49
P1 Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved. Confidential REO Trends

Three Patterns of Distress in Northeast Real Estate Markets

Embed Size (px)

DESCRIPTION

Presentation given at the Northeast Real Estate Investors meeting in Connecticut looks at the three patterns of distress that have emerged in the housing recovery and how those play out in Northeast markets. The presentation also provides a high-level overview of the U.S. housing market and some red flags in the real estate recovery.

Citation preview

Page 1: Three Patterns of Distress in Northeast Real Estate Markets

P1Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

REO Trends

Page 2: Three Patterns of Distress in Northeast Real Estate Markets

P2Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Quick Market Overview

Three Regional Distressed Trends

Finding Best Deals in Any Market

Real Estate Red Flags

Page 3: Three Patterns of Distress in Northeast Real Estate Markets

P3Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

U.S. Home SalesU.S. Home Sales

Nationwide August home sales at 4.8 million annualized pace, down a half-percent from July and down 16 percent from a year ago.

• Fourth consecutive month with a year-over-year decrease in U.S. sales volume

• Lowest annualized pace since January 2012

Page 4: Three Patterns of Distress in Northeast Real Estate Markets

P4Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median home price nationwide at $195,000, up 3 percent from July and up 15 percent from year ago.

• 29th consecutive month where U.S. median home price has increased from a year ago

• Highest level since August 2008 – a six-year high.

U.S. Home PricesU.S. Home Prices

Page 5: Three Patterns of Distress in Northeast Real Estate Markets

P5Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Overall sales of home priced $500,000 or more are up 23 percent from year ago as a share of all sales.

• But remember we’re talking about a bigger share of a smaller overall pie.

U.S. Home PricesU.S. Home Prices

Page 6: Three Patterns of Distress in Northeast Real Estate Markets

P6Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Majority of markets are where median home price is close to or below $200,000.

• Many of these markets are also hot spots for institutional investors buying up thousands of single family homes as rentals.

Local Market PricesLocal Market Prices

Page 7: Three Patterns of Distress in Northeast Real Estate Markets

P7Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• These are markets behaving rationally, returning to single-digit appreciation that is sustainable for the longer term.

• Good news is that this indicates another bubble is not forming.

• Bad news: the other “B” word, a return to a boring market.

Local Market PricesLocal Market Prices

Page 8: Three Patterns of Distress in Northeast Real Estate Markets

P8Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median list price of $219,900, down 4 percent from previous month but up 2 percent from Aug 2013.

• 17 consecutive months of annual increases in prices.

• Coming off 38-month high of $239,000 in June 2014.

• 2 percent annual appreciation in August 2014 compares to 17 percent annual appreciation in August 2013.

ConnecticutConnecticut

Page 9: Three Patterns of Distress in Northeast Real Estate Markets

P9Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median list price of $325,000 in Aug. 2014, down 1 percent from previous month but up 7 percent from year ago.

• 21 consecutive months of year-over-year increases in home prices.

• 51-month high hit in June 2014.

• 7 percent annual increase in Aug 2014 compares to 24 percent annual increase in Aug 2013

Mass.Mass.

Page 10: Three Patterns of Distress in Northeast Real Estate Markets

P10Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median list price of $169,995 in Aug 2014, down 3 percent from previous month but up 3 percent from Aug 2013.

• Fifth consecutive month of annual increase in home prices.

• Hit 50-month high in June 2014.

PAPA

Page 11: Three Patterns of Distress in Northeast Real Estate Markets

P11Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median sales price of $385,000 in Aug 2014, up 4 percent from previous month and flat from Aug 2013.

• 16 consecutive months of flat or increasing prices on annual basis.

• Hit 69-month high of $390,000 in Sept 2013.

New YorkNew York

Page 12: Three Patterns of Distress in Northeast Real Estate Markets

P12Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Median list price of $239,000 in Aug 2014, down 2 percent from previous month but up 4 percent from year ago.

• 20 consecutive months of year-over-year increases in home prices.

• Hit 50-month high of $245,000 in June 2014.

• 4 percent annual increase in Aug 2014 compares to 21 percent annual increase in Aug 2013

R.I.R.I.

Page 13: Three Patterns of Distress in Northeast Real Estate Markets

P13Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Scheduled foreclosure auctions nationwide increased annually in August after 44 consecutive months of decreases.

U.S. Foreclosure ActivityU.S. Foreclosure Activity

Page 14: Three Patterns of Distress in Northeast Real Estate Markets

P14Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Increasing auctions impacting Connecticut, New York, New Jersey, Maryland.

U.S. Foreclosure ActivityU.S. Foreclosure Activity

Page 15: Three Patterns of Distress in Northeast Real Estate Markets

P15Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

REOs Returning to Normal

REOs Rebounding

REOs Repressed

3 Regional REO Trends3 Regional REO Trends

Page 16: Three Patterns of Distress in Northeast Real Estate Markets

P16Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

REOs Returning to NormalREOs Returning to Normal

REO activity YTD in 2014 is at or below levels from 2006 before housing bubble burst

No legislative or legal intervention creating backlog of deferred REOs

Foreclosure timeline on the decline or flat

Low risk of another surge in REOs from negative equity, NPL sales or other

Includes markets in MI, TX, GA

Page 17: Three Patterns of Distress in Northeast Real Estate Markets

P17Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• 2014 REOs at 25 percent below pre-bubble norm of 169 per month.

ReturningReturning

Page 18: Three Patterns of Distress in Northeast Real Estate Markets

P18Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Still rising average time to foreclose a bit of a concern for Pittsburgh being fully back to normal.

ReturningReturning

Page 19: Three Patterns of Distress in Northeast Real Estate Markets

P19Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Another concern is huge uptick in foreclosure starts two years ago.

• But given the average time to foreclose is less than two years in Pennsylvania this is a dwindling concern.

ReturningReturning

Page 20: Three Patterns of Distress in Northeast Real Estate Markets

P20Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• NPL sales is another metric that could signify deferred foreclosures down the road.

• Pennsylvania had the 10th most FHA NPL sales in 2013.

ReturningReturning

Page 21: Three Patterns of Distress in Northeast Real Estate Markets

P21Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

REOs Rebounding: Atlantic CityREOs Rebounding: Atlantic City

REO activity YTD in 2014 above 2013

Most likely legislative or legal intervention created an REO backlog now hitting market

Foreclosure timeline high, often rising

Includes markets in NY, MD, OR, CT, NJ

Rebound is temporary, but temporary can mean multiple years

Page 22: Three Patterns of Distress in Northeast Real Estate Markets

P22Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• REO activity has increased from previous year for three consecutive years.

• 50 percent increase from 2013 to 2014.

• Still 33 percent below previous peak in 2010.

ReboundingRebounding

Page 23: Three Patterns of Distress in Northeast Real Estate Markets

P23Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• New Jersey has longest average time to foreclose of any state nationwide.

• Average time to foreclosure up 5 percent from year ago, up 242 percent from 2007.

• Foreclosure moratorium in 2011, foreclosure mediation legislation and recent change to requirement for

ReboundingRebounding

Page 24: Three Patterns of Distress in Northeast Real Estate Markets

P24Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Atlantic City foreclosure starts have increased on a year-over-year basis in 29 out of the last 32 months.

• Foreclosure starts increased 52 percent from a year ago in September.

ReboundingRebounding

Page 25: Three Patterns of Distress in Northeast Real Estate Markets

P25Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• New Jersey had the second most NPL sales by the FHA of any state in 2013, second only to Florida.

ReboundingRebounding

Page 26: Three Patterns of Distress in Northeast Real Estate Markets

P26Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

REOs Repressed: BostonREOs Repressed: Boston

REO activity YTD in 2014 below 2013 and 2012 levels but often above 2006 levels

Most likely legislative or legal intervention created artificial drop in REOs

No long-term rebound in REO yet but may be signs of recent increase

Foreclosure timeline high, often rising

Includes markets in CA, NV, FL, MA, IL

Page 27: Three Patterns of Distress in Northeast Real Estate Markets

P27Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• 2014 REO activity down 30 percent from 2013.

• Still well above 2006 levels and not far below 2007 levels.

RepressedRepressed

Page 28: Three Patterns of Distress in Northeast Real Estate Markets

P28Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Massachusetts had seventh highest average time to foreclose in third quarter.

• Average time to foreclose is up 18 percent from a year ago.

• Court rulings over the past several years impacting the foreclosure process along with 2012 legislation to prevent foreclosures have contributed to the lengthening process.

RepressedRepressed

Page 29: Three Patterns of Distress in Northeast Real Estate Markets

P29Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Seven consecutive months ending in September of year-over-year increases in foreclosure starts.

• Another surge in foreclosure starts in 2012 foreshadows an imminent surge in REOs given the average time to foreclose is about two years in Massachusetts.

RepressedRepressed

Page 30: Three Patterns of Distress in Northeast Real Estate Markets

P30Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Massachusetts 2013 FHA NPL sales were the 18th highest in the country.

RepressedRepressed

Page 31: Three Patterns of Distress in Northeast Real Estate Markets

P31Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Best and Worst Deals Nationally

Best and Worst Deals Regionally

Foreclosure Deal Heat Matrix

Using Data to find DealsUsing Data to find Deals

Page 32: Three Patterns of Distress in Northeast Real Estate Markets

P32Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Most of the best deal profiles are either properties in default or scheduled for auction.

• Most are vacant

• Most have negative equity

Best DealsBest Deals

Page 33: Three Patterns of Distress in Northeast Real Estate Markets

P33Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Somewhat surprisingly REOs often sell at a premium rather than a discount.

• Properties in default that are underwater (typically short sales) are no longer good deals. Although properties in default with positive equity are.

• Top group is control group that is not in any form of distress that we know of.

Click icon to add picture

Worst DealsWorst Deals

Page 34: Three Patterns of Distress in Northeast Real Estate Markets

P34Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Best and Worst Deals Regionally

Best and Worst Deals Regionally

Property Profile U.S. Connecticut Massachusetts New Jersey New York PennsylvaniaDiscount/Premium=Avg Pct Below Market Compared to Control Discount/Premium Discount/Premium Discount/Premium Discount/Premium Discount/Premium Discount/PremiumAuction + Negative Equity + Vacant + 1950< Effective Year Built>1990 -28.2% 0.0% 0.0% 0.0% 0.0% -13.6%Default + Positive Equity -26.0% -13.7% -25.6% -17.7% -15.3% -24.1%Default + Negative Equity + Vacant + Effective Year Built<=1950 -25.8% -13.5% -14.4% -20.2% -12.5% -15.5%Auction + Negative Equity +Vacant -24.7% -12.3% -13.2% -30.4% -38.5% -23.8%Auction + Vacant -24.6% -12.2% -13.1% -26.3% -35.1% -25.9%Auction + Negative Equity + Vacant + Effective Year Built<=1950 -23.8% -11.5% -12.4% -30.4% -16.8% -24.4%Auction + Negative Equity + Vacant + Effective Year Built>=1990 -23.6% 0.0% -12.2% 0.0% 0.0% -9.1%Auction + Positive Equity -23.6% -11.3% -35.7% -17.6% -36.6% -31.1%Default -23.3% -32.5% -26.5% -19.3% -17.4% -21.6%Default + Negative Equity + Vacant + 1950< Effective Year Built<1990 -22.4% 0.0% -10.9% 0.0% -15.3% -7.8%Default + Negative Equity -20.9% -8.6% -27.7% -21.1% -22.6% -17.4%Auction -20.5% -8.2% -34.5% -22.0% -36.9% -28.0%Default + Vacant -20.2% -7.8% -18.3% -18.3% 4.7% -21.2%REO + Vacant -18.2% 0.0% -18.2% -5.1% -11.1% -3.6%Auction + Negative Equity -16.8% -4.5% -5.3% -27.0% -38.1% -21.7%Default + Negative Equity +Vacant -16.4% -4.1% -4.9% -20.1% -12.6% -15.5%Control+ Positive Equity -7.6% -3.0% -3.9% -1.4% -2.1% -5.9%REO + Effective Year Built>=1990 -6.3% 6.0% 1.2% 0.0% 0.8% 8.3%REO + 1950< Effective Year Built<1990 -1.7% -1.8% 1.3% 11.4% -27.2% -10.2%Default + Negative Equity + Vacant + Effective Year Built>=1990 1.9% 0.0% 13.3% 15.0% 8.9% 16.5%REO 2.5% 2.1% 2.5% -9.2% -12.1% -10.2%REO + Effective Year Built<=1950 6.7% 2.4% 2.5% -9.2% -11.9% -10.3%Control+Negative Equity 19.2% 8.1% 13.3% 5.8% 14.4% 19.4%

Page 35: Three Patterns of Distress in Northeast Real Estate Markets

P35Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

NPL Sales

Affordability

Cash and Institutional Investors

HELOCs and HAMP Loan Mods

Real Estate Red FlagsReal Estate Red Flags

Page 36: Three Patterns of Distress in Northeast Real Estate Markets

P36Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

NPL Sales

More than 70,000 NPLs sold by FHA

alone between 2010 and 2013

Page 37: Three Patterns of Distress in Northeast Real Estate Markets

P37Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

NPL Sales

Backed by properties worth a cumulative

$9.6 billion

Page 38: Three Patterns of Distress in Northeast Real Estate Markets

P38Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Opposite Directions

Page 39: Three Patterns of Distress in Northeast Real Estate Markets

P39Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

NPLs delaying foreclosure?

Page 40: Three Patterns of Distress in Northeast Real Estate Markets

P40Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

NPLs delaying foreclosure?

Page 41: Three Patterns of Distress in Northeast Real Estate Markets

P41Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• 34 percent of nearly 1,200 counties analyzed had exceeded affordability “norms” in the second quarter.

• No counties had exceeded affordability levels seen during the housing bubble.

• Average affordability level for all counties over last 14 years was 19 percent of median income needed to buy median priced home.

AffordabilityAffordability

Page 42: Three Patterns of Distress in Northeast Real Estate Markets

P42Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Nationwide students with student loan debt need to make 34 percent more income to afford a median-priced house.

• In Orange County student loan debt reduces buying power by only 8 percent.

• Bad news is that that median income in Orange County is less than minimum income needed to buy a median priced home – with or without student loan debt (based on max 43 percent of income spent on housing).

Student Loan ImpactStudent Loan Impact

Page 43: Three Patterns of Distress in Northeast Real Estate Markets

P43Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Coming down after spike at the end of last year/beginning of this year.

• U.S. at 38 percent compared to long-term average of 32 percent (back to January 2001.

• California at 28 percent and Orange County at 27 percent compared to long-term state average of 25 percent.

Cash SalesCash Sales

Page 44: Three Patterns of Distress in Northeast Real Estate Markets

P44Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Also coming down after spike late last year in OC.

• U.S. at 4.7 percent compared to long-term average of 3.1 percent (since Jan 2001).

• California at 1.8 percent and Orange County at 0.6 percent compared to state long-term average of 2.4 percent.

Institutional InvestorsInstitutional Investors

Page 45: Three Patterns of Distress in Northeast Real Estate Markets

P45Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Still more than 8 million homeowners seriously underwater.

• Down to 15 percent of all homes with a mortgage from 29 percent at peak of negative equity in second quarter 2012

Home EquityHome Equity

Page 46: Three Patterns of Distress in Northeast Real Estate Markets

P46Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

• Highest underwater percentages on loans originated in 2004 to 2008.

Home EquityHome Equity

Page 47: Three Patterns of Distress in Northeast Real Estate Markets

P47Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Other Risks• HELOCs

• 16 million outstanding• $79 billion coming due in next few years

• Resetting HAMP loan mods• More than 775,000 coming to end of

government subsidized period this year• Typical increase expected to be $197 for

monthly payments

Page 48: Three Patterns of Distress in Northeast Real Estate Markets

P48Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

ResourcesLocal market stats and trends down to county, city, zip level: http://www.realtytrac.com/statsandtrends

RealtyTrac market reports: www.realtytrac.com/content

Download mailing lists of homeowners in foreclosure and other likely sellers: http://mega.realtytrac.com/

RealtyTrac Premium Subscription

Page 49: Three Patterns of Distress in Northeast Real Estate Markets

P49Copyright © 2014 Renwood RealtyTrac LLC. All rights reserved.

Confidential

Thank You!Daren Blomquist

[email protected]