FOR CLARITY… · 2020. 4. 19. · jburns@realestateconsulting.com. Howard Marks, Oaktree A World-Renowned Realist April 15, 2020 What does the U.S. see today: • One of the greatest

FOR CLARITY…

There Are A Lot Of Different Types

If Investors On This Call

TONS OF UNCERTAINTY IN TODAY’S MARKET

• The Capital Markets Have Dried Up For Rentals and Lowered LTV’s For

Rehabbers Which All Puts PRESSURE on Wholesalers…We Are All

Effected.

• BUY BOXES Are Moving Target Right Now…Creating RISK EXPOSURE.

• Showing Houses, Buying Houses, And Rehabbing Houses Haas Gotten

HYPER COMPLICATED With Social Distancing And “Shelter In Place”

Rules

TONS OF UNCERTAINTY IN TODAY’S MARKET

• MARKETING Has Become A Game Of Which Came First…THE

CHICKEN OR THE EGG?

• Rental Income Is GETTING DISRUPTED In Many Markets Around The

Country Which Is The One Thing We All Thought WAS A SURE THING.

• Then We Get To Combine ALL OF THIS With The Fact That We Are All

Going STIR CRAZY.

WE ALL JUST WANT TO GO BACK TO NORMAL

WHEN WILL THAT HAPPEN?

Can You Survive…

THE GAP?

IS THE CORONA VIRUS THE PROBLEM…

Or Is It Revealing The PROBLEM

TOUGH QUESTION…

• Insert Krause and pics of her and Snodgrass

• HAVE MARK LANE POST – WE FELT LIKE BIGGEST PLACE TO MAKE A DENT IS AT

THE CONVERSION LEVEL

Marcus Crigler

What To Do When Your P & L Is In The Green

But Your Bank Account

Is In The RED

TODAY’s AGENDA

• HOW WILL MARKET VALUES BE IMPACTED Across The

Country And For How Long?

• How Long Will It Take For HOUSING TO

RECOVER...After Shelter-At-Home Is Lifted?

• What Is The Overall IMPACT of The "MORTGAGE

PAYMENT HOLIDAY"?

• WHERE IS SAFETY FOUND In The Home Building

Sector?

TODAY’s AGENDA

• How WILL RENTS BE EFFECTED And For How Long?

• Will The Wall Street SECONDARY CAPITAL MARKETS

Return To Main Street And If So...When?

• Have iBUYERS PACKED UP THEIR BAGS...Short Term

Or Long Term?

• Are We Going To Experience a U SHAPED...V

SHAPED...OR L SHAPED RECOVERY?

TODAY’s AGENDA

• Where Will We Be In 6 Months?

NORMAL…RECESSION…DEPRESSION?

• DISPOSITONS During A PANDEMIC… Dispo Is KING

Covid-19 Crisis Webinar

A Global Reset

April 17, 2020

John Burns(949) 632-8240

jburns@realestateconsulting.com

Howard Marks, Oaktree

A World-Renowned Realist

April 15, 2020

What does the U.S. see today:

• One of the greatest pandemics in 102

years

• The greatest economic contraction

since the Great Depression

• The greatest oil-price decline in the

OPEC era (and, probably, ever) and

• The greatest central bank/government

intervention of all time

― Howard Marks, Oaktree

Bill Gates’

timeline

• Phase 1 Health Crisis: 10+ weeks of extreme lock down results in

areas opening up in May and June

• Phase 2 Economic recovery: At least 18 months from now,

when a vaccine becomes widely available, and people

interact normally again

• Phase 3 Home buying: Specifically mentioned as a very long

time until recovery

COVID-19 continues to wreak havoc in Washington.

January 21 – 1st confirmed case in the United States

Rising cases

COVID-19 continues to wreak havoc in Washington.

February 29 – 1st confirmed death

Rising deaths

The worst hot spots are in the East.

37%40%42%

48%27%

57%27%

57%37%39%

0% 20% 40% 60%

San Antonio

Dallas/Ft Worth

Earn < $60K

Without…

TX Workers

Percentage of Texas Workers Who

Can Work Remotely

Source: Federal Reserve Bank of Dallas tabulation of American Community Survey

Remote work favors higher paid employees.

Hardest Hit Industries

The Nevada, Ohio and Michigan economies have likely been hit the hardest.

Searches per capita for “Unemployment” by state.

California searches are 20X the norm!

126138142148149

176180194199210219225

245248248250250

267291293306

388404

438439

473476

768860

992

0 100 200 300 400 500 600 700 800 900 1,000

Boise City, ID

Charleston, SC

Myrtle Beach, SC

Sarasota, FL

Greenville, SC

Baltimore, MD

Sacramento, CA

Portland, OR-WA

Seattle, WA (MDivision)

Las Vegas, NV

Philadelphia, PA-NJ-DE-MD (MSA)

Minneapolis, MN-WI

Riverside-San Bernardino, CA

Fort Worth, TX (MDivision)

Chicago, IL**

Indianapolis, IN

Denver, CO

Orlando, FL

Jacksonville, FL

Nashville, TN

Tampa, FL

Raleigh-Durham, NC

Charlotte, NC-SC

Phoenix, AZ

San Antonio, TX

Washington DC, DC-VA-MD-WV (MSA)

Austin, TX

Atlanta, GA

Dallas, TX (MDivision)

Houston, TX

Number of Actively Selling Communities

Source: John Burns Real Estate Consulting

Supply down 8% or more

Supply up 5% or more

New home supply is generally low, and has risen more in some areas, and declined in

others.

Federally

Elected

Officials

The FedMortgage

Policy

GNMA / FHFA

3 Arms of Federal Government Coming to the Rescue

Massive 2020 Q2 stimulus will expire over time, creating challenges over the next year.

2020 Q2 2020 Q3 2020 Q4 2021 Q1

$105B FFCRA credits

$350B PPP

$250B Unemployment

Student Loan Forbearance

Mortgage Forbearance

Recipients lose $600/week bonus after 4 months

$290B Stimulus Check

Gradually Exit Shelter in Place?

Unemployment to rise again

Rent Forbearance

2021 Q2

12 week leave ends for early applicants

Spending/savings diminishes

Income declines for those still on unemployment

Payments Return

Modify, forgive

or foreclose on

homeownerModify, forgive or

foreclose on landlord

JBREC Housing Industry Demand Survey: Trends

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Demand stabilized a bit this week

10%

10%

11%

36%

39%

43%

55%

51%

46%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2 weeks ago

1 week ago

Current

Increasing The Same Decreasing

Current Goods and Services Demand by Industry: All Responses

Industry capital sources are seeing more demand. Investment

(stock and bond) funds and SF rental most stable.

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Is demand for your goods or services increasing or decreasing compared to last week?

5%

9%

9%

10%

10%

11%

13%

14%

15%

21%

32%

57%

53%

33%

62%

44%

43%

61%

47%

40%

45%

37%

38%

38%

58%

28%

46%

46%

26%

39%

45%

34%

32%

0% 20% 40% 60% 80% 100%

Apartment

Developer

Building products

Single-family rental

Private builder

All

Investment fund

Other

Public builder

Lender

Private equity

Increasing The Same Decreasing

Current Goods and Services Demand by Industry

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Builder and Developer Demand Improved this Week

4%

6%

15%

33%

37%

40%

63%

57%

45%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Public Builder

3%

5%

10%

33%

39%

44%

64%

56%

46%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Private Builder

Goods and Services Demand: DevelopmentIncreasing The same Decreasing

4%

6%

9%

36%

45%

53%

60%

49%

38%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Developer

A number of clients reported improving sales this past weekend as well.

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Private equity opportunities increased, while lenders

and investment funds reported less demand this

week.

21%

26%

21%

31%

38%

45%

48%

36%

34%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Lender

19%

21%

13%

35%

40%

61%

46%

39%

26%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Investment Fund

19%

14%

32%

37%

46%

37%

44%

40%

32%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Private Equity

Goods and Services Demand: CapitalIncreasing The same Decreasing

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Rental demand stabilized this week, with notably less

apartment industry distress.

15%

10%

10%

49%

54%

62%

35%

36%

28%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Single-Family Rental

17%

13%

5%

17%

25%

57%

67%

63%

38%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Apartments

Goods and Services Demand: RentersIncreasing The same Decreasing

Source: John Burns Real Estate Consulting, LLC, independent survey of ~2,000 weekly responses. Current data captured the week of 4/13/2020.

Little change for building product and other demand

this week.

14%

14%

14%

38%

43%

47%

47%

43%

39%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Other

8%

9%

9%

32%

30%

33%

59%

62%

58%

0% 25% 50% 75% 100%

2 Weeks Ago

1 Week Ago

Current

Building Products

Goods and Services DemandIncreasing The same Decreasing

-38%

-3%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

New ListingsActive Listings

ListingsPeak (pre-COVID19 fallout) to Current

Source: Redfin Data Center, 70 Market rollup, 4/15/2020. 'Current' represents data for week ending 4/3/2020.

Listings remain very low. Listings are down 3% more YOY than they were in February (down 19% vs 16%). The number of new listings has plunged 38%.

Searches for housing are down between -17% to -24%, but has improved since last week.

-23%

-24%

-28%

-17%-18%

-24%

New Homes Resale Homes Apartments

Last Week

Current

Google SearchesYear-over-Year %

Source: John Burns Real Estate Consulting (April 16, 2020)

Resale list prices are now down 1% YOY.

$359 K

$370 K$370 K

$357 K

$345,000

$350,000

$355,000

$360,000

$365,000

$370,000

$375,000

4/12/2019 6-Mar 13-Mar Mar-20 27-Mar 3-Apr 10-Apr

Median List Price(115 market areas)

-1% YOY

0.09%

1.7%

2.4%

0.25%

2.7%

3.7%

0.19%

4.3%

5.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

March 2 - March 8 March 23 to March 29 March 30 to April 5

Loans in Forbearance as % Share of Servicing Portfolio

Fannie Mae & Freddie Mac Total Ginnie Mae

Percentage of Loans in Forbearance Rising Rapidly

Source: Mortgage Bankers Association – Forbearance and Call Volume Survey (April 13th, 2020)

Risk Premium on 30 Year Fixed Rate Mortgage is Still Elevated Compared to Norm vs. 10 Year Treasury

Source: Freddie Mac, Federal Reserve (April 15th, 2020)

Normal Spread = 170bps (1.7%)

See Terms and Conditions of Use and Disclaimers.

Distribution to non-clients is prohibited. © 2019

Apartment defaults were about 7% this month – revised up from 9%.

• Texas and North Carolina had very little distress

• Bringing back an old concept:

– Economic occupancy - % paying

– Physical occupancy - % occupied

We introduced a new Friday email as a great way to

end the week.

THANK YOU!

A Global Reset

April 17, 2020

John Burns(949) 632-8240

jburns@realestateconsulting.com

www.2020HousingPredictions.com

HOW WILL MARKET VALUES BE IMPACTED

Across The Country And For How Long?

www.2020HousingPredictions.com

How Long Will It Take For HOUSING TO RECOVER...

After Shelter-At-Home Is Lifted?

www.2020HousingPredictions.com

What Is The Overall IMPACT of The

"MORTGAGE PAYMENT HOLIDAY"?

www.2020HousingPredictions.com

WHERE IS SAFETY FOUND

In The Home Building Sector?

www.2020HousingPredictions.com

How WILL RENTS BE EFFECTED

And For How Long?

www.2020HousingPredictions.com

Will The Wall Street SECONDARY CAPITAL MARKETS

Return To Main Street And If So...When?

www.2020HousingPredictions.com

Will The Wall Street SECONDARY CAPITAL MARKETS

Return To Main Street And If So...When?

www.2020HousingPredictions.com

Have iBUYERS PACKED UP THEIR BAGS...

Short Term Or Long Term?

www.2020HousingPredictions.com

Are We Going To Experience a

U SHAPED...V SHAPED...OR L SHAPED RECOVERY?

www.2020HousingPredictions.com

Where Will We Be In 6 Months?

NORMAL…RECESSION…DEPRESSION?

www.2020HousingPredictions.com

DISPOSITONS During A PANDEMIC…

Dispo Is KING

TONS OF UNCERTAINTY IN TODAY’S MARKET

• The Capital Markets Have Dried Up For Rentals and Lowered LTV’s For

Rehabbers Which All Puts PRESSURE on Wholesalers…We Are All

Effected.

• BUY BOXES Are Moving Target Right Now…Creating RISK EXPOSURE.

• Showing Houses, Buying Houses, And Rehabbing Houses Haas Gotten

HYPER COMPLICATED With Social Distancing And “Shelter In Place”

Rules

TONS OF UNCERTAINTY IN TODAY’S MARKET

• MARKETING Has Become A Game Of Which Came First…THE

CHICKEN OR THE EGG?

• Rental Income Is GETTING DISRUPTED In Many Markets Around The

Country Which Is The One Thing We All Thought WAS A SURE THING.

• Then We Get To Combine ALL OF THIS With The Fact That We Are All

Going STIR CRAZY.

IF YOU’D LIKE TO LEARN MORE ABOUT US…

www.LearnMoreAboutCG.com

So Many Investors Struggle With Cash Management

• Things can get complicated

• You’ve got funds coming in from Raising capital

• You’ve got funds going out paying of chunks of debt as well as debt service

• You’ve Got tons of projects going on at once time and each

of them has a thousand line items via the scope of work

• You’re hiring talent that will cost you 3 to 6 months of burnt

wages until they’re dialed in and producing more than their

salary

So Many Investors Struggle With Cash Management

• CASH MANAGEMENT shifts from glancing at your bank

accounts every now and then into studying your P and L,

forecasting pipeline performance, and a necessary skillset for you to elevate to the next level

• Things Can Get Hairy and it can get difficult to know what is

yours and what is not yours….

Things Can Get Hairy and it can get difficult to know…

WHAT’S MINE

&

WHAT’S NOT

5 Different Accounts In My System