is it worth it to buy a house presentation v7

8/3/2019 Is It Worth It to Buy a House Presentation v7

1/15

Is it Worth it to Buy a House?

Analysis and Predictions through the financial crisis

Developed by NA-13 Green Team

Alisa

Bryant

Damon

Gerson

Ryan

Shawna


2/15

Polls

How many of you have purchased ahome since 2000?

How many of you have felt the effects ofthe financial crisis as it relates to buyingor selling a home?


3/15

Market Participants

Banks

Mortgage

BrokersHome builders

US Treasury

(interests rates)

Homebuyers

Institutional

Investors(of mortgage

backed securities)

Supply Side

Demand Side

Appraisers

Direct Market Complementary Market

1st Time 2nd/Vaca

Investors

Land

Speculators

Home sellers


4/15

Before the CrisisGovernment promotion of home ownership

Market hype low inventory, bidding competitions, multiple offers

Home ownership at all time-high of 69% in 2004

Q3 2006 single-family starts 30% below peak levels

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Q400 Q201 Q401 Q202 Q402 Q203 Q403 Q204 Q404 Q205 Q405 Q206 Q406

Mon

thlySupplyofInventory

HousingPriceQuarterlyApprecationAnnaulized

Quarter

House Price

Quaterly

Appreciation

Annualized

Months Supply of

Inventory at current

sales

Source: US Census: Houses For Sale by Region and Months' Supply at Current Sales Rate; FHFA seasonally adjusted house price index


5/15

After the CrisisTimid recovery despite stimulus

Oversupply of homesRise in foreclosures

Decrease in number of buyers

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210

MonthlySupplyofInventory

HousingPriceQ

uarterlyApprecationAnnaulized

Quarter

House Price

Quaterly

Appreciation

Annualized

Months Supply of

Inventory at

current sales



6/15

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Q400 Q301 Q202 Q103 Q403 Q304 Q205 Q106 Q406 Q307 Q208 Q109 Q409

MonthlySupplyofInventory

HousingPriceQuarterlyApprecationAnnaulized

Quarter

House Price

Quaterly

Appreciation

Annualized

Months Supply

of Inventory at

current sales


Complete Picture


7/15

Supply ImbalanceDecrease in prices hasDecrease in prices has

not reduced supplynot reduced supply

SupplySupply shiftsshifts

Home owners

Dumping homes

due to lostincome, risingrates, etc

Banks

Dumping

foreclosuresHome Builders

Over built andliquidating

Quantity of HomesQuantity of Homes

PriceofHomes

PriceofHomes

Q1Q1 Q2Q2

P1P1

P2

P2

S1S1 s2s2

D1D1


PriceofHomes

PriceofHomes

Q1Q1 Q2Q2

P1P1

P2

P2

S1S1 s2s2

D1D1


PriceofHomes

PriceofHomes

Q1Q1 Q2Q2

P1P1

P2

P2

S1S1 s2s2

D1D1

Quantity of Homes

PriceofHomes

Q1 Q2

P1

P2

S1 s2

D1


8/15

Demand Imbalance

Demand shiftsDemand shifts

Decrease in prices hasDecrease in prices hasnot created morenot created moredemanddemand

Home BuyersHome Buyers

Price expectationsPrice expectationsIncomeIncome uncertainties,uncertainties,lossloss wages/jobs,wages/jobs,

CreditCredit crunchcrunch unableunableto get loans,to get loans,

SpeculatorsSpeculators

ShiftedShifted from buyersfrom buyers totosellerssellers


PriceofHomes

PriceofHomes

Q1Q1Q2Q2

P1P1

P2P2

S1S1

D1D1

D2D2

Quantity of Homes

PriceofHomes

Q1Q2

P1

P2

S1

D1

D2


9/15

Equilibrium & Outlook

Have not achieved

equilibrium

Key drivers for reachingequilibrium

Unemployment rates

Interest rates & LendingForeclosures

Quantity of Homes

PriceofHomes

Q1Q2

P1

P2

S1 s2

D1

D2


10/15

Unemployment Outlook

Most important variable

Expected to peak in early 2011

No Quick recovery anticipated

Many years before we every get back to 5% norm

Will drive a slow recovery in home demand

8.6%

8.8%

9.0%

9.2%

9.4%

9.6%

9.8%

2009 2010 2011 2012

Unemployment Rate Projection

Unemployment

Rate

Source: National Association of Realtors, US Economic Outlook, October 2010


11/15

Interest Rates & BorrowingCredit markets have started to ease

Rates have likely reached bottom

Pressure from Foreign Governments

Rates expected to rise in 2011 and beyond

Drives up the cost of borrowing

Source: HSH Associates. Points and fees are added to interest rates. Data as of October 1, 2010.

30-year Fixed Mortgage Rates


12/15

ForeclosuresMillions of foreclosures still on the market

23.3% of mortgages are underwater

Rate of new foreclosures is starting to decrease

Supply will remain high

Will further push home prices down

0.0

0.5

1.0

1.52.0

2.5

3.0

3.5

4.0

2005 2006 2007 2008 2009 2010

Qty(M

illions)

Foreclosures

Foreclosures

Source: Theawl.com , June 2010


13/15

PredictionPrices should bottom out in late 2011/2012 after a further 8% reduction

Unemployment, foreclosures, & anticipated rate increases slowing recoveryRecord low prices should start to drive demand

Market forever changed - Fewer homebuilders, tighter lending standards,retiring baby boom, price expectations

Proceed with caution, market changed forever

Chart: Annual

changes in

national house

prices

Sources: E. H. Boeckh and Associates, Bureau of Labor Statistics, U.S. Census Bureau and FreddieMac.


14/15

Concluding Poll

Is it worth it to buy a home?


15/15

Thank you

Questions and Answers

is it worth it to buy a house presentation v7

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