for download as .CSV file for easy integration into any spreadsheet model or database application.



MORE GOOD READS:

Two (2) White papers now available:

“Leading Indicators of Home Prices”

“QE2 & the Housing Market”

Today’s Presentation

Slides

OUR MARKET ANALYTICS TEAM:

Scott Sambucci, Vice President [email protected]

(415) 931 7942

Andrew Goei, Manager [email protected]

(650) 603-0805

Jeff Eckenhoff, Manager [email protected]

(650) 603-0905


mailto:[email protected]



Real Estate

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