U.S. Housing Trends in 2014: The Good, Bad and Ugly

U.S. HOUSING TRENDSTHE GOOD, THE BAD, THE UGLY

© 2013 Renwood RealtyTrac LLC

WELCOME

WHAT WE’LL COVER TODAY

• A brief bit on RealtyTrac• Home sales and prices overview• Cutting back on the f-word • Ghost inventory of NPLs• Double-edged home equity• Institutional investors & cash buyers• Monsters of housing market• Boomerang buyers


REALTYTRAC DATA PRIMER

Economic

Neighborhood & Local

MLS

Sales & Loan

Valuation& Prop Details

Foreclosure


REALTYTRAC DATA PRIMER

County-Level Public Documents• Pre-foreclosure, foreclosure auction and REO• Sales & Loan• Valuation and property characteristics

MLS• Listing status, price and other info• Property description and more characteristics

Publicly available datasets• Neighborhood features, amenities, red flags• Macro housing and economic metrics


AN OVERVIEW OF HOME SALES AND PRICE TRENDS


U.S. HOME SALES


BUCKING THE NATIONAL TREND


U.S. HOME PRICES

AN EXTREME MARKET


MARKETS WITH STRONGEST AND WEAKEST HOME PRICE GAINS


Fastest appreciation tends to be in markets where

foreclosures were cleared fastest.

STUBBORNLY HIGH DISTRESSED SALES


Bank-owned sales and foreclosure auction sales rose even as short sales

declined in 2013.

STUBBORNLY HIGH DISTRESSED SALES


Total short sales and distressed sales accounted

for 18percent of all U.S. residential sales in Jan 2014

CUTTING BACK ON OUR USE OF THE F-WORD


U.S. FORECLOSURE ACTIVITY OVERVIEW


Total U.S. properties with foreclosure filings in 2013 at

lowest level since 2007

U.S. FORECLOSURE ACTIVITY OVERVIEW


U.S. foreclosure starts at lowest level since 2006

THE (JUDICIAL) FORECLOSURE AUCTION PROBLEM


Increased 13 percent in 2013 after increasing 14

percent in 2012.

STATES WITH INCREASING F-BOMBS


Most are judicial foreclosure states or non-judicial win legislative intervention.

PIG MOVING THROUGH THE PYTHON


Foreclosure starts jumped to a 43-month high in

January

PIG MOVING THROUGH THE PYTHON


Scheduled foreclosure auctions rose to 39-month

high in January

PIG MOVING THROUGH PYTHON


Bank repossessions jumped to 39-month high in January

THE ROOT OF THE PROBLEM: LENGTHENING TIMELINES


Average time to foreclose up to 564 days nationwide.

A SYMPTOM OF THE PROBLEM: LONGER TIME TO SELL


Jump in time to sell bank-owned properties at end of

2013 indicates banks working through older

inventory.

TIMELINES SOARING EVEN IN NON-JUDICIAL STATES


EARLY EVIDENCE OF A BACKLOG EVEN IN SOME NON-JUDICIALS


Increase follows 17 straight months of

decreases in foreclosure starts

GOOD NEWS: NOT NEW DISTRESS


THE ROOT OF THE PROBLEM PART 2: BAD BUBBLE LOANS


Majority of homes in foreclosure purchased from

2004 to 2008.

A MARKET NEARLY BACK TO NORMAL


Averaged 2,400 foreclosure filings a month in 2013

compared to 1,500 a month in 2006.

TAKEAWAYS FROM HOUSING OVERVIEW

• Housing market is clearly in recovery mode– Sales volume rising with greater demand– Home prices have hit bottom and have substantially

bounced off that bottom in most markets– The worst of the foreclosure crisis is behind us

• But housing still has a nagging cough that indicates there are still some problems– Slowing sales in some states– Persistently high share of distressed sales– Rebounding foreclosure activity in some states– Average times to foreclose continue to lengthen


GHOST INVENTORY OF NPLS

GHOST INVENTORY GROWING WHILE REO INVENTORY SHRINKS


GHOST INVENTORY IN DOLLARS


GHOST INVENTORY DISCOUNTS


STATES WITH MOST GHOST INVENTORY


IMPLICATIONS OF GHOST INVENTORY

• Potentially hundreds of thousands of distressed loans that were diverted from foreclosure but could potentially end up as foreclosures down the road.– FHA program requires new owners to wait at

least six months before foreclosing• This is making foreclosures look better but the

underlying distressed is more serious than the foreclosure numbers alone would indicate.

• Highest instance in states with an already substantial backlog of foreclosures that are being worked through– That could mean a long road back to for these

states© 2013 Renwood RealtyTrac LLC

THE DOUBLE-EDGED SWORD OF HOME EQUITY


NEGATIVE EQUITY STILL CUTTING DEEPLY


BUT NEGATIVE EQUITY BLADE GROWING DULLER


19 percent of homeowners with a mortgage

underwater at end of 2013, down from 29 percent at peak of negative equity.

HOMEOWNERS WHO PURCHASED IN 2004 TO 2008 WORST OFF


Only homeowners who have owned 15+ years have

enough equity, on average, to justify an equity sale.

MARKETS WITH MOST DEEPLY UNDERWATER HOMES


MARKETS WITH MOST EQUITY RICH HOMEOWNERS


IMPLICATIONS OF DOUBLE-EDGED EQUITY

• Negative equity and low equity homes have been held off the market for several years, creating potential pent-up supply

• Some of the negative equity is deeply entrenched and will take years or even decades to recover– Short sales are probably best option for these deeply

entrenched homeowners, or some sort of principal balance reduction

– But short sales are falling out of favor with banks and borrowers

– Remains to be seen the stance toward principal balance reduction

• Millions of previously underwater homeowners regained equity in 2013, and that could translate into a sizable increase in homes listed for sale in 2014


INSTITUTIONAL INVESTORS & CASH BUYERS


U.S. HISTORICAL OVERVIEW


All-cash purchases reach a recent high of 44percent of all U.S. residential sales in

January 2014.

TOP MARKETS FOR ALL-CASH BUYERS


29 percent of all U.S. residential sales in 2013

were all-cash, up from 19 percent in 2012.

TOP MARKETS FOR INSTITUTIONAL INVESTORS


7.3 percent of all U.S. residential property sales in

2013 were made by institutional investors, up from 5.8 percent in 2012 and 5.1 percent in 2011.

DRAMATIC DROP IN JANUARY


Dropped to 5.2 percent of all residential sales, lowest

level since March 2012

SHIFTING TO NEW MARKETS


SPURRING A SURGE IN FORECLOSURE AUCTION SALES


Foreclosure auction sales hit 1.5 percent of all U.S.

residential sales in January, highest since we began

tracking.

TOP MARKETS FOR FORECLOSURE AUCTION SALES


1 percent of all U.S. residential sales in 2013 were foreclosure auction

sales, up from 0.5 percent in 2012 and 2011.

DEEPER INSTITUTIONAL INVESTOR INSIGHTS


INSIGHT INTO REAL INVESTORS OVERALL


INSIGHT INTO REAL ESTATE INVESTORS OVERALL


Investors owning 100 or more single-family homes account for 5 percent of

total single-family homes

DISTRESS AND INVESTOR PURCHASES DIVERGE


Investors have purchased more than 366,000 single

family homes since January 2011.

SFR PURCHASES BY PRICE RANGE


Homes priced under $200k account or 56 percent of all

purchases.

BREAKDOWN BY PROPERTY SITUATION


Majority of purchases distressed but nearly one-

third non-distressed

HOME PRICE APPRECIATION BUTTRESSING SFR STRATEGY


HPA a solid safety net institutional investors.

DIFFERENT DISPOSITION STRATEGIES EVIDENT


Despite solid HPA, major SFR players are not pressing

the sell button.

SOME ON-THE-GROUND STATS FOR SFR


From Pintar Investments in 74 cities in CA, NV and GA

Expense Ratio Rent Gross YieldMean 40.0% $1,719 9.1%Std Dev 6.6% $723 1.6%Max 58.3% $7,050 13.8%Min 11.2% $1,175 6.7%

TOP MARKETS FOR BUYING SINGLE FAMILY RENTALS


State CountyName Median Value All Sales 3BR Rent 40 Percentile Annual Rent Gross YieldPA Philadelphia County $70,267 $1,414 16,968 24%FL Duval County $93,450 $1,233 14,796 16%TN Shelby County $81,633 $1,066 12,792 16%OH Cuyahoga County $79,878 $1,005 12,060 15%FL Pasco County $105,317 $1,269 15,228 14%OH Montgomery County $79,500 $953 11,436 14%MI Macomb County $96,279 $1,124 13,488 14%GA Dekalb County $103,648 $1,187 14,244 14%MI Wayne County $100,000 $1,124 13,488 13%FL Brevard County $107,317 $1,193 14,316 13%OH Summit County $88,050 $965 11,580 13%FL Volusia County $110,332 $1,199 14,388 13%OH Hamilton County $95,212 $1,018 12,216 13%WI Milwaukee County $98,309 $1,036 12,432 13%NV Clark County $150,000 $1,530 18,360 12%FL Hillsborough County $124,933 $1,269 15,228 12%FL Polk County $110,517 $1,094 13,128 12%FL Orange County $132,500 $1,311 15,732 12%FL Miami-Dade County $166,000 $1,600 19,200 12%GA Gwinnett County $123,800 $1,187 14,244 12%

IMPACT OF INSTITUTIONAL INVESTORS: CASE STUDY NO. 1


In smaller market HPA rises and falls with share of institutional investors

IMPACT OF INSTITUTIONAL INVESTORS CASE STUDY NO. 2


HPA reaches double-digits in Sept 2012, coinciding with institutional investor share

reaching 20 percent.

IMPACT OF INSTITUTIONAL INVESTORS CASE STUDY NO. 3


HPA peaks in April 2013 and has gradually slowed since, coinciding

with pull back in institutional investor share after 13 straight

months on the increase

TAKEAWAYS FROM INSTITUTIONAL INVESTOR INSIGHTS

• Institutional investors have helped to accelerate recovery

• Institutional investors at this point are showing no signs of unloading inventory en masse

• Early signs of institutional investors slowing their pace of purchasing– In markets where this has been happening for

some time there is no indication that the bottom is falling out of the market, although it certainly is having a cooling effect


MONSTERS OF THE HOUSING MARKET


THE PROBLEM & OPPORTUNITY OF ZOMBIE FORECLOSURES

• The problem– More than 150,000 vacant homes nationwide, 20

percent of all homes in the foreclosure process– Homeowners often don’t realize they still own the

property and are responsible for taxes etc.

• The opportunity– Homeowners who have exhibited a desire to let go of

the property– Lenders who don’t want to foreclose


ZOMBIE FORECLOSURES


METROS WITH MOST ZOMBIE FORECLOSURES


ZOMBIE FORECLOSURES BY YEAR BUILT


One-third of owner-vacated foreclosures built between 1970

and 1990.

THE PROBLEM & OPPORTUNITY OF OCCUPIED REOS

• The problem– 50 percent of foreclosed homes (REO) are still occupied

by the former homeowner (approx. 250,000)– Properties are not being re-sold and re-integrated into

the market, creating shadow inventory

• The opportunity– Homeowners are motivated to stay in property– Lenders want to dispose of property or at least get it

performing in some way


OCCUPIED REOS


WILL BOOMERANG BUYERS SAVE US?


BOOMERANG BUYERS BOOMERANGING MORE QUICKLY

• The News– HUD just recently changed its guidelines to allow some

homeowners who have gone through foreclosure, short sale or bankruptcy to qualify for FHA financing.

– Now these homeowners can qualify for FHA financing as soon as 12 months after the “last event”

– This is down from a minimum of 36 months

• The Promise– Millions more homeowners who may qualify to purchase

again, sooner

BOOMERANG BUYERS BOOMERANGING MORE QUICKLY


4.6 million completed foreclosures and short sales from 2007 to 2010.

Additional 2.4 million completed foreclosures and short sales in 2011

and 2012

LEVERAGING DISTRESSED MARKET TRENDS WITH REALTYTRAC

• Standard and Customized Reports• 800.913.0439• http://data.realtytrac.com/

• Back to Reality with Buy to Rent White Paper– Jointly authored with Pintar Investment Company– Download free at www.realtytrac.com/sfr

• Investor Insight Report– Detailed breakdown by investor, property type, financing etc.– 949.502.8300 Ext. 158


http://data.realtytrac.com/

http://data.realtytrac.com/

http://www.realtytrac.com/sfr

INVESTOR INTEREST


• Multi-Market Report – Identify target markets with our 300 metro area comparison report

• Investor Activity Report - Understand your competition with investor activity including purchase count, value breakdown, and more

• Local Insights – Empower “Pre-diligence” with local market trends, demographics, schools, crime, and local hazards

• Match-and-Append - Retrieve data on a portfolio of properties, selecting the metrics to be appended to your property list

• MEGA Property Query – Retrieve a list of properties that meet your criteria, including all stages of the foreclosure process

• Custom Reports – Let the RealtyTrac reporting team create custom reports at state, county, metro, city, or ZIP code level

DAREN BLOMQUISTVICE PRESIDENT, [email protected]


THANK YOU!

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U.S. Housing Trends in 2014: The Good, Bad and Ugly

Real Estate

Transcript of U.S. Housing Trends in 2014: The Good, Bad and Ugly