land and home(s) no longer four letter words?
DESCRIPTION
A look at the Southern California residential market.TRANSCRIPT
Jeff Meyers, PresidentMeyers LLC, a Kennedy Wilson Company(310)887-6297
Allen MatkinsReal Estate Development Law
Update
Land and Home(s)No Longer Four Letter Words?
February 27, 2013
2009 & 2010
2011 & 2012
2013
New Home Market Trends
Thursday, September 28, 2006
Michelle WolkoysPrincipalBuilder Advisors, LLC (Meyers Group)(949) 640-0050 x207(714) 357-6005 mobile
E/P RATIOCalifornia
Source: NAR; CAR; www.meyersllc.com
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
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1987
1988
1989
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1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
F20
12F
2013
F20
14F
2015
F20
16F
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30State of California Price Appreciation and E/P Ratio
CA Price Appreciation 40-Year CA Historical Average E/P
Year
Year
-ove
r-Ye
ar P
rice
Chan
ge
E/P
Ratio
8.1% Annual Average
New Home Market TrendsBAY AREA HOUSING MARKETExisting Single-Family Median Sales Price (Q4 2012 vs. Q4 2011)
SOURCE: DataQuickNote: Median prices of completed sales of existing single-family homes.
New Home Market TrendsAgenda
1. The Recovery
2. A Few Samples
3. What to Watch For
New Home Market Trends1. The Recovery
Source: BLS, Moody’s Analytics
Excess Supply – REO is moving through system
Stopped New Construction – Five Year Absence
Economic Fundamentals – Improving
Still some mixed macro signals, but from the ground up, this recovery is gaining momentum.
New Home Market TrendsAgenda
1. The Recovery
2. A Few Samples
3. What to Watch For
New Home Market TrendsANNUAL NONFARM JOB CHANGES BY STATEDecember 2012 vs. December 2011
Source: BLS
+225,900
+260,800
+123,600
New Home Market Trends
Source: Indeed.com
Rank (Last Qtr Rank) Metropolitan Area Job Postings per 1000 People
1 (1) San Jose, CA 153
2 (2) Washington, DC 112
3 (3) Raleigh, NC 106
4 (4) Hartford, CT 102
5 (5) Boston, MA 92
6 (6) Baltimore, MD 88
7 (7) Denver, CO 82
8 (8) San Francisco, CA 77
9 (10) Seattle, WA 73
10 (9) Austin, TX 73
Job Trends – Job Postings per Capita
2. A Few Samples
New Home Market Trends
Source: Wells Fargo Securities
California Employment Growth by Industry3-Month Moving Average, Nov. 2012
2. A Few Samples
New Home Market Trends2. A Few Samples
Source: Wells Fargo Securities
California Employment Growth by County3-Month Moving Average, Nov. 2012
New Home Market Trends2. A Few Samples
Source: Census
California Single Family Permits (in thsds)
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
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1995
1996
1997
1998
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2009
2010
2011
2012
0
20
40
60
80
100
120
140
160
180
200Recession Recession Recession Recession
Added 13.3M people since ‘82
New Home Market Trends
FINISHED LOT VALUES, LOS ANGELES COUNTYMapped
Source: DQ News, Meyers Research
Assumes a home size of 2,000 square feet and directs of $45/ft. Soft costs estimated at 20% with a targeted profit margin of 15%.
New Home Market Trends
FINISHED LOT VALUES, LOS ANGELES COUNTYTop and Bottom Markets
Source: DQ News, Meyers Research
Community Name
ZIP CodeMedian Resale
Home Price/ Sq. Ft
Est. Median New Home Price/ Sq. Ft (+
15%)
Est. Median New Home Price (2,000
SF)
Est. Finished Lot Value
Finished Lot, % Home Price
Snta Monica 90402 $1,042 $1,198 $2,396,600 $1,467,790 61%Snta Monica 90403 $952 $1,095 $2,189,600 $1,333,240 61%LA/Brentwd 90049 $856 $984 $1,968,800 $1,189,720 60%Beverly Hills 90212 $855 $983 $1,966,500 $1,188,225 60%Venice 90291 $816 $938 $1,876,800 $1,129,920 60%Snta Monica 90405 $810 $932 $1,863,000 $1,120,950 60%P Palisades 90272 $805 $926 $1,851,500 $1,113,475 60%Malibu 90265 $801 $921 $1,842,300 $1,107,495 60%Beverly Hills 90211 $768 $883 $1,766,400 $1,058,160 60%Hermosa Bh 90254 $742 $853 $1,706,600 $1,019,290 60%
Palmdale 93551 $97 $112 $223,100 $55,015 25%Lancaster 93536 $87 $100 $200,100 $40,065 20%Littlerock 93543 $84 $97 $193,200 $35,580 18%Palmdale 93550 $79 $91 $181,700 $28,105 15%Palmdale 93552 $78 $90 $179,400 $26,610 15%Lancaster 93535 $72 $83 $165,600 $17,640 11%Lancaster 93534 $71 $82 $163,300 $16,145 10%Palmdale 93591 $66 $76 $151,800 $8,670 6%Llano 93544 $57 $66 $131,100 ($4,785) -4%Pearblossom 93553 $50 $58 $115,000 ($15,250) -13%
Assumes a home size of 2,000 square feet and directs of $45/ft. Soft costs estimated at 20% with a targeted profit margin of 15%.
New Home Market TrendsAgenda
1. The Recovery
2. A Few Samples
3. What to Watch For
Peak to Trough
Source: RCA and Moody’s Investors Service
MARKET SHARE BY GENERATIONGen Y captures 25% of population
Source: Census
Generation Silent Baby Boomers GenerationX
Echo Boom/Gen Y
Years Born 1925 – 1945 1946 – 1964 1965 – 1979 1980 - 2000
Age Range 65 to 85 46 to 64 31 to 45 10 to 30
US Population 34M 82M 62M 84M
% of Population 13% 31% 23% 32%
PREFERRED COMMUNITY TYPENational Association of Realtors 2011
SOURCE: NAR
City - Downtown Area
City - Residential Area
Suburb - mix of housing, businesses
Suburb - housing only
Small Town
Rural Area
0% 5% 10% 15% 20% 25% 30%
8%
11%
28%
12%
18%
22%
If you could choose where to live, in which type of the following locations would you most like to live?
City + Suburban Mixed-Use = 47%
New Home Market Trends
Thursday, September 28, 2006
HOUSING AFFORDABILITY & NEW HOME SALESUnited States
Source: CAR, Census, Freddie Mac
*Housing Affordability Index score thru Q3 2012
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
*2012
0
200
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1,000
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1,400
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US New Home Sales US Affordability
NEW
SFD
HO
ME
SALE
SH
OU
SING
AFFORDABILITY IN
DEX
Annual Mortgage Rates:1988 – 10.34 %1993 – 7.31%2002 – 6.54%2009 – 5.04%
Currently – 3.41%
New Home Market Trends
AVERAGE FICO OF AGENCY MBS ORIGINATIONSSeptember 2003 – October 2012
Source: CoreLogic Loan Performance
New Home Market TrendsCASH BUYERSCalifornia
Source: DQ News
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100,000
200,000
300,000
400,000
500,000
600,000
700,000
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
10.3% 10.7% 11.0%10.1%
13.1%
20.1%
27.6%29.4%
31.3%
33.8%
All Resales % Cash
Tota
l Res
ales
% o
f Cas
h Bu
yers
New Home Market TrendsCASH BUYER ACTIVITY IN CALIFORNIAMarket Share by Region
Source: DQ News
Mountains*
North Calif*
Coast
Bay Area
Central Valley
Southern California
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%
1.49%
2.41%
2.90%
18.00%
21.71%
53.48%Chart Title
New Home Market TrendsCASH BUYER ACTIVITY IN SO CALMarket Share by County
Source: DQ News
Imperial
Ventura
Orange
San Bernardino
San Diego
Riverside
Los Angeles
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%
1%
3%
14%
14%
17%
20%
32%Chart Title
1959
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F20
14F
2015
F20
16F
2017
F20
18F
2019
F
0
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200
300
400
500
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700
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900
1,000
1,100
1,200
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
Multi-Family Homeownership Rate
Perm
its (i
n th
ousa
nds)
Hom
eow
ners
hip
Rate
Historical Total Annual Permit Average = 469
1970’s6.7 Million
1990’s3.1 Million
2000’s3.9 Million
New Home Market TrendsMULTIFAMILY PERMITSHistory and Forecast
Source: Census; Meyers LLC
1960’s 4.9 Million
1980’s5.6 Million
2010’s (Forecast)4.3 Million
New Home Market TrendsMULTIFAMILY PERMITSTop 10 By Metro Area, 2012 vs 2011
Source: Census
Rank Metro Area 2012 2011 % Ch.
1 NY-North NJ-Long Island NY-NJ-PA 20,137 15,138 33.02%2 Dallas-Fort Worth-Arlington TX 15,976 10,443 52.98%3 Houston-Baytown-Sugar Land TX 14,883 8,127 83.13%4 Los Angeles-Long Beach-Santa Ana CA 12,486 10,197 22.45%5 Wa. DC-Arlington-Alexandria DC-VA-MD-WV 11,382 9,633 18.16%6 Austin-Round Rock TX 11,249 4,025 179.48%7 Seattle-Tacoma-Bellevue WA 9,400 5,150 82.52%8 Denver-Aurora CO 8,156 2,902 181.05%9 Miami-Fort Lauderdale-Miami Beach FL 7,578 3,279 131.11%
10 Raleigh-Cary, NC 6,460 1,613 300.50%
New Home Market Trends
TOP 10 RENTAL MARKETS IN CALIFORNIARanked by Average Rent
Source: RealFacts
Area Avg. Rent Yr/Yr Change Purchase Power Avg. OccupancySanta Monica $3,041 2.10% $656,640 96.70%San Francisco $2,741 -0.70% $591,861 95.60%
Palo Alto $2,714 -1.00% $586,031 95.50%Los Gatos $2,455 0.40% $530,105 96.40%
Marina del Rey $2,454 0.70% $529,889 95.90%Berkeley $2,368 -12.10% $511,319 86.10%
Cupertino $2,357 0.70% $508,944 94.90%Foster City $2,307 -0.30% $498,148 95.20%
South San Fran. $2,296 -0.40% $495,773 95.10%Newport Beach $2,263 -0.90% $488,647 94.60%
Note: only includes areas with at least 5 communities
New Home Market Trends
TOP SELLING ATTACHED PROJECTSVicino by KB Home, San Jose, CA
Source: The Ryness Report, February 17, 2013
• 3 floor plans ranging from 1,507 – 1,812 SF• 3 Bedrooms with 3 or 3.5 Bathrooms• Mid $700,000s to low $800,000s• YTD/Overall sales: 21/51 homes• YTD/Overall monthly sales rate: 13.0/9.14
CAPITAL STACKTerm Sheet Summary
SOURCE: Meyers LLC
• Co-invests: 10% to 20%• Preferred Returns: 12% (Pari Passu)• Waterfalls: 75/25 to a 22%-25% IRR with
a multiple of 1.5X• Capital Management Fees: 0.5% to 1%• G&A Fees: 3%
Lease up for NEW projects will continue to be robust
Trended Rents will increase at a decreasing rate and Home Prices will accelerate
Lease up for NEW projects will continue to be robust
Job growth will continue but probably at a decreasing rateMultifamily development will increase over the next several years
New Home Market Trends4. Going Forward
Consensus Forecasts:
Jeff Meyers, PresidentMeyers LLC, a Kennedy Wilson Company(310)887-6297
Allen MatkinsReal Estate Development Law
Update
Land and Home(s)No Longer Four Letter Words?
February 27, 2013