bfm_a bearish view of u.s. real estate
TRANSCRIPT
U.S. Real Estate:
Here is the Bearish View !
Executive Summary
• Lower household formation since 2007
• Lower homeownership of the newly formed households
• Homeownership rates may continue to decline
• There may be an excess supply of more than 2 million unit for the next 5 years
• The number of vacant homes waiting to be sold from the pre-2004 average has doubled
• Distressed-driven home price declines
• 7 million distressed sales are projected to take place in the next five years (on top of the
4.8 million borrowers who have already been evicted since 2008)
• The market is unable to absorb the supply of distressed homes
• 5 million borrowers are already in some state of delinquency (vs. 1 million before 2006)
• Tight credit and constrained borrowers
• Risk-averse buyers are concerned about:
- Job market weakness
- Further declined in home prices
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Consumers Think Prices Could
Go Down Further
Sources : National Association of Realtors, FactSet, J.P. Morgan Asset Management, and Census Bureau
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Household Formation is Running Below
Trend by Almost 3 Million
Source: Credit Suisse
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Homeownership Rate
is Still High
Sources : FactSet, US Census Bureau, as of September 30,2011.
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Total Homes for Sale is Still High
Sources : Census, MBA, BLS, and J.P. Morgan Asset Management.
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Month’s Supply of Homes
is Still High
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Sources: FactSet, NAR, and US Census Bureau, as of November 30,2011.
US Homes/ Households Ratio
is Still High
Sources : Haver Analytics
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Housing Inventories are Lower
But Still High
Sources : Census, National Association of Realtors, and J.P. Morgan Asset Management.
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Housing Inventory/Sales Ratios
are Still High
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Number of Vacant Homes for Sales is
Twice the Historical Norm
Source: Credit Suisse, and Census Bureau.
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Total Vacant Housing Units
is Still High
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Source: Bureau of the Census.
Distressed Inventory
is Very High
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Source: Credit Suisse, NAR.
Excess Supply – 7 Million Homes
Need to be Absorbed by Investors
Numbers are in millions. First-time home buyers accounts for about 23% of home sales, according
to CoreLogic.
Source: Credit Suisse, NAR, MIRA, and Census Bureau
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Percent of Mortgage
+90 days Delinquent is Still High
Sources : MBA, and J.P. Morgan Asset Management
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Delinquency Rate is Still High
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Few Homeowners Able to Refinance
Sources : Equitax, Moody’s Analytics.
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Almost 1 in 10 Households in
Foreclosure Or Arrears
Source: Mortgage Bankers Associations, and Merril Lynch
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House Prices Declines
by Year and City
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Chicago House Prices Went Down
More than Average
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Sources : FHFA, 1996 Q1=100, NSA
California Home Prices
Went Down a Lot
(As of 01/2009 so prices went down much more since then…maybe around 2000-2001 prices)
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