real estate outlook jan 2010
TRANSCRIPT
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 1/30
Real Estate Market OverviewJanuary 2010
Stan Humphries, PhD
Chief Economist
206.470.7127
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 2/30
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 3/30
3
• Case-Shiller usually reports
on the Composite-20 Indexwhich is dominated bybubble markets.
• Case-Shiller only looks atsingle-family homes(excludes condos/coops).
• Case-Shiller only includes
homes that have sold atleast twice (and excludes allnew construction)
• Case-Shiller includesforeclosure re-sales eventhough these aresubstantially different thannon-distressed sales.
• ZHVI looks at all homevalues, regardless of whathas sold or not.
• ZHVI does not includeforeclosure re-sales.
Differences Between Zillow Home Value Index (ZHVI) and Case-Shiller
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 4/30
4
Home Values in the United States
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 5/30
5
Foreclosures in the United States
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 6/30
6
Local Markets: The Good, The Bad and The Ugly
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 7/30
7
Local Real Estate Performance: The Good
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 8/30
8
What Do the Good Look Like? Los Angeles Home Values
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 9/30
9
What Do the Good Look Like? Los Angeles Foreclosures
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 10/30
10
Local Real Estate Performance: The Bad
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 11/30
11
What Do the Bad Look Like? Tampa Home Values
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 12/30
12
What Do the Bad Look Like? Seattle Foreclosures
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 13/30
13
Local Real Estate Performance: The Ugly
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 14/30
14
What Do the Ugly Look Like? Las Vegas Home Values
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 15/30
15
What Do the Ugly Look Like? Las Vegas Foreclosures
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 16/30
16
Continuing Challenges for Housing Market
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 17/30
17
Negative Equity + Unemployment = More Foreclosures
Metro marketswith the highest
rates of negativeequity
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 18/30
18
Negative Equity Among the Largest Metro Markets
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 19/30
19
Lots of Vacant Inventory
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 20/30
20
• Up 40 BPSsince earlyDecember
• Likely toincreasefurther as Fedcontinues toramp down
purchase of MBS
Mortgage Rates Rising Again
Source: Zillow.com; see real-time rates and historical charts athttp://www.zillow.com/Mortgage_Rates/
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 21/30
21
Mortgages Continue to Reset and Recast
Source: Deutsche Bank Global Markets Research
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 22/30
22
Internal Dynamics of the Current Real Estate Market
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 23/30
23
• In most metro areas,the value of the lowerthird of homes hasfallen farther than thevalue of the uppertwo-thirds.
• This holds true inmetro areas like SanFrancisco, New York,Los Angeles, Chicago,Philadelphia, Atlanta,
Detroit, Boston, etc.
Low-End Homes Falling Faster than High-End Homes
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 24/30
24
• The trend of
differencesbetween pricetiers plays outgeographically,as well.
• San Franciscometro cities andtowns with ahigher ZillowHome ValueIndex show lessof a decline.
Low-End Homes Falling Faster than High-End Homes, Cont’d
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 25/30
25
• In some metroregions, however, thethree price tiers arebehaving similarly.
• This is true in theSeattle, Miami,Portland, Ore. andOrlando metros.
Low-End Homes Falling Faster than High-End Homes, Cont’d
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 26/30
26
• In the Seattle
metro area,trends indepreciationseemindependent of home values.
Low-End Homes Falling Faster than High-End Homes, Cont’d
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 27/30
27
Foreclosures Move Up-Market
• Homes in the top one-third of home values
now make up twice theproportion of foreclosures they didthree years ago.
• In 2006, the top one-third made up 16% of foreclosures.
• In July 2009, they madeup 30%.
• High delinquency ratesin Prime, Alt-A andOption Adjustable Ratemortgages result inforeclosures outside of subprime.
• Cure rates are low, andwith 21% of all single-family homes withmortgages underwater,they will likely stay low.
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 28/30
28
Foreclosures are a Distinct Market from Non-Foreclosures
• Foreclosures sell for
substantially lessthan non-foreclosures, evenafter controlling forlocation and physicalspecifications.
• In Seattle, foreclosedhomes currently sellfor 81% of non-foreclosure saleprice.
• Across all metros,foreclosures sell forabout 72% of non-foreclosure saleprice.
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 29/30
29
• More foreclosures in
an area do lead to asmaller gap betweenforeclosure and non-foreclosure prices.
• But this discount israrely less than 20%.
• Methodology:Comparing actualsales of foreclosuresand non-foreclosuresto Zillow valuation
(Zestimate)
Foreclosures are a Distinct Market from Non-Foreclosures, Cont’d
8/14/2019 Real Estate Outlook Jan 2010
http://slidepdf.com/reader/full/real-estate-outlook-jan-2010 30/30
30
• Home values will continue to fall until Q2 2010
• Likely another 5% decrease in the ZHVI for a total peak-to-trough decline of 25%.
• Further declines driven by foreclosures (themselves drivenby negative equity and unemployment as well as by moremortgage resets/recasts), increasing mortgage rates, analready high supply of for-sale homes, and weaker demandafter the homebuyer tax credits lapse due to demand-
shifting.
• Very anemic appreciation after bottom is reached; may notappreciate at all in real terms for next 3-5 years.
Conclusions