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Housing Market Update May 24, 2011 Wayne Yamano, Vice President

Housing Market Update May 24, 2011 Wayne Yamano, Vice President. Who is John Burns Real Estate Consulting?. Independent research and consulting firm focused on the housing We help Investors, Builders/Developers, Lenders, and Building Product Manufacturers make smart decisions

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Housing Market Update May 24, 2011 Wayne Yamano, Vice President

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  1. Housing Market Update May 24, 2011 Wayne Yamano, Vice President

  2. Who is John Burns Real Estate Consulting? • Independent research and consulting firm focused on the housing • We help Investors, Builders/Developers, Lenders, and Building Product Manufacturers make smart decisions • We analyze 80 Metros each month, in 10 major regions. • Our research clients receive: • Monthly reports • Survey Results • Insight from the Experts • Webinars • White Papers • Introductions • And much more…

  3. Today’s Agenda Current State of Housing Excess Housing Vacancy Shadow Inventory For-Sale Vs. Apartments

  4. Prices heading down • Builders dropped prices in 7 of 9 regions in 1Q11 • CA showed the most severe declines • Prices have been under more pressure in 2Q11

  5. All builders hurting

  6. Spring selling season disappointing

  7. Today’s Agenda Current State of Housing Excess Housing Vacancy Shadow Inventory For-Sale Vs. Apartments

  8. Excess Vacancy = 3.1 million units (2.4%) • From 2000 to 2010: • Total housing stock grew by 15.8 million • Households only grew by 11.2 million • Vacancy increased from 9.0% to 11.4%

  9. CA not so bad Oak: 3.3% Sac: 2.7% SD: 2.3% OC: 1.8% LA: 1.7% SF: 1.5% Riv-SB: 0.7% CA Excess Vacancy = 2.2%

  10. U.S. back to equilibrium in 2015 • Construction averaging 1.03MM/yr through 2015 • Household growth averaging 1.46MM/yr through 2015 OC: 2012 LA: 2014 SF: 2014 SD: 2014 Riv-SB: 2015 Oak: 2015 Sac: 2016

  11. Pent-up household growth = 3.4MM • HH growth slowed to 1.0%/yr in 2000s, after 2 decades of 1.4%/yr growth • HH growth should have averaged 1.3%/yr in 2000s, based on demographics and normal headship rates Expected Theoretical Household Growth Rate

  12. More young adults living with parents • 1.5 million more young adults living with their parents today than in 2000

  13. Today’s Agenda Current State of Housing Excess Housing Vacancy Shadow Inventory For-Sale Vs. Apartments

  14. Is the worst behind us? • Based on our forecasts: • 50% of the Foreclosure Notices have been filed • Only 30% of the distressed homes have been sold

  15. U.S. Shadow Inventory = 10 months • Central CA markets have most shadow • Coastal Bay area has least shadow

  16. Distressed sales to take larger share • Distressed sales: • 27% of sales in 2010 • Forecasted to be 36%-37% of sales in 2011-2013 • Typically 6%-7% of sales

  17. Today’s Agenda Current State of Housing Excess Housing Vacancy Shadow Inventory For-Sale Vs. Apartments

  18. Scale tipping towards rental demand

  19. Apartment fundamentals surging

  20. Rents rising as prices falling • Apartments rents have been rising since beginning of 2010 • For-sale housing has never been this cheap compared to apartment rents

  21. Rents rising as prices falling San Francisco Oakland San Jose Sacramento Orange County Los Angeles

  22. …so why is the for-sale market so weak? • Prospective buyer pool is lousy! • FICO scores too low • No $ for down payment

  23. Construction will come back steadily Construction will return as: 1) we add jobs, 2) vacancy is filled, and 3) builders can find ways to make $$$. 2010 to 2015 MF: +173% SF: +72%

  24. Be very bullish long-term!!! • High Demand: Census Bureau says population will grow by 3.2 million per year and they will need to live somewhere. Recovery Timeline Housing Vacancies Filled Demand Exceeds Supply Rents and Home prices Rise Construction Returns to Normal Job Growth • Recovery is Underway: Rents and home prices have stabilized in many of the best middle class neighborhoods today. • Full Construction Recovery Will Take 6+ Years: It will take years to reach 1.7 million+ construction starts due to land locations and feasibility

  25. Make great decisions with great analysis Wayne Yamano wyamano@realestateconsulting.com (949) 870-1200

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