LEVERAGING THE LATEST HOUSING MARKET TRENDS TO HELP ... · Negative equity at lowest level since Q1...
Transcript of LEVERAGING THE LATEST HOUSING MARKET TRENDS TO HELP ... · Negative equity at lowest level since Q1...
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LEVERAGING THE LATEST HOUSING MARKET TRENDS TO HELP DISTRESSED HOMEOWNERS
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WHAT WE’LL COVER
• A bit about RealtyTrac
• Where have all the foreclosures gone?
– Markets bucking the downward trend
– Shadow inventory?
– Zombie foreclosures and occupied REOs
• Risks remain
– Underwater homeowners
– Zombie foreclosures and occupied REOs
– Non-performing loan sales
• Home prices lifting all boats
– Rising equity: non-distressed and distressed
– Fewer short sales, more auctions and bank-owned sales
• Institutional investors, cash buyers and flippers
– What happens when institutional investors pull out of a market?
– Effect of international buyers
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FORECLOSURE TRENDS FIRST QUARTER 2014
• U.S. Foreclosure continues downward trend with a handful exceptions
– U.S. foreclosure activity at lowest level since Q2 2007
– Foreclosure starts increased from year ago in 19 states
– Scheduled foreclosure auctions increased from a year ago in 29 states
• Occupied REOs still a problem
– More than half of 483,224 bank-owned homes nationwide still occupied
– Banks will likely be more aggressive in coming months to evict occupants
– REOS sold in first quarter took an average of 226 days to sell, up 34 percent from a year ago.
• Average time to complete foreclosure still climbing nationwide
– Up to 572 days on average nationwide
– New Jersey overtakes New York as state with longest process (1,103 days)
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FORECLOSURE STARTS
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SCHEDULED FORECLOSURE AUCTIONS
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TIME TO FORECLOSE
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TIME TO SELL FORECLOSURES
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FORECLOSURE TRENDS APRIL 2014
• Overall foreclosure activity continues path back to normal
– 115,000 properties with foreclosure filings in April, down 20 percent from year ago, representing the 43rd consecutive month where activity decreased annually
– Normal is about 85,000 a month, and the peak was 367,000 in March 2010.
• Bank Repossessions were up from a year ago in 16 states
– Judicial states: New York, New Jersey, Illinois, Maryland
– Non-judicial states: Oregon, California, Nevada
• Banks turning attention to clearing out stubborn shadow inventory
– Silver lining is that these additional REOs in some areas mean more inventory will soon be listed for sale in a market that is starved for inventory.
– In some areas these are bottom-of-the-barrel properties that will need rehab
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HISTORICAL U.S. FORECLOSURE ACTIVITY
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STATES WITH HIGHEST FORECLOSURE RATES
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STATES WITH BIGGEST JUMPS IN BANK-OWNED HOMES
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ZOMBIE FORECLOSURES
• Vacant foreclosures account for more than one in five properties in the foreclosure process. – More than 150,000 nationwide
– Added to 500,000 bank-owned properties
• In part an unintended consequence of long foreclosure timelines – Biggest increases in non-judicial states
– Some of longest average zombie lifespans in non-judicial states
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ZOMBIE FORECLOSURES
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STATES WITH MOST ZOMBIES
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STATES WITH MOST ZOMBIES AND REOS COMBINED
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LIFESPAN OF ZOMBIES
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LEVERAGING OPPORTUNITY WITH FORECLOSURE TRENDS
• Age of grace for distressed homeowners coming to an end
– More urgency to do a short sale or other foreclosure alternative
• The shadow is shorter, and taking longer to materialize
– Less competition from bandwagon agents no longer working distressed market
• Targeting distressed homeowner niches may be most effective
– Zombies: short sales in search of an agent
– Occupied REOs: listings in limbo
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NEGATIVE EQUITY
• Negative equity at lowest level since Q1 2012
– 9.1 million properties seriously underwater, 17 percent of all homes with mortgage
– Down from 12.8 million seriously underwater, representing 29 percent of all homes with mortgage in Q2 2012.
• More foreclosures with equity
– 35 percent of properties in foreclosure process have equity
– Up from 24 percent a year ago
• More homeowners are equity rich or have resurfacing equity
– 9.9 million equity rich (19 percent of all mortgages)
– 8.5 million equity resurfacing (16 percent of all mortgages
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NEGATIVE EQUITY
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NEGATIVE EQUITY
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NEGATIVE EQUITY AND HOME PRICES
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FORECLOSURES WITH EQUITY
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LEVERAGING OPPORTUNITY WITH HOME EQUITY TRENDS
• Long tail of short sales
– Will take years for many underwater owners to regain equity
– Many will encounter a sales trigger before they regain equity
• Distress without the mess: foreclosures with equity
– Many may not know they now have equity
– Those without equity today may have equity tomorrow
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SALES AND HOME PRICES FIRST QUARTER AND MARCH
• Signs of life after a slow winter
– U.S. sales volume up monthly after 4 months flat or declining
– Sales prices up monthly after 6 months flat or declining
• Price appreciation cooling in some of first markets to bounce back
– San Francisco, Detroit, Cape Coral, Phoenix, Atlanta
• Distressed sales down long-term but up from previous quarter – Biggest increases in foreclosure auction sales and REO sales,
indicating banks pushing through old inventory
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MEDIAN HOME PRICES
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HPA COOLING IN SOME OF HOTTEST MARKETS
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DISTRESSED SALES
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LEVERAGING OPPORTUNITY WITH HOME PRICE TRENDS
• Window of opportunity to sell may be closing for distressed sellers
• Slowing home prices mean many may have to give up hope of regaining equity in near future
• Banks are less inclined to do short sales because they know they can get the properties sold at auction or as bank-owned
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CASH SALES AND INSTITUTIONAL INVESTORS
• Cash buyers still king
– 43 percent of all U.S. residential sales in first quarter were cash sales
– Tight lending, uptick in interest rates, low inventory
– 52 percent were to investors, 48 percent to owner-occupants
• Institutional investors cautiously opportunistic
– 5.6 percent of all sales in first quarter, down from 7.0 percent a year ago
– Jumping back in when more inventory at right price becomes available
• Institutional investor pullback seems to be sending HPA negative in some markets
– Jacksonville, Fla. & Greensboro, N.C.
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CASH BUYERS & INSTITUTIONAL INVESTORS
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CASH BUYERS & INSTITUTIONAL INVESTORS
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CASH BUYERS & INSTITUTIONAL INVESTORS
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HOME FLIPPING
• Flippers behaving more rationally in this recovery
– Fewer flips compared to year ago but bigger profits
– Longer time to flip indicates more rehab
• Flippers are still in good position because of low inventory and slow pace of home building
• Bigger rehab translates into more ROI – up to a very specific point
– More expenditure on rehab = bigger ROI up to 23 percent of original purchase price spent on rehab.
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FLIPPING
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FLIPPING
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FLIPPING
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FLIPPING
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INTERNATIONAL BUYERS
• From 2009 to 2013 RealtyTrac subscriber activity from foreign countries up 125 percent
• Biggest increases in United Arab Emirates (up 352 percent), Switzerland (up 270 percent) and China (up 254 percent).
• Biggest share of international subscriber activity from Canada (45 percent), UK, Australia, China and Mexico
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INTERNATIONAL BUYERS
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INTERNATIONAL BUYERS
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LEVERAGING OPPORTUNITY WITH INVESTORS, CASH BUYERS
• Connect motivated sellers with motivated buyers
• Scenario 1
– Motivated seller: homeowner in pre-foreclosure occupying a property in decent condition
– Motivated buyer: international cash buyer ready to act quickly
• Scenario 2
– Motivated seller: homeowner in pre-foreclosure who has vacated property (zombie)
– Motivated buyer: flipper willing to do rehab
• Scenario 3
– Motivated seller: bank with occupied REO they need to sell
– Motivated buyer: institutional investor that may be willing to allow homeowner to stay on as renter
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DAREN BLOMQUIST VICE PRESIDENT, REALTYTRAC [email protected]
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THANK YOU!