1 / 22

War Room 29 Feb 2012 Housing – Rebound or Reckoning Ahead?

War Room 29 Feb 2012 Housing – Rebound or Reckoning Ahead?. War Room. Monthly macro discussion Using tools in context Update on HiddenLevers Features Your feedback welcome. Housing – Rebound or Reckoning Ahead ?. Housing Fundamentals Housing – Harsh Realities

china
Download Presentation

War Room 29 Feb 2012 Housing – Rebound or Reckoning Ahead?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. War Room 29 Feb 2012 Housing – Rebound or Reckoning Ahead?

  2. War Room • Monthly macro discussion • Using tools in context • Update on HiddenLevers Features • Your feedback welcome

  3. Housing – Rebound or Reckoning Ahead? • Housing Fundamentals • Housing – Harsh Realities • Scenario: Return to Long-Term Trend • Scenario: US Housing Rebound

  4. HiddenLevers Housing - fundamentals

  5. Housing Overview: Prices Commercial real estate has worked off the bubble faster than residential, touching 0% 10 year growth recently.

  6. Housing Overview: Foreclosures The foreclosure rate is declining – this effect is more pronounced in Commercial RE, which has no robo-signing issues.

  7. Housing Overview: Construction New housing starts and home builders' sentiment track closely, and both show a slight rebound since the housing crash.

  8. Housing Overview: Home Sales New home sales are at all-time lows despite mortgage rates – the traditional inverse relationship has broken down.

  9. HiddenLevers Housing – Harsh Realities

  10. Housing Inventory • Inventory charts = mixed bag • Fast decline in overall inventory • Higher inventory than late 80s still • big gap = shadow inventory • Shadow Inventory • - 17 months of supply • downside pressure • head and shoulders?

  11. Household Formation • Housing Inventory • About 3.5 mm excess US homes • Must be absorbed by household formation • Household Formation • Usually above 1mm/year • Closer to 500k/year now • Affected by: • marital status changes • birthrates • immigration • joining families • adult children at home Usual Bullish Argument: Housing Starts below trend (5 year low)  IRRELEVANT

  12. Household Formation – Families Non-Families = 34% of US population – dipped in 2008, now back to trend Families = 66% of US population – decoupled since 2008 Family Household Formation = key to equilibrium

  13. HiddenLevers Scenario: Return to Long-term trend

  14. Return to Long-Term Trend: Timeline

  15. Return to Long-Term Trend: Context

  16. Return to Long-Term Trend: 120 years

  17. Return to Long-Term Trend: What’s next?

  18. HiddenLevers Scenario: us housing rebound

  19. Affordability highest in decades Historically low mtg rates + price declines 75% of homes sold are now affordable to median income buyers In many markets buying cheaper than renting Housing Rebound: Affordability NAR Affordability Index NAHB Housing Opportunity Index Sources: National Associations of Realtors, Home Builders, and Wells Fargo

  20. Household formation at half historical rate as young adults stay home Job growth will eventually lead to household formation Very tight correlation between household formation and housing market Housing Rebound: Jobs = Households Sources: National Associations of Realtors, Home Builders, and Wells Fargo

  21. Housing Rebound vs Back to Long-Term Norms Consequences: S+P to new highs, but muted impact from here 2. Industrial commodities will benefit most Employment picture change will be cause Rebound will in turn affect employment in sector • Consequences: • Home prices may suffer up to 30% more downside • Good chance of US economy going into recession • Pendulum’s don’t stop in the middle • Home ownership dies as an American tradition

  22. HiddenLevers - New Features • Fixed Income Support • Time Frames for Scenario Modeling • Yield taken into account in Models • Auto-notification of Missing Tickers • Coming soon: • Macro Profile for a Portfolio

More Related