Jerry Johnson Principal Johnson Reid, LLC
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Transcript of Jerry Johnson Principal Johnson Reid, LLC
RECENT ECONOMIC ANDRESIDENTIAL MARKET
TRENDS AND FORECAST
PORTLAND METROPOLITAN AREA
TICOR TITLEJanuary 2010
Jerry JohnsonPrincipal
Johnson Reid, LLC
NATIONAL GDP GROWTH
-8%
-6%
-4%
-2%
0%
2%
4%
6%1Q
042Q
043Q
044Q
041Q
052Q
053Q
054Q
051Q
062Q
063Q
064Q
061Q
072Q
073Q
074Q
071Q
082Q
083Q
084Q
081Q
092Q
093Q
094Q
091Q
102Q
103Q
104Q
101Q
11
QUARTER
ANN
UAL
IZED
RAT
E O
F G
ROW
TH
HistoricBaseline Forecast
CONSUMER CONFIDENCE SERIES
0
25
50
75
100
125
150
Dec
-00
Jun-
01
Dec
-01
Jun-
02
Dec
-02
Jun-
03
Dec
-03
Jun-
04
Dec
-04
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Dec
-08
Jun-
09
1985
= 1
00
NEGATIVE EQUITY MORTGAGES
SOURCE: First American CoreLogic, August 2009
RESIDENTIAL LOAN BALANCES THAT WILL EXPERIENCE PAYSHOCK
HOME PRICING TRENDS
SOURCE: Case-Schiller
0
50
100
150
200
250
300
Jan-
87
Jan-
88
Jan-
89
Jan-
90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
AZ-Phoenix
CA-Los Angeles
CA-San Diego
CA-San Francisco
NV-Las Vegas
WA-Seattle
OR-Portland
National-Standard & PoorsCase-Shiller Home Price Indices
S&P Case-Shiller Index - Portland
100105110115120125130135140145150155160165170175180185190
Mar
-01
Jul-
01
Nov
-01
Mar
-02
Jul-
02
Nov
-02
Mar
-03
Jul-
03
Nov
-03
Mar
-04
Jul-
04
Nov
-04
Mar
-05
Jul-
05
Nov
-05
Mar
-06
Jul-
06
Nov
-06
Mar
-07
Jul-
07
Nov
-07
Mar
-08
Jul-
08
Nov
-08
Mar
-09
Jul-
09
National-Standard & PoorsCase-Shiller Home Price Indices
S&P Case-Shiller Index - Portland
100105110115120125130135140145150155160165170175180185190
Purchased 12/23/05
Area 147 …LO/WL Average Sales Price
West Linn & Lake Oswego Average Price - Sold
$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
$600,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Area 151 …Wilsonville Average Sales Price
Wilsonville/Tigard Area Ave Sold $
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
$275,000
$300,000
$325,000
$350,000
$375,000
$400,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
COMMERCIAL PRICING TRENDS
SOURCE: MIT
TRANSACTIONS-BASED PRICE INDEX
50
100
150
200
250
300
350
1Q94
1Q95
1Q96
1Q97
1Q98
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
Rental Apartments
Industrial
Offi ce
Retail
NATIONAL HOME SALES TRENDS
SOURCE: NAR
FINANCING FOR HOMEBUYERSOCTOBER 2009
SOURCE: Campbell Communications
25%
6%
72%22%
12%
6%
22%
61%
2%32%
21% 20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CurrentHomeowner
First-TimeHomeowner
Investor
All OtherFHAFannie/FreddieCash
YEAR OVER YEAREMPLOYMENT CHANGEPortland Metro Area
SOURCE: OLMIS
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
Jan-
01A
pr-0
1Ju
l-01
Oct
-01
Jan-
02A
pr-0
2Ju
l-02
Oct
-02
Jan-
03A
pr-0
3Ju
l-03
Oct
-03
Jan-
04A
pr-0
4Ju
l-04
Oct
-04
Jan-
05A
pr-0
5Ju
l-05
Oct
-05
Jan-
06A
pr-0
6Ju
l-06
Oct
-06
Jan-
07A
pr-0
7Ju
l-07
Oct
-07
Jan-
08A
pr-0
8Ju
l-08
Oct
-08
Jan-
09A
pr-0
9Ju
l-09
EMPLOYMENT CHANGEBY SECTOR – Portland
Metro AreaSep-08-Sep-09
SOURCE: OLMIS
ABSOLUTE GROWTH
(12,400)
(3,500)
(4,100)
(3,300)
(3,000)
1,300
(6,300)
(1,700)
(2,000)
(11,400)
(12,100)
-20,
000
-15,
000
-10,
000
-5,0
00 0
5,00
0
Construction
Manufacturing
Wholesale Trade
Retail Trade
T.W.U. 1/
Financial Activities
Professional & Business Services
Educational & Health Services
Leisure & Hospitality
Other Services
Government
PERCENT GROWTH
-18.0%
-10.0%
-6.1%
-3.8%
-8.7%
-4.4%
-8.8%
1.0%
-6.2%
-4.5%
-1.4%
-20%
-15%
-10% -5
% 0% 5%
EXPANDING AND DECLINING INDUSTRY SECTORS - OREGON
SOURCE: OLMIS
Nat. Resources
Construction
Wood Products
Metals & Machinery
Electronics
Trans. Equipment
Food
Retail Trade
Wholesale Trade
T/W/Util Information
Finance
Prof. & Bus. Services
Health Services
Leisure & Hospitality
Govt excl Education
Public Education
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-25% -20% -15% -10% -5% 0% 5% 10%Year-over-year % change
Qtr-
to-q
tr %
chan
ge
Contracting Newly Slowing
Newly Expanding Expanding
UNEMPLOYMENT RATEBaseline and with
Discouraged
SOURCE: BLS
0
2
4
6
8
10
12
14
16
18
20
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PERC
ENT
U-6U-3
NET CHANGE IN POPULATIONPORTLAND METRO AREA
SOURCE: Portland State Pop Center and Washington Office of Financial Management
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
POPULATION BY COUNTYLast Ten Years
SOURCE: Portland State Pop Center and Washington Office of Financial Management
SOURCE: Oregon Office of Economic Analysis, Washington Office of Financial Management, and JOHNSON REID
SHARE OF 10-YEAR POPULATION GROWTH
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Popu
latio
n
Natural Increase
Net Migration
22.4%
24.9%14.5%
38.3%
Clackamas Clark
Multnomah Washington
RESIDENTIAL PERMIT TRENDS
Period20082009YOY Δ
SOURCE: US Census and JOHNSON REID
SINGLE FAMILY DETACHED RESIDENTIAL PERMITSClackamas Clark Multnomah Washington Metro Total
1,713698 817 643 852 3,010
-43%-49% -48% -46% -31%355 428 346 584
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
Resi
denti
al P
erm
its
Clackamas
Clark
Multnomah
Washington
HOMEOWNER VACANCY RATES – NATIONAL AVERAGE
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
VACA
NCY
RA
TE
SOURCE: Census Bureau
CMA – Vacancy
RENTAL VACANCY RATES – NATIONAL AVERAGE
SOURCE: Census Bureau
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
VACA
NCY
RAT
E
ECONOMIC/DEMOGRAPHIC TRENDS SUMMARY
• CONFIDENCE LOW– High Unemployment– Significant Percentage of Negative Equity
• BANKS WILL REMAIN ON DEFENSIVE– Residential Bust Followed by Commercial Bust– Foreclosures Likely to Continue
• LOCAL EMPLOYMENT TRENDS NEGATIVE– Loss of 60,000 Jobs– Employment Back at 2005 Levels
• PRICING APPEARS TO HAVE FOUND A BOTTOM– Lots of Residential Overhang Remains
OWNERSHIP RESIDENTIAL MARKET
CASE-SHILLER INDEX
SOURCE: S&P/Case Shiller, Seasonally Adjusted
6.0%
4.2%
3.0%
-5.7
%
-9.6
%
-11.
6%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
20-Year 10-Year 5-Year 3-Year 2-Year 1-Year
AZ-PhoenixCA-Los AngelesCA-Los AngelesNV-Las VegasOR-Portland
PORTLAND METRO AREA MEDIAN HOME PRICE
TRENDS
* Based on price trend between 1994 and 2002
SOURCE: Johnson Reid, LLC
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,00019
94
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Med
ian
Pric
e
Median Sale Price
Historic Trendline*
HOUSING TRENDS
PORTLAND METRO AREA MEDIAN HOME PRICE
TRENDS
SOURCE: RMLS and JOHNSON REID
$200,000
$225,000
$250,000
$275,000
$300,000
$325,000
$350,000
$375,000
$400,000
$425,000
Jan-
08
Feb-
08
Mar
-08
Apr-
08
May
-08
Jun-
08
Jul-0
8
Aug-
08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
Apr-
09
May
-09
Jun-
09
Jul-0
9
Aug-
09
Sep-
09
Med
ian
Pric
e
New Construction
New and Existing Homes
PORTLAND METRO AREA MEDIAN HOME PRICE
FORECASTYear-over-Year Price
Change-7.7%
Precent (%) Change from Peak of Bubble
-18.4%
Percent (%) to Return to Trend
-6.0%
Estimated Return to Price Equilibrium
January 2010
STANDING RESIDENTIAL INVENTORY IN MONTHSPORTLAND METRO AREA
SOURCE: Realtors Multiple Listing Service
0
2
4
6
8
10
12
14
16
18
20
Jan-
04
May
-04
Sep-
04
Jan-
05
May
-05
Sep-
05
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
MO
NTH
S O
F IN
VEN
TORY
STANDING RESIDENTIAL INVENTORY IN MONTHSPORTLAND METRO AREA
SOURCE: RMLS and JOHNSON REID
NEW CONSTRUCTION ALL HOMES (New & Existing)
0
2
4
6
8
10
12
4Q07
1Q08
2Q08
3Q08
4Q08
3981
4
3984
5
3987
3
3990
4
3993
4
3996
5
3999
5
4002
6
4005
7
Inve
ntor
y (In
Mon
ths)
0
2
4
6
8
10
12
4Q07
1Q08
2Q08
3Q08
4Q08
3981
4
3984
5
3987
3
3990
4
3993
4
3996
5
3999
5
4002
6
4005
7
Inve
ntor
y (In
Mon
ths)
RESIDENTIAL INVENTORYPORTLAND METRO AREA
SOURCE: Realtors Multiple Listing Service
0
5,000
10,000
15,000
20,000
25,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
UN
ITS
20052006200720082008
RESIDENTIAL INVENTORYPORTLAND METRO AREA
SOURCE: Realtors Multiple Listing Service
0
5,000
10,000
15,000
20,000
25,000
Nov
-04
Feb-
05
May
-05
Aug-
05
Nov
-05
Feb-
06
May
-06
Aug-
06
Nov
-06
Feb-
07
May
-07
Aug-
07
Nov
-07
Feb-
08
May
-08
Aug-
08
Nov
-08
Feb-
09
May
-09
Aug-
09
RESI
DEN
TIAL
LIST
ING
S
NEW LISTINGSAND CLOSED SALES
PORTLAND METRO AREA
SOURCE: Realtors Multiple Listing Service
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Nov
-04
Jan-
05M
ar-0
5M
ay-0
5Ju
l-05
Sep-
05N
ov-0
5Ja
n-06
Mar
-06
May
-06
Jul-0
6Se
p-06
Nov
-06
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep-
07N
ov-0
7Ja
n-08
Mar
-08
May
-08
Jul-0
8Se
p-08
Nov
-08
Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep-
09
UN
ITS
New Listings
Closed Sales
UNIT INVENTORYBY GEOGRAPHY AND TYPE
GEOGRAPHY New Existing AllConstruction1 Homes2 Homes
Clackamas County 150 2,927 3,077
Clark County 175 3,146 3,321
Multnomah County 102 3,828 3,930
Washington County 252 2,919 3,171
TOTAL 679 12,820 13,499
1 Unsold Spec Inventory
2 Current Listings not new construction
SOURCE: RMLS, New Home Trends, and JOHNSON REID
UNIT INVENTORY
RESIDENTIAL INVENTORY TRENDS
Year Clackamas Clark Multnomah Washington Total2003 1,079 2,341 557 2,037 6,014 2004 1,182 2,452 557 2,273 6,464 2005 1,268 2,348 712 2,084 6,412 2006 991 1,126 453 1,210 3,780 2007 834 1,022 379 1,111 3,346 2008 494 686 224 753 2,157
2009* 305 448 132 457 1,342
Year Clackamas Clark Multnomah Washington Total2003 5,580 6,798 10,772 7,877 31,027 2004 5,930 7,335 11,861 8,402 33,528 2005 6,261 7,925 13,210 9,085 36,481 2006 5,313 6,475 10,789 7,394 29,971 2007 4,410 5,138 9,018 6,082 24,648 2008 3,096 3,847 6,430 4,311 17,684
2009* 2,375 3,163 4,546 3,259 13,343
* Year to Date (September 2009)SOURCE: RMLS and JOHNSON REID
NEW CONSTRUCTION
ALL HOMES (new and existing)
STANDING INVENTORY IN MONTHS
1 2 3 4 5 6 7 8 9 10 11 12Months of Inventory at Existing Supply Levels
679
13,499
Exi
ig
nitI
nven
tory
(tt
oSc
ale)
New Construction2.7 - 4.5 months
All Homes9.1 - 11.2 months
STANDING INVENTORYBY PRICE RANGE – SEPT-
09
SOURCE: RMLS and JOHNSON REID
4.9
6.1
6.3
8.0
8.6
9.6
10.3
20.4
3.0
5.2
5.0
6.2
7.3
7.0
9.0
12.6
$100,000 - $149,999
$150,000 - $199,999
$200,000 - $249,999
$250,000 - $299,999
$300,000 - $349,999
$350,000 - $399,999
$400,000 - $499,999
$500,000+
Inventory, (In Months)
3Q09
3Q07
STANDING INVENTORYBY PRICE AND COUNTY –
SEPT-08
SOURCE: RMLS and JOHNSON REID
6.7
6.3
9.4
9.9
9.8
13.8
25.7
5.2
6.3
7.3
8.7
9.4
13.5
14.4
29.8
4.4
5.6
6.5
7.0
7.7
7.8
7.8
15.6
5.5
6.4
5.1
7.9
8.3
9.5
8.2
16.4
6.2$100,000 - $149,999
$150,000 - $199,999
$200,000 - $249,999
$250,000 - $299,999
$300,000 - $349,999
$350,000 - $399,999
$400,000 - $499,999
$500,000+
Inventory, (In Months)
Clackamas
Clark
Multnomah
Washington
RESIDENTIAL LOT INVENTORY
PORTLAND METRO AREATotal Vacant or
COUNTY Recorded Lots Unsold
5,000 2,590
7,270 3,955
1,534 771
5,364 2,881
19,168 10,197 SOURCE: New Home Trends and JOHNSON REID
TOTAL LOT SUPPLY
SHARE OF VACANT AND UNSOLD LOT INVENTORY
CLACKAMAS COUNTY
CLARK COUNTY
MULTNOMAH COUNTY
WASHINGTON COUNTY
Washington(28%)
Clackamas(25%)
Clark(39%)
Multnomah(8%)
ESTIMATED INVENTORY OF LOTS IN MONTHS
SOURCE: Realtors Multiple Listing Service
5 10 15 20 25 30 35 40 45 50 55 60Months of Inventory at Existing Supply Levels
10,197
Exst
ngLo
tIv
nto
yN
otto
Sca
)
Metrowide Inventory24.7 - 47.6 months
PENDING LOT INVENTORYPORTLAND METRO AREA
Prelim FinalCOUNTY Review Approval Review Total
109 2,391 20 2,520
931 5,706 446 7,083
250 155 330 735
987 1,376 55 2,418
2,277 9,628 851 12,756
SOURCE: New Home Trends and JOHNSON REID
TOTAL LOT SUPPLY
SHARE OF UNRECORDED LOT INVENTORY
CLACKAMAS COUNTY
CLARK COUNTY
MULTNOMAH COUNTY
WASHINGTON COUNTY
Washington(19%)
Clackamas(20%)
Clark(56%)
Multnomah(6%)
MARKET CONCLUSIONS• FUNDAMENTALS IMPROVING
– Standing Inventory at 6.5 Months– Very Low New Home Inventory
• THREATS REMAIN ON HORIZON– Pricing Stabilizing, but Foreclosures Coming– Unemployment Too High – Will Peak in 2010
• PRICING POWER LIMITED– Shadow Inventory– Limited Confidence
• CONDO MARKET DEAD UNTIL FURTHER NOTICE
MARKET CONCLUSIONS• FIRST TIME TAX CREDIT
– Less Effective over Time– May be Setting Up FHA for Crash
• CHANGE IN PRODUCT TYPE– First Time Homebuyer Target– Loss in Equity Will Impact Move-Up Markets
• METRO – URBAN GROWTH REPORT– Not Even Trying Anymore– Expect No New Residential Land
PRELIMINARY UGRRESIDENTIAL CAPACITY
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Low Baseline High
New Urban Areas"Subsidized" RefillResidential RefillExisting PlatsENV & Title 13Units Not FeasibleVacant Land