3. What to expect in 2011 and why
Implications of Dodd-Frank, GSEs, Mortgages
& Taxes, QE2, Robo-signing
Impacts on RMBS & Whole Loans
Home Prices vs. Home Values
Copyright Altos Research | www.altosresearch.com | 12/09/2010
4. 180+ Metropolitan Statistical Areas (and growing every month)
covering 20,000+ zip codes
2 million active listings updated every week
Market Analytics & Leading Indicators available by zip code, city,
county, MSA, state and nationally
All data & market analytics for each geography (zip, city, metro)
independently calculated
Copyright Altos Research | www.altosresearch.com | 12/09/2010
5. 0-12 month Forecasting This list in a partial list of market
Median Price stats published weekly, with over
Price of New Listings
Price of Listings Absorbed
400 coincidental & leading
Market Action Index indicators available
List-to-Sale Ratios
Altos Research also provides
6-18 month forecasting market analytics based on
Percent Price Decreased/Increase
Magnitude Price Decreased/Increase
Property Characteristics:
Inventory Square Footage
Percent Relisted # Beds/Baths
Days-on-market (mean and median) Lot Size & Age
Tic/Trend/Peakiness/Troughiness Price per Bedroom/Bathroom
12-24 month forecasting Price per Square Foot (mean &
Year-over-Year Price
median)
Year-over-Year Inventory
Year-over-Year Percent Price Decreased
Year-over-Year Days-on-Market
Copyright Altos Research | www.altosresearch.com | 12/09/2010
8. Correlation with 4-month lead = 0.705
% change Ask Price % change CSXR
3.00%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
-4.00%
Copyright Altos Research | www.altosresearch.com | 12/09/2010
9. We’ll get some type of
seasonal bounce – we
always do. The size and
scope will likely be small as
compared to 2009, but it will
be a breather
Copyright Altos Research | www.altosresearch.com | 12/09/2010
10. • Tax credit stimulated demand temporarily Fewer
sellers required price reductions to sell.
• Sellers are feeling distressed again Price Reductions
on the rise and nearly back to crash levels.
Copyright Altos Research | www.altosresearch.com | 12/09/2010
14. Banks were selling into market strength seen
from Homebuyer Tax Credit
Market picked up, and banks increased the
rate of foreclosures to get assets through the
pipeline
Copyright Altos Research | www.altosresearch.com | 12/09/2010
15. Difficult to see effects
Baked into prices?
Home Price Inflation - A Counterfactual
argument
(Note: See Altos Research White Paper:
“QE2 & the Housing Market”)
Copyright Altos Research | www.altosresearch.com | 12/09/2010
16. In 2004 alone, Fannie Mae and Freddie Mac purchased
$175,000,000,000 in subprime mortgage securities, which
accounted for 44 percent of the market that year, and from 2005
through 2007, Fannie Mae and Freddie Mac purchased
approximately $1,000,000,000,000 in subprime and Alt-A loans,
while Fannie Mae’s acquisitions of mortgages with less than 10
percent down payments almost tripled.
The conservatorship for Fannie Mae and Freddie Mac has
potentially exposed taxpayers to upwards of $5,300,000,000,000
worth of risk.
The hybrid public-private status of Fannie Mae and Freddie Mac
is untenable and must be resolved to assure that consumers are
offered and receive residential mortgage loans on terms that
reasonably reflect their ability to repay the loans and that are
understandable and not unfair, deceptive, or abusive.
Copyright Altos Research | www.altosresearch.com | 12/09/2010
17. Would lead to an increasing 3.5% down
payment mortgages as FHA market share
rises
Any significant downward shift in prices will
lead to negative equity situations.
Would force government to further bolster
the market until we reach the Keynesian
endpoint in 201?, 202?, 203?
No political will to seek ST pain of alternative
Copyright Altos Research | www.altosresearch.com | 12/09/2010
18. 2009-10:Definitely helped the market, but
was temporarily. Diminishing effect in ‘10 vs.
‘09.
May make sense to re-introduce in 2012 or ‘13
Mortgage interest deduction: appears here to
stay. (See NAR/MBAA uproar, Deficit
reduction committee)
Unequivacally shows that tax credits do
impact markets
Copyright Altos Research | www.altosresearch.com | 12/09/2010
19. 360,000
340,000
320,000 A
300,000
280,000 B C (Projected)
260,000
240,000
220,000
200,000
(A) 2008 Trough to Peak = 20% increase
(B) 2010 Trough to Peak = 30% increase
(C) Assuming a 25% rise in Spring 2011, that will bring inventory back to
crash levels
Higher inventory Downward price pressure
Copyright Altos Research | www.altosresearch.com | 12/09/2010
20. Not just the number of homes, but the quality of homes
Bifurcated Market - Don’t confuse price with value. Prices
will fall not only because of demand weakness but the
available stock
This might also case a quick jump in perceived home
values because of cash infused to asset
Copyright Altos Research | www.altosresearch.com | 12/09/2010
21. • Investors and speculators provide liquidity to the market.
• Motor oil between Bank REOs and “regular” buyers (i.e. first-time
home buyers)
• First-time homebuyers with 3.5% down typically don’t have cash
sitting around to fix the roof and re-install stripped copper pipes
• Investors worked us out of the S&L crisis and can pull us out now
Copyright Altos Research | www.altosresearch.com | 12/09/2010
22. Even 2.0-2.5% GDP growth is growth
More people should have jobs in Dec ‘11 than
Dec ‘10
Even the hint of higher mortgage rates may
scare a few buyers into the market. (See
Congressional Tax Debate)
Mortgage rate increases still put them at
historical lows
The good news is that we know more bad
news is here
Copyright Altos Research | www.altosresearch.com | 12/09/2010
23. Nationally, prices will be lower by 5-10%
Some seasonal bounce in Q1, Q2. Bounce will
likely be more like 2008, 2010
2011 will mean lower prices because of:
Rising Inventory
Quality of Inventory
Less Demand (homeownership rates, consumer
exhaustion, consumer trepidation)
The Contrarian Argument - There’s nothing but
bad news out there, so that must mean we’re
hitting the trough
Copyright Altos Research | www.altosresearch.com | 12/09/2010
24. • All markets are not equal
• Do your research: “one-size-fits-all” model will lead your astray
• Wide Distribution of 4- and 12-week price changes over 20,000
zip codes in the Altos Research Market Analytics Platform
Copyright Altos Research | www.altosresearch.com | 12/09/2010
26. BPO based on June comps $184,000
Altos real-time market data
Phoenix 85057 Home Prices Altos Forecast
Copyright Altos Research | www.altosresearch.com | 12/09/2010
27. Not yet. But it won’t be down forever.
2011: Expect 5-10% downside
2012-2014ish
Stabilize and slowly rise as unemployment lags
(see Bernanke, “60 minutes” interview)
Mix of elevated unemployment, high inventory,
and low quality will keep prices low even as
transactions pick up over time
Good for getting in as long as you don’t need to
get out
Copyright Altos Research | www.altosresearch.com | 12/09/2010
28. Submit list of loans,
property addresses or
underlying asset zip
codes to Altos
Research
Altos Research
Housing Market
Data Platform
yields real-time
market analytics
and leading
indicators for
each zip code
submitted.
Copyright Altos Research | www.altosresearch.com | 12/09/2010
29. All data files available for download as .CSV file for easy
integration into any spreadsheet model or database
application.
Copyright Altos Research | www.altosresearch.com | 12/09/2010
31. MORE GOOD READS: OUR MARKET ANALYTICS TEAM:
Two (2) White papers Scott Sambucci, Vice President
now available: scott@altosresearch.com
(415) 931 7942
“Leading Indicators of
Home Prices” Andrew Goei, Manager
“QE2 & the Housing andrew@altosresearch.com
Market” (650) 603-0805
Jeff Eckenhoff, Manager
Today’s Presentation jeff@altosresearch.com
(650) 603-0905
Slides
Copyright Altos Research | www.altosresearch.com | 12/09/2010