TwinRock Partners. Single Family Housing Research Western Region. Newport Beach, California

Transcription

1 TwinRock Partners Single Family Housing Research Western Region Newport Beach, California 1

2 Presentation Outline I. Market Data 3 A. Inland Empire 4 B. Sacramento 25 C. Stockton 33 D. Modesto 40 E. Phoenix 47 F. Las Vegas 57 2

3 I. Market Data 3

4 A. Inland Empire 4

5 US & Inland Empire Median Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike. $450, $400, $350, US Avg Home Price $300, $250, $200, Inland Empire Avg Home Price Treasury Rate $150, Inflation Rate $100, $50, $ Source: Federal Housing Finance Agency (FHFA) 5

6 US Home Appreciation Rate vs. Inflation: During times of rising inflation U.S. home appreciation has outpaced inflation by approximately 60% or 1.60x for the past 30 years % 30.00% 20.00% 4.5% 5.0% 6.3% 8.8% -3.5% US Home Appreciation Rate 10.00% 0.00% Inflation Rate % 3.8% 4.0% 2.4% 2.2% 1.3% % Average Growth or Inflation rate per annum during highlighted periods % % Source: Federal Housing Finance Agency (FHFA) 6

7 Inland Empire Home Appreciation Rate vs. Inflation: During times of rising inflation I.E. home appreciation has outpaced inflation by approximately 300% or 3.0x for the past 30 years % -0.4% 10.3% 7.9% 21.6% -1.9% 30.00% Inland Empire Home Appreciation Rate 20.00% 10.00% 0.00% Inflation Rate % 3.8% 4.0% 2.4% 2.2% 1.3% % % Average Growth or Inflation rate per annum during highlighted periods % Source: Federal Housing Finance Agency (FHFA) 7

8 Regression Analysis Riverside County Home Sales $700,000 Average Sale Price $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $380,000 $400,000 $250, Corona Moreno Valley Murrieta Riverside Temecula This chart shows the average Trend Line for the pre-bubble years from , 2015, and 2017 projected price levels for the five cities charted. The chart shows that these cities are undervalued to historic norms and significant appreciation is needed to revert back to the Trend Line. 8

9 Regression Analysis San Bernardino County Home Sales $450,000 Average Sale Price $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 $280,000 $268,000 $175, San Bernardino Highland Rialto Fontana This chart shows the average Trend Line for the pre-bubble years from , 2015, and 2017 projected price levels for the four cities charted. The chart shows that these cities are undervalued to historic norms and significant appreciation is needed to revert back to the Trend Line. 9

10 Apartment Cap Rates vs. Key Rates: Moderate cap rate increase when interest rates increase (Delayed Reaction) Year Treasury Rate 8 Rate % 6 30 Year Freddy Mac Fixed Rate 4 Apartment Cap Rates Source: Federal Housing Finance Agency (FHFA) 10

11 Home Vacancy Rates in the 20 Largest States by Population (Plus Nevada) 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 8.10% 6.00% 4.00% 2.00% Source: US Census Bureau 0.00% FL AZ NV NC WI MI MO GA TN TX IN OH PA NY NJ MA MD WA VA IL CA 11

12 While San Bernardino & Riverside County s unemployment is high, it is decreasing at a faster pace than National unemployment % 14.0 San Bernardino and Riverside Counties % Unemployment Rate % 9.1% National Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Source: US Bureau of Labor Statistics 12

13 Inland Empire Population Growth 5,000,000 4,500,000 4,224,851 4,303,694 (+1.86% YoY) 4,000,000 3,500, % Growth ( ) 3,000,000 2,500,000 2,000,000 Riverside Population San Bernardino Population 1,500,000 1,000, , Current Estimate Source: US Census Bureau 13

14 California Population Breakdown by Generation 40.00% 36.00% 35.00% 30.00% 29.30% 25.00% 23.80% 20.00% 15.00% 10.90% 10.00% 5.00% Source: US Census Bureau 0.00% Echo Boom (0-24) Baby Bust (25-44) Baby Boom (45-64) Pre-Baby Boom (65+) 14

15 California home construction is not keeping pace with population growth. Per California Department of Housing and Development, CA is estimated to need 220,000 units annually to meet population demand far above recent years. SoCal Forecast 2008 =30,241 permits 2009 = 17,798 permits 2010F = 19,495 permits 2011F = 26,170 permits Source: Bureau of the Census, LAEDC; 15

16 Housing Recovery is a W with a Long Tail 7/09 TODAY The initial significant downturn (2006 early 2010) was the aftermath of 12 years of positive and speculative influences ( ). Reported Price Appreciation The Leg Up from April 2009 to March 2010 was caused by the tax credit and other government intervention. Temporary Bottom Cyclical Bottom Source John Burns The Leg Down from April 2010 to 2012 is going to be driven by a shift to excessive distressed home sales, with great affordability and investor REO appetite providing a floor. The Long Tail will be driven by: Supply/Demand Equalization Demand increases from increasing population and fewer new homes under construction Deleveraging - below average economic growth while government, businesses and consumers reduce their debt, while concurrently existing and new credit sources expand availability Tightening Underwriting - Less accommodative for-sale housing policies such as rising mortgage rates and down payment requirements, offset by homebuyers increasing their credit ratings 16

17 Foreclosure Starts will trend down Number of Loans 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 U.S. Annual Foreclosure Starts (NOD) Forecast Economy-related Foreclosure Starts (JBREC) Foreclosure Starts from ARM Resets (JBREC) Baseline Foreclosure Starts (JBREC) Source: John Burns Real Estate Consulting using Mortgage Bankers Assoc and other data, Sep P 2011P 2012P 2013P 2014P 2015P 2016P Source John Burns 17

18 Average Mortgage Payment to Median Household Income Ratio: OC Average; SD and LA Good; San Bernardino and Riverside Great 80.00% 70.00% 60.00% Orange County Ratio San Diego Ratio 50.00% Inland Empire Ratio 40.00% Los Angeles Ratio 30.00% California Ratio 20.00% 10.00% 0.00% Source: California Association of Realtors 18

19 Rising rents will help encourage home buying Source John Burns 19

20 Foreclosure Data * 10,296 Bank Owned REO in May, Down 2.34% Y/Y. * 11,925 Bank Owned REO in May, Down 1.92% Y/Y. 20

21 Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. 1,511 Notices of Default in April, Down 36.78% Y/Y. 1,873 over 90 days past due in April, Down 34.05% Y/Y. Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 21

22 Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. 1,979 Notices of default in April, Down 33.21% Y/Y. 2,191 over 90 days past due in April, Down 36.29% Y/Y. Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 22

23 The complexity a homebuilder faces is the competition from resales. They need to sell the house below for $230,000 which can be purchased for $100,000 today. Replacement Cost Analysis Byron St. Highland, California House Size - Sq. Ft. 1,354 Lot Size - Sq. Ft. 12,375 PSF Sales Price $ 230,029 $ 170 Lot Premium $ - $ - Total Sales Price $ 230,029 Finished Lot Values (1) $ 100,000 Fees $ - House $ 67,700 $ 50 Soft Costs (2) $ 41,405 18% Total Costs $ 209,105 Profit $ 20,924 Gross Profit 10.01% 1. Per Hoffman Company Land Value Index assuming 7,200/sf lot. This implies negative land value as the cost to complete a lot to buildable state is $105,000 on average. 2. Includes Sales Commission 23

24 Miscellaneous If immigration reaches the Census Bureau s expectations, growth could climb to 14.8 million over the next decade. - Joint Center for Housing Studies - Harvard University From a mortgage payment to income standpoint, for-sale housing has not been this inexpensive in at least 30 years. - John Burns Real Estate Consulting Minorities are likely to fuel 73% of household growth in , with Hispanics leading the way at 36%. - ImmigrantImpact.com We project 14% growth in apartment rents from Ivy Zelman, Zelman & Associates 24

25 B. Sacramento 25

26 US & Sacramento Average Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike % % % 10.00% 8.00% 6.00% 4.00% 2.00% Sacramento Median Home Price US Median Home Price Inflation Treasury Rate % % 26

27 Sacramento Home Appreciation Rates vs. Inflation: During times of rising inflation Sacramento home appreciation has outpaced inflation by approximately 128% or 2.3x for the past 30 years % 30.00% 12.0% 17.8% 8.4% 20.00% 10.00% -1.3% -5.6% 0.00% Sacramento Home Appreciation Rates % % 3.8% 4.0% 2.4% 2.2% 1.3% Inflation Rate Average Growth Rate During Highlighted Periods % % Source: Federal Housing Finance Agency (FHFA) 27

28 Regression Analysis - Sacramento $350, Home Price Median Home Price $300, $250, $200, $150, $100, $50, $178,000 $185,000 $197,000 $ This chart shows the average Trend Line for the pre-bubble years from , and projected price levels in 2015 and

29 Sacramento Unemployment Rate % % % 9.1% Sacramento MSA Unemployment rate 4.0 National Unemployment Rate 2.0 Source: US Bureau of Labor Statistics 0.0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 29

30 Average Mortgage Payment to Median Household Income Ratio 70.00% 60.00% 50.00% Sacramento County Ratio 40.00% Inland Empire Ratio California Ratio 30.00% US Ratio 20.00% 10.00% Source: Federal Housing Finance Agency (FHFA) 0.00%

31 Foreclosure Data * 6,117 Bank Owned REO in Jun, Down 5.05% Y/Y. 31

32 Foreclosure Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. 1,210 Notices of Default in June, Down 20.86% Y/Y. 1,176 over 90 days past due in April, Down 37.88% Y/Y. Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 32

33 C. Stockton 33

34 US & Stockton Median Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike % % % San Joaquin Median Sales Price % US Median Home Price % Inflation % 0.00% Treasury Source: Federal Housing Finance Agency (FHFA) % 34

35 Stockton Home Appreciation Rates vs. Inflation: During times of rising inflation Modesto home appreciation has outpaced inflation by approximately 160% or about 2.6x for the past 30 years % 30.00% 10.8% 10.7% 17.8% 20.00% 0.7% -4.8% 10.00% Stockton Home Appreciation Rate 0.00% Inflation Rate % 3.8% 4.0% 2.4% 2.2% 1.3% Average Growth Rate During Highlighted Periods % % Source: Federal Housing Finance Agency (FHFA) %

36 Stockton Unemployment 20.0% 18.0% 18.3% 16.2% 16.0% 14.0% Stockton Unemployment 12.0% 10.0% 8.0% 10.1% National Unemployment 6.0% 9.1% 4.0% 2.0% Source: US Bureau of Labor Statistics 0.0%

37 Mortgage Payment to Income Ratio 70.00% 60.00% 50.00% 40.00% Stockton Ratio Inland Empire Ratio 30.00% California Ratio 20.00% 10.00% Source: Federal Housing Finance Agency (FHFA) 0.00%

38 Stockton Foreclosure Data * 3,066 Bank Owned REO in Q2, Down 3.04% Y/Y. 38

39 Stockton Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. * 527 Notices of Default in Q2, Down 31.91% Y/Y * 601 Over 90 days past due in Q2, Down 39.78% Y/Y Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 39

40 D. Modesto 40

41 US & Modesto Median Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike % % % % 4.00% 3.00% 2.00% Median Home Price US Median Home Price Inflatioin Treasury Rate % % Source: Federal Housing Finance Agency (FHFA) % 41

42 Modesto Home Appreciation Rates vs. Inflation: During times of rising inflation Modesto home appreciation has outpaced inflation by approximately 100% or about 2.0x for the past 30 years % 19.4% 30.00% 20.00% 10.00% -4.1% 12.0% 7.7% -6.2% Average Growth Rate During Highlighted Periods Modesto Home Appreciation Rates 0.00% Inflation Rate % 4.0% 2.4% 2.2% 1.3% % 3.8% % Source: Federal Housing Finance Agency (FHFA) %

43 Modesto Unemployment 20.0% 18.9% 17.4% 18.0% 16.0% 14.0% Modesto Unemployment Rate 12.0% 10.0% National Unemployment Rate 8.0% 10.1% 9.1% 6.0% 4.0% 2.0% Source: US Bureau of Labor Statistics 0.0%

44 Mortgage Payment to Income Ratio 70.00% 60.00% 50.00% 40.00% 30.00% Modesto Ratio California Ratio Inland Empire Ratio 20.00% 10.00% Source: Federal Housing Finance Agency (FHFA) 0.00%

45 Modesto Foreclosure Data * 6,832 Bank Owned REO in Q2, Down 3.46% Y/Y. 45

46 Modesto Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. * 1,231 Notices of Default in Q2, Down 30.88% Y/Y * 1,495 Over 90 days past due in Q2, Down 30.98% Y/Y Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 46

47 E. Phoenix 47

48 US & Phoenix Median Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike % % % Phoenix Median Home Price US Median Home Price % Inflatioin Treasury % % -2.00% Source: Federal Housing Finance Agency (FHFA) 48

49 Phoenix Home Appreciation Rates vs. Inflation: During times of rising inflation Phoenix home appreciation has outpaced inflation by approximately 24% or about 1.2x for the past 30 years % Phoenix Home Appreciation Rate % -.2% 6.33% -9.9% Inflation Rate Average Growth Rate During Highlighted Periods % 4.0% 2.4% 2.2% % Source: Federal Housing Finance Agency (FHFA) 49

50 Regression Analysis - Phoenix $350, Home Price Median Home Price $300, $250, $200, $150, $100, $50, $140,000 $157,000 $152,000 $ This chart shows the average Trend Line for the pre-bubble years from , and projected price levels in 2015 and

51 Home Vacancy Rates in the 20 Largest States by Population (Plus Nevada) 20.00% 18.00% 16.00% 16.30% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Source: US Census Bureau 0.00% FL AZ NV NC WI MI MO GA TN TX IN OH PA NY NJ MA MD WA VA IL CA 51

52 Phoenix Unemployment % % % 8.1% National Unemployment Rate 6 4 Phoenix Unemployment Rate 2 Source: US Bureau of Labor Statistics

53 Arizona Population Breakdown by Generation 40.00% 35.00% 35.37% 30.00% 25.00% 26.28% 24.55% 20.00% 15.00% 13.80% 10.00% 5.00% Source: US Census Bureau 0.00% Echo Boom (0-24) Baby Bust (25-44) Baby Boom (45-64) Pre-Baby Boom (65+) 53

54 Mortgage Payment to Income Ratio 50.00% 45.00% 40.00% 35.00% 30.00% Phoenix Ratio 25.00% Inland Empire Ratio 20.00% Arizona Ratio 15.00% 10.00% 5.00% 0.00% Source: Federal Housing Finance Agency (FHFA) 54

55 Foreclosure Data * 16,845 Bank Owned REO in Jun, Down 10.92% Y/Y. 55

56 Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. 4,476 over 90 days past due in April, Down 27.41% Y/Y. Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 56

57 F. Las Vegas 57

58 US & Las Vegas Median Home Prices vs. 10-Yr. Treasury Rate: Moderate change to home prices when interest rates spike % % 6.00% Las Vegas Median Home Price US Median Home Price % Inflation Treasury Rate % % Source: Federal Housing Finance Agency (FHFA) % 58

59 Las Vegas Home Appreciation Rates vs. Inflation: During times of rising inflation Las Vegas home appreciation was outpaced by inflation by approximately 55% or about 1.5x for the past 30 years % 18.3% 30.00% -8.6% 4.5% 20.00% 3.0% Las Vegas Home Appreciation Rate 10.00% -11.1% 0.00% Inflation Rate % % 4.0% 2.4% 2.2% Average Growth Rate During Highlighted Periods % 3.8% 1.3% % Source: Federal Housing Finance Agency (FHFA) 59

60 Regression Analysis Las Vegas $350, Home Price Median Home Price $300, $250, $200, $150, $100, $50, $138,000 $180,000 $170,000 $ This chart shows the average Trend Line for the pre-bubble years from , and projected price levels in 2015 and

61 Home Vacancy Rates in the 20 Largest States by Population (Plus Nevada) 20.00% 18.00% 16.00% 14.00% 14.30% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Source: US Census Bureau 0.00% FL AZ NV NC WI MI MO GA TN TX IN OH PA NY NJ MA MD WA VA IL CA 61

62 Las Vegas Unemployment % % 9.1% Las Vegas Unemployment Rate 12.1% National Unemployment Rate Source: US Bureau of Labor Statistics

63 Nevada Population Breakdown by Generation 40.00% 35.00% 33.84% 30.00% 28.52% 25.00% 25.63% 20.00% 15.00% 12.01% 10.00% 5.00% Source: US Census Bureau 0.00% Echo Boom (0-24) Baby Bust (25-44) Baby Boom (45-64) Pre-Baby Boom (65+) 63

64 Mortgage Payment to Income Ratio 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% Las Vegas Ratio Inland Empire Ratio Nevada Ratio 20.00% 15.00% 10.00% 5.00% Source: Federal Housing Finance Agency (FHFA) 0.00%

65 Las Vegas Foreclosure Data * 40,633 Bank Owned REO in Q1, Up 21.06% since Y/Y 65

66 Las Vegas Foreclosure Data Foreclosure Filings Notice of Default filings are the first step in the foreclosure process. Notice of Trustee Sale filings set the date and time of an auction, and serve as the homeowner's final notice before sale. * 14,905 Notices of Default in Q1, Down 32.08% Y/Y. * 15,251 Over 90 days past due in Q1, Up 15.06% Y/Y. Foreclosure Outcomes After the filing of a Notice of Trustee Sale, there are only three possible outcomes. First, the sale can be Cancelled for reasons that include a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements. Alternatively, if the property is taken to sale, the bank will place the opening bid. If a 3rd party, typically an investor, bids more than the bank's opening bid, the property will be Sold to 3rd Party; if not, it will go Back to the Bank and become part of that bank's REO inventory. 66