Real Estate

1
Real Estate
Kirk Lesh
January 15, 2009
2
Agenda

• How Did We Get Here?
• Where is Here?
• Where are we going?

3
How Did We Get Here?
4
Increase Demand
5
(No Transcript)
6
Increased Demand

• Cheap Money

7
Real Mortgage Rates
11.5
9.5
7.5
5.5
3.5
1.5
-0.5
1984
1987
1990
1993
1996
1999
2002
2005
2008
1-Yr Arm
30-Yr Fixed
8
Increased Demand

• Cheap Money
• Government Intervention

9
Enterprise Share of Outstanding
Mortgage Debt
50
45
40
35
30
25
20
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008 Q1
2008 Q3
10
Increased Demand

• Cheap Money
• Government Intervention
• Innovative Lending
• - Increased Risk

11
Innovative Lending

• New Loan Products
• Lower Standards
• Credit Default Swaps
• Securitization

12
Imbalance Between Prices and Income
13
Price Growth vs. Income Growth
20
10
0
-10
-20
-30
-40
-50
1991
1993
1995
1997
1999
2001
2003
2005
2007
US
CA
14
Where is Here?
15
(No Transcript)
16
U.S. Percent of
1.2
Foreclosures
1.0
0.8
0.6
0.4
0.2
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
17
California
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1994
1996
1998
2000
2002
2004
2006
Q3 2008
Foreclosures
Notices of Default
18
Home Ownership
19
Home Ownership

70
68
66
64
62
60
58
56
54
52
50
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
U.S.
CA
20
Real Estate Wealth
21
U.S. Real Estate Wealth
Change
10
5
0
-5
-10
-15
-20
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2005
2006
2007
2008
22
New Construction
23
Housing Starts per Thousand
20
18
16
14
12
10
8
6
4
2
0
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
U.S.
CA
24
Commercial Real Estate
25
Office/Industrial Markets

• Weak
• Location Specific
• 1) Orange County/New York City
• 2) Peninsula/Houston
• 3) Rust Belt
• 4) Interior California

26
Retail Market
27
(No Transcript)
28
(No Transcript)
29
(No Transcript)
30
Where Are We Going?
31
Existing Single-Family Median Home Prices
Y-O-Y Change
10
0
-10
-20
-30
-40
-50
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
U.S.
CA
32
Existing Single-Family Home Sales
Q-O-Q Change
30
20
10
0
-10
-20
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
U.S.
CA
33
California
140
120
100
80
60
40
20
0
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
Foreclosures
NODs
34
U.S. Home Ownership
69
68
67
66
65
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
35
California New Housing Units
thousands
35
30
25
20
15
10
5
0
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
36
California New Non-Residential Building
B
6
5
4
3
2
1
0
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007
2008
2009
37
Conclusion
38
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