seattleoutlook_oct2010

8/8/2019 SeattleOutlook_Oct2010

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Seattle Real Estate Market OverviewSeattle Real Estate Market OverviewOctober 2010October 2010

Stan Humphries, PhDStan Humphries, PhD

Chief EconomistChief Economist

[email protected]@zillow.com

206.470.7127206.470.7127


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Current Market Performance

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Home values in the United States

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Source: Zillow.com


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Foreclosures in the United States

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Source: Zillow.com


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Local real estate performance: The Good

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Source: Zillow.com


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Local real estate performance: The Bad

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Source: Zillow.com


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Local real estate performance: The Ugly

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Source: Zillow.com


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Home values: Seattle vs. US

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Source: Zillow.com


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Seattle home value trends by price tiers

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Source: Zillow.com


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Seattle foreclosures in perspective

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Source: Zillow.com


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Seattle home values in perspective

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Source: Zillow.com


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Peak-to-current change in home values

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Source: Zillow.com


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Month-to-month changes in home values

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Source: Zillow.com


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Construction activity Seattle (units, SAAR)

15 Source: Census Dept.,Moodys Economy.com


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Housing starts Seattle (units, SAAR)

16 Source: Census Dept.,Moodys Economy.com


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Unprecedented decline in new home sales

17 Source: Census Dept.


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Despite falling starts, supply still high and sales cycle long

18 Source: Census Dept., NAHB,Moodys Economy.com


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Foreclosures increasing in WA; delinquencies high

19 Source: Mortgage BankersAssoc., Moodys Economy.com


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Continuing Challenges for Housing Market

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America is flush with empty homes

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Source: US Census; Zillow


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Current inventory level of for-sale homes is very high

We made some goodprogress reducing

inventory levels lastfall with tax credits

Did not work as wellthis year

Pent-up supply? 7% of homeowners(5.3 million) want to sell if they see

signs of improvement

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In most months of

this year, we addedmore homes to themarket than we tookoff due to sales

Monthly supply now

back to 2008 levels


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Lots of shadow inventory in the wings

Pct Mortgages

In Foreclosure 4.63% 2,407,600.00

30-90 Days Delinquent 4.47% 2,324,400.00

> 90 Days Delinquent 4.91% 2,553,200.00

7.3 million mortgages either in foreclosure ordelinquent as of March 2010.

Accounting for shadow inventory, there was 45% moresupply than indicated in official NAR inventory numbersas of Sept 2009.

This discrepancy is growing over time meaning that,

while official inventory has been falling, real inventoryis essentially unchanged.

23 Source: Mortgage Bankers Association; FirstAmerican/Corelogic


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Negative equity among the largest metro markets

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Source: Zillow.com


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Negative equity + unemployment = more foreclosures

Negative equity can onlybe worked down bysales/foreclosures, priceappreciation or paying

down mortgage balances

We dont expect muchprice appreciation near-term

Metro

Percent Single-Family

Homes With Mortgages in

Negative Equity

Unemployment

Rate

(March 2010) (March 2010)

USA 23.3% 10.2%

Las Vegas Metro, NV 80.6% 13.8%

Orlando Metro, FL 74.8% 12.1%Phoenix Metro, AZ 64.6% 8.9%

Reno Metro, NV 64.4% 13.2%

Modesto Metro, CA 60.7% 19.2%

Merced Metro, CA 58.8% 22.1%

Lakeland Metro, FL 58.5% 13.0%

Fort Me ers Metro FL 58.2%

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Unemployment forecastedto remain above 8%through end of 2012

Result: 3+ years of high

unemployment visited onhomeowners who canteasily sell or refinancetheir mortgages

, . .

Stockton Metro, CA 57.7% 18.4%

Port St. Lucie Metro, FL 56.2% 14.0%

El Centro Metro, CA 54.9% 27.0%

Vallejo Metro, CA 54.7% 13.0%

Tampa Metro, FL 53.1% 12.7%

Riverside Metro, CA 51.2% 15.0%

Jacksonville Metro, FL 49.1% 11.9%

Sarasota Metro, FL 47.8% 12.7%

Madera Metro, CA 46.4% 17.5%

Melbourne Metro, FL 45.6% 12.2%

Bakersfield Metro, CA 45.6% 18.3%

Vero Beach Metro, FL 45.2% 13.9%

Miami-Fort Lauderdale Metro, FL 44.3% 11.5%

Source: Zillow.com


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Mortgage ratesare currentlyhelping themarket

Wed beenexpectingmortgage rates tobe in the upper

When will mortgage rates rise?

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of year. Seemsunlikely now.

Fed QE, lacklusterGDP growth andcomplete lack of

inflation pressurehave helped keepinterest rates low. Source: Zillow.com; see real-time rates and historical charts at

http://www.zillow.com/Mortgage_Rates/


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Mortgages resets and recasts are better news than before

Alt-A resets andOption ARM recasts

have been a concern

Alt-A: Lessworrisome now withlow mortgage rate

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Source: Deutsche Bank Global Markets Research

environment

Option ARM: Defaultrates have alreadybeen high in thisproduct so fewer

that will have torecast


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Home values nationally will continue to fall until early 2011.

Seattle bottom will lag the national bottom; mid- to late-2011.

Likely another 5% decrease in the national ZHVI for a total peak-to-troughdecline close to 30%. Another 5-7% decline in Seattle for a peak-to-trough of 32-34%.

Conclusions

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Further declines driven by foreclosures (themselves driven by negativeequity and unemployment as well as by more mortgage resets/recasts),an already high supply of for-sale homes, and weaker demand after thehomebuyer tax credits lapse due to demand-shifting.

Very anemic appreciation after bottom is reached; may not appreciate atall in real terms for next 3-5 years.

seattleoutlook_oct2010

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