apd solutions, llc
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Housing Industry Outlook
Creating New Opportunities with21st Century Solutions
Vaughn D. Irons, CEOAPD Solutions
October 7, 2009
This presentation is a conglomeration of information and details provided by multiple sources including:
•MD Sass/Waterfall Asset Management•Morgan-Stanley•Standard & Poors•Goldman Sachs•Duetsche Bank•Brookings Institute•Pew Center for Social Research
Housing Industry Outlook
Who is APD Solutions?
Firm Background
APD Solutions is a National Neighborhood Revitalization Firm created to meet the current housing industry challenges
Affiliated with APD, Inc. established in 1990 with the help of the FDIC and Resolution Trust Corp. (RTC)
National reputation in developing redevelopment strategies for low-to-moderate, historic and minority neighborhoods
Experience
Over 225 years experience in housing, finance, affordable programs and neighborhood development
APDS Company Profile
Our Core Values
For us it isn’t only important what we do… but also why we do it.
Community Development
Consulting
Acquisition andAsset Management
NeighborhoodProgram Design and
Oversight
Sub-serviceProviders*
Real Estate &DispositionStrategies
SociallyResponsible
Investing
What We Provide
Urban &Neighborhood
Planning
Our Clients
Real Estate Market Performance
Unprecedented Housing Crisis:• Foreclosures have increased by 71% since last year
• 1.2 million REOs by the end of 2008
• 2 million foreclosures in the first 6 months of 2009
• Only 325,000 modifications
Enormous Impact on Entire Communities:• 40.6 million homes in neighborhoods surrounding foreclosed
homes will suffer price decline
• $352 billion total decline in property values
• Localities will lose $4.5 billion in property taxes and other local tax revenue
Recap of the Last Year
“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”
Charles Darwin
Old Views and Skills Won’t Work in the Future
Real Estate Performance•Market Recovery Projections•Foreclosure Focus•The Impact on Home Price Appreciation
The Impact of “In” Migration•The South is the biggest beneficiary •Georgia is #1 African-American
Household Growth (11% or 1.2mm HH/yr)•Childless households•Racial/ethnic household changes •Immigrant household growth
Presentation Overview: Future Trends
Projections of Market Recovery
Foreclosed Properties Up to 40% of Transactions
2010-2011 Price Forecast
Focus on Pre-2003 Purchasers
Considering The Shadow Inventory
Foreclosed Properties Create More AffordabilityPrice to Income - Foreclosed
Affordability for Existing Homes Still a ChallengePrice to Income - Existing
The Negative Equity Issue
Rising Home Inventory Levels
have not been met with Rising Demand, as
“Prime” Loan Underwriting
Guidelines have tightened,
excluding many borrowers from
qualifying.Today homebuyers are being asked to qualify with 700 minimum credit scores, 5% down, sufficient reserves, 33/41 debt to income ratios, and stellar credit history.
Yesterday homebuyers were being asked to qualify with 580-600 minimum credit scores, 0% down, no reserves, and 45 debt to income ratios.
Qualified Buyer Pools are Much Smaller
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Apr '07
Mar '07
Jun '07
Jul '07
Aug '07
Sep '07
Oct '07
Nov '07
Dec '07
Jan '08
Feb '08
Mar '08
Apr '08
REO Liquidation REO from Foreclosures
2009
Yet the Banks are only finding Buyers for roughly 10% of the unsold home inventory…
New Demographic Shifts
Understanding Household Growth
Racial & Ethnic Minorities• Racial and ethnic minorities account for large
share of household growth• Minorities will account for 65% of net household
growth• Hispanic and Asian household growth will account for
the largest share of the minority increase• Because they are younger, minorities will constitute
large part of first-time homeownership demand• Minority homeownership rate has dropped
due to foreclosures
Household Growth This Decade (2000-2010)
-1,900
6,177
1,104 1,263
2,320
1,2721,076659
-4,000
-2,000
0
2,000
4,000
6,000
8,000
Age Under 55 Age 55 and Over
Age of Household Head
Thou
sand
s of
Hou
seho
lds
White
Black
Hispanic
Other
Educational Attainment Impacts Homeownership
Immigration Still an Opportunity• 11% of U.S. population is foreign-born
• 44% of foreign-born have entered the U.S. since 1990 (relative newcomers)
• 27% of total household growth in next decade will result from immigration
Immigration will be concentrated in Gateway Regions
• Hispanic household growth will be largest contributor
51% of foreign-born are from Latin America
CA Immigrant Growth
The Number vs. Percentage
Changes in Households (2000 to 2010)
5,276
-76
-11
1,023
4,948
572
-500
500
1,500
2,500
3,500
4,500
5,500
6,500
Th
ou
san
ds
of H
ou
seh
old
s
Married, Childless
Married, Children
Single Parents
Other Family
Single Person
Other Nonfamily
Changes in Households Beyond 2010
Childless Households Dominate Growth
So What… Now What?
How Can APDS Help?
Acquisition
Asset Management
Disposition
Acquisition DispositionAsset
Management
Overall Program Design
Continuity of Responsibility
31
Property Acquisition Services (BuySmart)
Atlanta Sample MapFor Waterfall A.M.Pre Portfolio Acquisition
45 units
32
Sample of APD Mapping and GIS Capabilities
33
Sample of APD Tracking and Targeting Capabilities (Chattanooga)
34
Sample of APD Tracking and Targeting Capabilities (Chattanooga)
Community Participation
Accountability
Socially Responsible Options
Targeted Intervention/Clustering4
3
2
1
Two-Pronged Marketing Approach
Aggressive Implementation7
6
5Rehabilitate a superior product
APDS Property Disposition Principles
The APDS Approach
Force Everything to Work Together
APDS Housing Programs
Galvanized
Disposition
TypicalHousing Programs
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