jb
Fisher Center Real Estate Conference
April 22, 2013
Dean Wehrli, Vice President
1
2012 Was A Great Year
• Home Prices and Sales
Rates Were Up
• Giants won the
World Series
• Stanford won the Rose Bowl
2
Northern California Price
Appreciation Among the Best
Nationally
Burns Home Value IndexTM
(12-month Change)
Phoenix, AZ
Las Vegas, NV
San Jose, CA
Sacramento, CA
San Francisco, CA
Riv/San Bern
San Diego, CA
Orange County, CA
Denver, CO
Miami, FL
Dallas/Fort Worth, TX
Washington D.C.
Seattle, WA
Tampa, FL
Minneapolis, MN-WI
Oakland, CA
Los Angeles, CA
Portland, OR-WA
Boston, MA-NH
New York, NY-NJ
Charlotte, NC-SC
Chicago, IL
Atlanta, GA
• This is great news for
private builders who need
equity partners.
• This is also why the public
builders are allocating
capital to Northern CA
22%
17%
16%
15%
14%
13%
13%
12%
12%
9%
9%
8%
7%
7%
7%
7%
6%
6%
6%
5%
5%
4%
4%
0%
5%
10%
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
3
15%
20%
25%
Foreclosure Starts Trending Down to
Normal through 2014
Distressed still an Issue, but less so all the time
4
Agenda
1. Market Trends Near You
2. The Big Creep
3. Pros and the Cons
5
Cycles
6
JBREC Housing Cycle Risk Index™ looks at
4 major categories for fundamentals
4 major categories, with 11
subcategories and 25 calculations
I. Demand
1. Total Buying Activity (New and Resale)
2. Median Resale Price Appreciation
3. Job Growth
4. Population Growth
5. Realtor Market Ratings
II. Supply
1. Permit Trends
2. Resale Listings
III. Affordability
1. JBREC Affordability Index
2. Home Equity
3. Mortgage Rates
IV. U.S. Economy
7
San Jose HCRI is a B+
Real Price Apprec YOY
+70%
+60%
+50%
+40%
+30%
+20%
+10%
0%
-10%
-20%
-30%
-40%
-50%
A+
A
AB+
B
BC+
C
CD+
D
DF
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
Housing Cycle Risk Index
Housing Cycle Risk Index™
Positive Real Apprec
Negative Real Apprec
Housing Cycle Risk Index™
Source: John Burns Real Estate Consulting (Data: Feb/13, Pub: Apr/13)
8
San Francisco HCRI is a B+
Real Price Apprec YOY
+70%
+60%
+50%
+40%
+30%
+20%
+10%
0%
-10%
-20%
-30%
-40%
-50%
A+
A
AB+
B
BC+
C
CD+
D
DF
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
Housing Cycle Risk Index
Housing Cycle Risk Index™
Positive Real Apprec
Negative Real Apprec
Housing Cycle Risk Index™
Source: John Burns Real Estate Consulting (Data: Feb/13, Pub: Apr/13)
9
Oakland HCRI is an A-
Real Price Apprec YOY
+70%
+60%
+50%
+40%
+30%
+20%
+10%
0%
-10%
-20%
-30%
-40%
-50%
A+
A
AB+
B
BC+
C
CD+
D
DF
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
Housing Cycle Risk Index
Housing Cycle Risk Index™
Positive Real Apprec
Negative Real Apprec
Housing Cycle Risk Index™
Source: John Burns Real Estate Consulting (Data: Feb/13, Pub: Apr/13)
10
Sacramento HCRI is an A
Real Price Apprec YOY
+70%
+60%
+50%
+40%
+30%
+20%
+10%
0%
-10%
-20%
-30%
-40%
-50%
A+
A
AB+
B
BC+
C
CD+
D
DF
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
Housing Cycle Risk Index
Housing Cycle Risk Index™
Positive Real Apprec
Negative Real Apprec
Housing Cycle Risk Index™
Source: John Burns Real Estate Consulting (Data: Feb/13, Pub: Apr/13)
11
Sales
12
San Jose new home sales growth through
2016 – but still below 2007 levels
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
2013P
2014P
2015P
2016P
2017P
ANNUAL NEW HOME SALES
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
13
Oakland same story – new home sales to near
6,000 in 2016, but still below 2006
ANNUAL NEW HOME SALES
12,000
10,000
8,000
6,000
4,000
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
2013P
2014P
2015P
2016P
2017P
2,000
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
14
Sacramento also better bit below the norm INVENTORY
ANNUAL NEW HOME SALES
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
2013P
2014P
2015P
2016P
2017P
2,000
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
15
Prices
16
Huge near-term appreciation in San Jose
New Home Price
Appreciation Forecast
ANNUAL MEDIAN NEW HOME PRICE
$700,000
$600,000
18%
$500,000
16%
16%
14%
$400,000
11%
12%
10%
$300,000
8%
$200,000
6%
6%
4%
$0
2%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
$100,000
3%
1%
0%
2013P
2014P
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
17
2015P
2016P
2017P
Milder but still strong in Oakland
New Home Price
Appreciation Forecast
ANNUAL MEDIAN NEW HOME PRICE
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
$0
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
9%
9%
6%
3%
1%
2013P
2014P
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
18
2015P
2016P
2017P
Nowhere to go but up in Sacramento
New Home Price
Appreciation Forecast
ANNUAL MEDIAN NEW HOME PRICE
$500,000
$450,000
18%
$400,000
16%
$350,000
16%
14%
14%
$300,000
12%
$250,000
10%
$200,000
8%
8%
$150,000
6%
$100,000
4%
4%
$50,000
1%
2%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current
$0
0%
2013P
2014P
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
19
2015P
2016P
2017P
New home share of total sales. Not the norm
– below even the mid-1990s
60%
50%
40%
30%
20%
10%
Sacramento
Oakland
San Jose
Stockton
Fresno
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
20
Current
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0%
Monthly inventory levels – neither is this
16
14
12
10
8
6
4
2
0
2005
2006
Sacramento
2007
2008
Oakland
2009
San Jose
2010
2011
Stockton
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
21
2012
Fresno
Agenda
1. Market Trends Near You
2. The Big Creep
3. Pros and the Cons
22
Nowhere worked
23
Call me if it’s in the core
24
Call Us
25
Please can we buy your land? Pretty
please?
26
Agenda
1. Market Trends Near You
2. The Big Creep
3. Pros and the Cons
27
The Good
• Economy Picking Up: Knocking on wood.
• Boomerang Buyers: Itching to get back into the
for-sale market.
• Urgency Back: Prices not falling and how long will
these mortgage rates last?
• Inventory: How low can it go?
• Rising Prices: With a vengeance.
• Rising Sales: But already supply constrained.
28
10% of 2013 demand from “boomerang”
buyers
29
The “Concerning”
• Prices Rising: Low payments still, but price to
income not great anymore.
• Mortgage Rates: Have to go up – and with them
the payments to price ratio.
• Investors: Organic buyers often shut out.
• Inventory: Resales inventory has to go up – the
chicken and egg phenomenon.
• No Place to Build: We need to get lots to the
market.
• Be Careful of the Hype: But a hot market will
eventually lead to mistakes.
30
The Bi-Polar Market
The Big Re-Set
The Big Switch Flip
31
Prices vs. Payments
Metro
San Jose
San Francisco
Oakland
Sacramento
Stockton
Fresno
Price to Income Ratio
Normal
Current
Difference
6.0
7.5
1.5
7.9
10.2
2.3
4.7
5.2
0.5
4.0
3.7
-0.3
4.4
3.5
-0.9
3.8
3.5
-0.3
Payment to Income Ratio
Normal
Current
Difference
60.1%
53.7%
-6.4%
78.4%
73.3%
-5.1%
47.6%
37.5%
-10.1%
39.9%
26.6%
-13.3%
44.7%
25.1%
-19.6%
39.2%
25.3%
-13.9%
• Core marks already above the long-term norm – though we may
have a new normal that is still a little concerning.
• Low mortgage rates leave room to grow – at least for the near
term.
Source: John Burns Real Estate Consulting, Metro Analysis & Forecast, April 2013
32
Make Great Decisions Using Great Analysis
? Questions ?
dean@jbrec.com
(916) 647-3263
33