General Sessions day 1 · 4.Houston 5.Orlando 6.Jacksonville ... 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14

Welcome

Christopher Ptomey

Terwilliger Center for Housing

Thank you to our 2020 SponsorsBronze Sponsors

Thank you to our 2020 SponsorsFriend Sponsors

Welcome

Ron TerwilligerTerwilliger Pappas Multifamily

Properties

Welcome

Ed WalterGlobal Chief Executive Officer,

Urban Land Institute

Opening Keynote: The State of the U.S. Housing Market

Tim SullivanMeyers Research

8www.metrostudy.com

The State of US Housing Markets:Crash Landing or Clear Skies Ahead?

2020 ULI Housing Opportunity Conference

Tim SullivanSenior Managing Principal

Meyers Research/MetrostudyFebruary 24, 2020

9

Tracking: ‐18,000 Active New home subdivisions‐ 825 Masterplans (and 125 upcoming ones)‐ 7.6 million future lots in 28,000 locations‐ Permits, starts, contracts and closings

10

Our Team: Advisory Leadership

Tim Sullivan: Residential and Mixed Use Strategic Solutions Kimberly Byrum: Multifamily Focus

Mollie Carmichael: National Consumer & Product Specialty

11

Agenda

1. The Big Picture

2. Housing Trends

3. Today’s Buyers Meet Some Challenges

4. Considerations About Future Demand

5. Recession Talk And Conclusions

12

The Big Picture

13

The Two Largest Parts of the Economy Are Working Against Each Other

30

40

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100

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3Q10

4Q10

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4Q11

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2Q19

3Q19

4Q19

Consumer Sentiment vs CEO Confidence CEO Confidence Consumer Sentiment

Source: University of Michigan; Conference Board; Meyers Research

14

CEOs Are Carrying the Weight of the World

Recession Risk

More Intense Competition

Tight Labor Market

Uncertainty About Global Trade

Global Political Uncertainty

1

2

3

5

4

15

Housing Trends

16

U.S. Housing Permits: 1995 to 2019

Note the Increasing %Of MF Permits

17

U.S. Housing Starts: 1995 to 2019

Not even back to ‘95 Levels

18

New Home Market Was ~12% of Total 2019 Sales

6%

8%

10%

12%

14%

16%

18%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

United States New Home Share of Total Home Sales

Source: US Census Bureau; NAR; Meyers Research

~12%

16%

7%

19

New Homes Have Lost Market Share, But Still a Vital Part of the Economy

1. Austin2. Raleigh3. San Antonio4. Houston5. Orlando6. Jacksonville7. Dallas8. Las Vegas9. Charlotte10.Nashville

20

New Home Market is a Big Contributor to Economy

New home buyers are estimated to spend 10% more on:

• Appliances,• furnishings, • and property repairs and

alterations

(compared to those purchasing an existing home)

It is calculated that for every 1,000 average single-family homes built, 2,975 jobs are created (3-1 Ratio)

This is considerably higher than the 500 jobs attributed to 1,000 existing home sales(.5-1 Ratio)

21

Pending Home Sales Up 13% YOY; 3% Higher Than 2 Years Ago

22

Sales Growth Rates Pulled Up From Solid Markets; 2‐Year Change Shows Different Story

Source: Zonda and Metrostudy Source: Zonda and Metrostudy

23

Top Builder Share of Closings: The Big Get Bigger

3,000

5,000

7,000

9,000

11,000

13,000

15,000

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

# of Builders w/10+ Closings

Share of Total Closin

gs

# of Builders w/10+ Closings Top 10 Builders Top 25 Builders Top 250 Builders

2019 Annualized through June

Will consolidation continue?

24

Top‐Selling Master Plans in 2019: FL and TX Dominate

Master Plan Community Market2019 Sales Subdivision Count

Avg List Price Avg Project Sales Rate

The Villages The Villages, FL 2,400 6 $327,245 ‐Lakewood Ranch Sarasota, FL 1,436 61 $481,621 1.85

Summerlin Las Vegas, NV 1,338 46 $619,359 2.28West Villages Venice, FL 989 27 $342,540 2.89Eastmark Mesa, AZ 943 18 $419,782 3.10Nocatee Ponte Vedra, FL 678 39 $462,636 1.53Inspirada Las Vegas, NV 668 14 $416,429 3.82Bridgeland Cypress, TX 574 33 $434,707 1.55Tartesso Buckeye, AZ 571 2 $246,490 ‐

Great Park Neighborhoods Irvine, CA 565 20 $998,230 3.02Cadence Henderson, NV 555 16 $356,676 3.30Daybreak South Jordan, UT 532 26 $407,147 1.84Verrado Buckeye, AZ 520 25 $364,897 1.79

Mountain House Stockton, CA 516 19 $651,153 3.02Sienna Missouri City, TX 493 33 $395,860 1.17

Stapleton Denver, CO 484 26 $550,759 1.85Viera Melbourne, FL 476 28 $464,055 1.55

Cross Creek Ranch Fulshear, TX 464 21 $437,942 1.62Skye Canyon Las Vegas, NV 460 13 $382,805 2.65

Rancho Mission Viejo San Juan Capistrano, CA 449 13 $748,428 2.24

Sales and pricing data as reported by builders’ sales agents in ‘bottom-up’ Project-level monthly survey conducted by Zonda

25

Today’s Buyers Meet Some Challenges

26

Millennials Are Still Looking For Homes

Source: NAHB; Meyers Research

27

Large Share of Unmarried Home Shoppers: Housing Implications

Source: Pew Research Center tabulations of the 2017 Current Population Survey Annual Social and Economic Supplement (ASEC) from the Integrated Public Use Microdata Series (IPUMS); Meyers Research

Single women are buying homes at record rates, are

the largest growth segment, and purchase homes alone two times their single male

counterparts

28

Markets With The Highest Homeownership Rates For Single Women

Source: U.S. Census Bureau ; Meyers Research

29

Over 2.5M Units Shy of Matching Long‐Term Housing Demand

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Atlanta LosAngeles/OC

United States Tampa Dallas Orlando Washington,DC

Phoenix Charlotte Seattle Denver

Months of Supply by MSA Current Last Year

Source: Zillow; Public Record Data; Zonda by Meyers Research

30

U.S. New Home Activity Concentrated in the $300K‐$400K Range

0%

5%

10%

15%

20%

25%

30%

<$150k $150K-$250k

$250k-$300k

$300k-$400k

$400k-$500k

$500k-$600k

$600k-$700k

$700k-$800k

$800k+

Annual Starts Annual Closings

31

Dallas, Houston, and Central Florida Leading For Starts & Closings

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Suburban Maryland

Tampa

San Antonio

Charlotte

Raleigh/Durham

Salt Lake City

Northern California

Austin

Southern California

Denver/Colorado Springs

Phoenix/Tucson

Atlanta

Central Florida

Houston

Dallas/Ft.Worth

Annual Closings

Annual Starts

32

Inventory in $800K+ Exceeds Annual Closings

0%

5%

10%

15%

20%

25%

30%

<$150k $150K-$250k

$250k-$300k

$300k-$400k

$400k-$500k

$500k-$600k

$600k-$700k

$700k-$800k

$800k+

Housing Inventory Annual Closings

33

Affordability Crunch Continues

2

3

4

5

6

7

8

9

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Median Single-Family Home Price to Household Income Ratio

Dallas Denver Phoenix Miami

Source: NAR; US Census Bureau, Moody's Analytics; Meyers

34

Price Appreciation Was Slowing But Picking Back Up

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

Jan-1

6

Apr-16

Jul-1

6

Oct-16

Jan-1

7

Apr-17

Jul-1

7

Oct-17

Jan-1

8

Apr-18

Jul-1

8

Oct-18

Jan-1

9

Apr-19

Jul-1

9

Oct-19

Corelogic/Case-Shiller Home Price Index (YOY Change)

Source: S&P/Case-Shiller; Corelogic; Zonda by Meyers Research

35

Annual Appreciation Slowed For Most Markets in 2019 But Still Generally Outpacing Wage Growth

6%

6% 6%5%

5%4%

4% 3%3% 3%

1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Phoenix Atlanta Charlotte Austin Orlando Seattle Miami Houston Dallas Denver LosAngeles/OC

SFD Existing Price Growth (YOY Change)2018 2019

Source: Zonda by Meyers Research

36

And December Saw Big Gains (But Remember 4Q 2018…)

13% 12%12% 12%

9%

8% 7%7% 6%

6%5%

0%

2%

4%

6%

8%

10%

12%

14%

Charlotte Atlanta Phoenix Seattle LosAngeles/OC

Miami Austin Houston Denver Orlando Dallas

SFD Existing Price Growth (YOY Change)Dec-18 Dec-19

Source: Zonda by Meyers Research

37

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Jan-1

8Feb

-18Mar-1

8Apr-

18May-1

8Ju

n-18

Jul-1

8Aug

-18Sep

-18Oct-

18Nov-1

8Dec-1

8Ja

n-19

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-2

0

Relationship Between Mortgage Rates and Bond Market30-Year FRM 10-Year Treasury Yield

Source: Moody's Analytics; Freddie Mac Primary Mortgage Market Survey; Meyers Research

Low Rates Particularly Help the New Home Market

2.2% and 4.0%

38

Even With Low Rates, Affordability Problems Aren’t Going Away

United States

Source: Bureau of Labor Statistics; Moody's Analytics; Meyers Research

HOUSING VALUATION PATTERNS

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

prj.

2021

prj.

2022

prj.

2023

prj.

2024

prj.

2025

prj.

Med

ian Hou

sing

Value

Historical/Forecast Home Price Income Supported Home Price

39

Considerations About Future Demand

40

30%

40%

50%

60%

70%

80%

90%

1Q00

3Q00

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3Q01

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3Q03

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3Q05

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3Q14

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1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19

Homeownership Rate By Age Under 35 years 35 to 44 years 45 to 54 years 55 to 64 years

Source: US Census Bureau; Meyers Research

The Homeownership Rate Remains Below Historic Levels

1 Million More Households If H/O Rate Got Back To 40%

2 Million More Households If H/O Rate Got Back To 70%

41

Low Rates do Help With Affordability, But DP is Critical

$(600)

$(400)

$(200)

$-

$200

$400

$600

$800

$1,000

Los Angeles/OC Las Vegas Washington, DC Dallas Phoenix Charlotte Orlando Tampa Atlanta

Median Rent Payment Vs. Median SF Existing Monthly Mortgage Payment Difference*

20% Down 10% Down 3.5% Down

Source: NAR: Zillow; Freddie Mac; Wallethub; Meyers Research; *Assumes the noted down payment, 3.66% mortgage rate, taxes, and insurance

Owning More

Affordable

Renting More Affordable

42

Labor Market Continues to Outperform

3% 3%3% 3% 3%

3% 3%

2% 2%

2%2%

1%

0%

1%

2%

3%

4%

Austin Dallas Orlando Phoenix Seattle Houston Charlotte Atlanta Denver Miami Washington,DC

LosAngeles/OC

Nonfarm Job Growth (YOY)


43

Higher Incomes Benefit the New Home Market

80%78%

56%53% 52% 52%

49% 48% 47%43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Austin Nashville Orlando Las Vegas Charlotte Tampa Dallas Raleigh San Francisco Atlanta

10-Year Professional and Business Services Job Growth Rate


38%

27%25%

22%21% 21%

18% 18% 17% 17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Orlando Austin Las Vegas Tampa Nashville San Antonio San Francisco Sacramento Charlotte Dallas



8%

7%

6% 6%5%

5%

5% 4%4%

4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Jacksonville Cleveland Austin Raleigh Houston Orlando Baltimore Riverside/SanBernardino

Dallas Seattle



44

The Compelling Case for Purpose Built to Rent

44

Conclusions

Copyright, Metrostudy 2019

1. The potential for this development concept is enormous.

2. There is much nuance to the Built for Rent business and several challenges.

3. The analysis of Built to Rent is an evolving science…and art.

4. A few players are doing it well.

5. Some of the big homebuilders are getting in, but most won’t likely play in both detached apartments and more conventional single family rentals.

6. Institutional Capital is hovering.

45

Horizontal Apartments

Built to Rent DevelopmentTwo Distinct Product Options

Platted Lot Subdivisions

Diversity in community size (8‐10 DU/Acre) Typically single‐family homes on individual legal lots 3‐4 bedrooms, private yards, one/two‐stories, garages Significant family renters with schools as top concern Owner could sell some or all units individually Doesn’t typically compete with for sale or apartments

Typically 150‐200 units per community (12 DU/Acre) Attached 1B units and detached 2B/3B units 1‐3 bedrooms, smaller yards, surface parking Significant millennial and empty nester renters Built on a single legal lot (cannot sell units individually) Doesn’t compete with for sale, but can with apartments Traffic counts are important (like with apartments)

46

Job‐Fueled Demand and Supply Will Breakeven Years Down the Road

United States

Source: Bureau of Labor Statistics; Moody's Analytics; Meyers Research

* Over/Under supply measures based on current jobs-to-housing relationship relative to long-term relationship betw een jobs and housing.

HOUSING DEMAND AND SUPPLY PATTERNS

97,000,000

107,000,000

117,000,000

127,000,000

137,000,000

147,000,000

157,000,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

prj.

2021

prj.

2022

prj.

2023

prj.

2024

prj.

2025

prj.

Units D

eman

d/Su

pplie

d

Total Housing Supply Total Housing Demand

47

Recession Talk And Conclusion

48

Election Years Don’t Historically Stall Out the Economy

Home Sales Go Down 15% From Oct To November In An Election Year Compared To ‐8% In A Non‐Election Year

49

Part of the Economy Look Overleveraged, But Housing is Different Than Last Cycle

50

Let’s Address the Threats to our Forecast First…

Our baseline projection is for a 20% probability the US will enter a recession next 10‐12 months.

• Phase 1 of trade talks aren’t enough to nullify business fears or bring the manufacturing sector back to life

• Inflation picks up faster than anticipated and mortgage rates rise quicker than anticipate

• Normally a pullback related to a presidential election is short‐lived. In today’s contentious environment, we could see the slowdown in the housing market or broader consumer spending last longer than anticipated

• Political or financial risk that’s hard to make sense of and the quickest to steer the economy off course

51

The Economy Entered 2020 With Some Momentum

• Economic data has turned positive, including the labor market, consumer confidence, and the reversal of the inverted yield curve

• Phase 1 of trade talks point to policymoving in the right direction

• Lower mortgage rates to stay low and buoy the housing market

• More builders entering into the SFR space offering a market hedge and additional segmentation

• Demand exceeds supply and builders are getting more creative with design and space

52www.metrostudy.com

Thank You!

Timothy P. SullivanSenior Managing Principal

Meyers Research LLC

(858) 381‐[email protected]

General Sessions day 1 · 4.Houston 5.Orlando 6.Jacksonville ... 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14

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