is there trouble with the bubble? presented by: gregory h. leisch, cre november 14, 2005
TRANSCRIPT
Is There Trouble With Is There Trouble With The Bubble?The Bubble?
Presented by:
Gregory H. Leisch, CRE
November 14, 2005
Prices Are Way UpPrices Are Way Up
U.S. Is Experiencing Record Homeownership
Sources: U.S. Census Bureau; Economy.com; Delta Associates;11/14/05.
70%
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Ho
me
ow
ne
rsh
ip R
ate
And Investor Purchases Are Up
4%
5%
6%
7%
8%
9%
10%
2000 2001 2002 2003 2004
Sources: LoanPerformance and HMDA; Delta Associates; 11/14/05.
% H
ome
Pur
chas
es b
y In
vest
ors
And In Some Markets, Way Up
Washington, D.C. Las VegasSouth Florida
Speculators & Investors End Users
70%
30%
85%
15%
80%
20%
Sources: Multifamilyexecutive.com; Delta Associates; 11/14/05.
Condo Purchases in Select Markets
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1 yr. 5 yr. 10 yr.
REITs
NCREIF
Stocks (S&P 500)
Bonds (VanguardLong-Term)
Source: NAREIT, NCREIF, Vanguard, Delta Associates; November 2005.
Tota
l R
etu
rn/Y
ear
Real Estate
Alternatives
Real Estate Returns vs.Investment Alternatives
As of Mid-Year 2005
And Second Home Purchases Are Up
0%
1%
2%
3%
4%
5%
6%
2000 2001 2002 2003 2004
Sources: LoanPerformance and HMDA; Delta Associates, 11/14/05.
% o
f M
ortg
ages
for
Sec
ond
Hom
es
Annual Increase Existing Home Values
As of June 2005
Sources: OFHEO; Delta Associates; 11/14/05.
0%
5%
10%
15%
20%
25%
30%
35%
Dal Hou Chi SFBay
NY Was Mia LA LV Ft.Laud
Phx
5 YR Avg. Mid 04 - Mid 05
An
nu
al H
ou
se P
rice
In
crea
se
U.S. Averag
e
13.4%
Are Prices Sustainable?Are Prices Sustainable?
Trend In RatioMedian Home Price to Median Household
Income1981-2005
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
81 84 87 90 93 96 99
Sources: Freddie Mac; Delta Associates; 11/14/05.
Ra
tio
0502
RatioMedian Home Price to Median Household
Incomeat June 2005
Major Metro Areas
0
1
2
3
4
5
6
7
8
9
10
LA SFBay
NY Mia Bos Was Balt Chi Phx Phil Hou Atl Dal
Rat
io
Sources: NAR; Economy.com; Delta Associates; 11/14/05.
U.S. 4.3
Types of Mortgages (Second Half of 2004)
0%
10%
20%
30%
40%
50%
Fixed Rate Adjustable Rate Interest Only
% S
econ
d H
alf
2004
Orig
inat
ions
Sources: MBA; Delta Associates; 11/14/05.
Are Certain Cities at Risk?Are Certain Cities at Risk?
0
10
20
30
40
50
60
70
80
90
Was NY Phx Chi Hou LA Ft. Laud SF Bay Dal Mia
Th
ou
san
ds
of
Ne w
Jo
bs
Payroll Job GrowthLarge Metro Areas
12 Months Ending September 2005
Sources: BLS, Delta Associates; 11/14/05.
Average Annual Building Permits
2000-2002
0
10,000
20,000
30,000
40,000
50,000
60,000
NY Phx Chi Was Hou Dal LV SF Bay LA Mia Ft.Laud
Sources: US Census Bureau; Delta Associates; 11/14/05.
Nu
mb
er o
f U
nit
s
Barriers to Entry
0
1
2
3
4
5
6
7
8
9
10
SF Bay NY Was LA Mia Ft. Laud Chi Phx Dal Hou LV
Sources: Delta Associates; 11/14/05.
Percent of Apartment Sales to Condo Converters
April 2004-March 2005
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Mia LV Chi Phil Was Balt LABasin
Hou Phx Atl NY Dal
Sources: Real Capital Analytics; Delta Associates; 11/14/05.
Prerequisite to a Burst:
Over production of housing
Source: Delta Associates; 11/14/05.
Trauma to the local economy
Softer Markets Will Begin To Experience:
Supply will begin to outstrip demand Price appreciation will decline severely Instead of one day sell outs and waiting
lines, concessions will appear Since owners will not be able to sell units
as quickly as before, they will offer them for rent
Source: Delta Associates; 11/14/05.
Is There Trouble With Is There Trouble With The Bubble?The Bubble?
Presented by:
Gregory H. Leisch, CRE
November 14, 2005