real estate outlook june 2010 master

8/9/2019 Real Estate Outlook June 2010 Master

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Real Estate Market OverviewReal Estate Market OverviewJune 2010June 2010

Stan Humphries, PhDStan Humphries, PhD

Chief EconomistChief Economist

[email protected]@zillow.com

206.470.7127206.470.7127


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Home Value Index Methodology


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Chart to the right is the outputfrom X-12 seasonal adjustmentfor Case-Shiller and ZHVI.

Case-Shiller has substantiallyhigher seasonal and irregular

components compared toZHVI.

The increasing magnitude ofthe seasonal component hasled S&P to advise against usingthe seasonally adjusted Case-

Shiller HPI. Recourse is to usethe unadjusted numbers butone is then subject to theeffects of seasonality.

ZHVI methodology better controls for seasonality


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Current Market Performance


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Home values in the United States

Source: Zillow.com


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Foreclosures continue to climb in the U.S.

Source: Zillow.com


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Comparing the top metros

Source: Zillow.com


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Comparing the top metros

Source: Zillow.com


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The Good (they weakened last fall but have sustained their upward momentum will it last?)

Source: Zillow.com


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The Good: San Diego home value losses in context

Source: Zillow.com


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The Good: San Diego foreclosure activity

Source: Zillow.com


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The Bad (they got better, then slipped offagain, but appear to be improving again)

Source: Zillow.com


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The Bad: Seattle home value losses in context

Source: Zillow.com


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The Bad: Seattle foreclosure activity

Source: Zillow.com


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The Ugly (they make the Bad look not so bad)

Source: Zillow.com


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The Ugly: Vegas home value losses in context

Source: Zillow.com


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The Ugly: Vegas foreclosure activity

Source: Zillow.com


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The Uncertain (not so good but not that bad either, relatively speaking)

Source: Zillow.com


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A look at the magnitude of the housing recession

Metro

Peak-to-Current

Fall in Home

Values

Last Time Home

Values Were At

Current Level

Merced, CA -69.5% 2000-04

Stockton, CA -61.8% 2000-10

Modesto, CA -61.4% 2001-01

Madera, CA -59.4% 2002-02

Vallejo, CA -57.2% 2000-10

Las Vegas, NV -57.0% 2000-10

El Centro, CA -54.5% 2001-12

Salinas, CA -54.5% 2000-09

Port St. Lucie, FL -53.7% 2002-07

Riverside, CA -53.2% 2002-12

Bakersfield, CA -52.7% 2003-09

Orlando, FL -51.9% 2002-04

Sarasota, FL -51.1% 2002-07

Naples, FL -51.1% 2003-02

Bend, OR -51.0% 2002-06

Phoenix, AZ -50.4% 2002-05

Reno, NV -49.9% 2002-10Melbourne, FL -49.6% 2003-04

Vero Beach, FL -49.4% 2002-10

Fresno, CA -48.4% 2003-05

Miami-Fort Lauderdale, FL -48.0% 2003-04

Detroit, MI -47.1% 1996-02Source: Zillow.com

The magnitude and breadthof current housing recession

are unprecedented in thepost-Depression era


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Continuing Challenges for Housing Market


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Current inventory level offor-sale homes is very high

We made some goodprogress reducinginventory levels lastfall with tax credits

Did not work as well

this year

April: Nearly twiceas many homesadded to market aswere sold in month

May inventory levels

back to August 2009levels

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

signs ofimprovement


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Lots of shadow inventory in the wings

Pct MortgagesIn 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 or

delinquent as of March 2010. Accounting for shadow inventory, there was 45% more

supply 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.

Source: Mortgage Bankers Association; First

American/Corelogic


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Negative equity among the largest metro markets

Source: Zillow.com


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Mortgage ratesare currentlyhelping themarket

Wed beenexpectingmortgage rates tobe in the upper5% range by endof year. Seemsunlikely now.

Europeansovereign debt

issues andcomplete lack ofinflation pressurehave helped keepinterest rates low.

When will mortgage rates rise?

Source: Zillow.com; see real-time rates and historical charts athttp://www.zillow.com/Mortgage_Rates/


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InternalD

ynamics o

fthe Current Real Estate Market


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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

Source: Zillow.com


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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, Contd

Source: Zillow.com


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In the Seattlemetro area,trends indepreciationseemindependent ofhome values.

Low-End Homes Falling Faster than High-End Homes, Contd

Source: Zillow.com


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Foreclosures Move Up-Market

Homes in the top one-third of home valuesnow make up twice theproportion offoreclosures they didthree years ago.

In 2006, the top one-third made up 16% offoreclosures.

In July 2009, they madeup 30%.

High delinquency ratesin Prime, Alt-A andOption Adjustable Ratemortgages result inforeclosures outside ofsubprime.

Cure rates are low, andwith 21% of all single-family homes withmortgages underwater,they will likely stay low.


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Foreclosures are a Distinct Market from Non-Foreclosures

Foreclosures sell forsubstantially less thannon-foreclosures, evenafter controlling forlocation and physicalspecifications.

In Seattle, foreclosed

homes currently sell for81% of non-foreclosuresale price.

Across all metros,foreclosures sell forabout 72% of non-

foreclosure sale price.

Source: Zillow.com


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More foreclosures inan area do lead to asmaller gap betweenforeclosure and non-foreclosure prices.

But this discount is

rarely less than 20%.

Methodology:Comparing actualsales of foreclosuresand non-foreclosuresto Zillow valuation(Zestimate)

Foreclosures are a Distinct Market from Non-Foreclosures, Contd

Source: Zillow.com


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About Zillow.com

Zillow.com is an online real estate marketplace where homeowners, buyers, sellers, renters, realestate agents and mortgage professionals find and share vital information about homes andmortgages. Launched in early 2006 with Zestimate home values and data on millions of U.S.homes, Zillow has since added homes for sale and homes for rent, a directory of real estate andlending professionals, Zillow Advice and Zillow Mortgage Marketplace. One of the most-visited U.S.real estate Web sites, with more than 10 million unique visitors per month, Zillow's goal is to helppeople become smarter about homes and real estate in every stage of their lives -- home buying,selling, renting, remodeling and financing. The company is headquartered in Seattle and has raised$87 million in funding.

Zillow.com, Zillow and Zestimate are registered trademarks ofZillow, Inc.

Press Contact: [email protected]

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real estate outlook june 2010 master

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