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EMERGING TRENDS IN THE 2010 HOUSING MARKET

2010 Housing MarketLeading Indicatorspresented by

Altos Research

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Who’s with you today?

Scott Sambucci, VP, Data Analytics scott@altosresearch.com (415) 931 7942 - direct http://blog.altosresearch.com Twitter: @AltosResearch

Scott Macwhinnie, Sales Manager, Institutional & Corporate Markets scottm@altosresearch.com (646) 435-1100- direct

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Grab you coffee… Lots to cover

Altos Research Seller Confidence Indicators Pending Mortgage Market Effects S&P/Case-Shiller HPI Selected Regional & Metro Trends (including the reason why being a Cubs fan isn’t

the worst thing about living in Chicago…)

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Altos 10-City Composite

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Sellers show the way Price Discovery Trends

Price Reductions: Elevated but improving Price vs. Inventory

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The Lagging Luxury Market

Quartile 1: Most expensive 25% of propertiesQuartile 2: Top Middle 25%Quartile 3: Bottom Middle 25%Quartile 4: Least expensive 25% of properties

Example: 80 homes for sale in a market (city or zip code) 4 "quartiles" (groups) each have 20 properties

based on individual property prices. Allows for market definition by price, not just

geography

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The Washington Post:“Stakes are high as government plans exit from

mortgage markets”

"We did what we thought was necessary to stabilize the market, but we don't think the government should continue special efforts forever," said Michael S. Barr, an assistant secretary at the Treasury Department. "As you bring stability, private participants come back in. We do expect this now that the market has stabilized. I'm not going to say there will be no effect on rates, but we do think you are seeing market signs and market signals that there should be an orderly transition."

When Fed stops funding mortgages, there’s a scenario that says “everything stops”

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S&P/Case ShillerHPI

Oct ‘09 released on 12/29/09: Reported up 0.2%,

Oct ‘09 revised on 1/26/20: Now downfractionally

Altos – Trough in Jan, peak in June

CS - Trough April, in Peak in Sept

Nov ‘09 released on 1/26/09: Down fractionally

14 of 20 markets moved negatively in November

By we already knew that… How?...

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Altos 10-City Composite: Leading the SPCSI by 3-4 months

130140150160170180190200210220230

$420,000

$440,000

$460,000

$480,000

$500,000

$520,000

$540,000

$560,000

date

Feb-

07A

pr-0

7Ju

n-07

Aug

-07

Oct

-07

Dec

-07

Feb-

08A

pr-0

8Ju

n-08

Aug

-08

Oct

-08

Dec

-08

Feb-

09A

pr-0

9Ju

n-09

Aug

-09

Oct

-09

Dec

-09

Median Ask Price Case-Shiller

New sellers expecting lower sales prices San Francisco-Oakland MSAOne of six SPCSI markets that moved positively in Nov ’09

SF List Prices peaked in Nov ‘09

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Los Angeles-Orange County MSAOne of six SPCSI markets that moved positively in Nov ’09

Prices held steady through most of

Fall ‘09

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Los Angeles MSA: New Sellers

Phoenix MSAOne of six SPCSI markets that moved positively in Nov ’09

Peaked in July, but… Short

sales/REOs take longer to close

Phoenix: New Sellers less confident

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Scottsdale’s Lagging Luxury Market… Atlanta MSA Spring ‘09 gains gone– back to Jan 2009 price levels ATXR peaked in August, reported November

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It’s bad enough being a Cubs fan... City Trends ≠ MSA Trends

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The Northwest: Seattle & PortlandStrong stock

market through 2008

Grab an umbrella…

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2009 Market: Cause & Effect?

Price Floor Evidence Stimulus ResponseGovernment Mortgage Rates

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2010 – Now What? Fed will stop supporting mortgage markets Are private lenders going to pick up the slack? Will RMBS resume to off-load risk?

The Annual Macy’s Sale, er, Home buyer tax credit re-expires in April ’10

Expect ST strength through July/August as homes going to contract in April close, then fall off in latter half of 2010

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And then…? Supply & Demand metrics Shadow inventory Infrastructure & Political Will

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The 2011 Crystal Ball

Prices start the same by year end 2010 Double dip recession means we’re exactly the

same place in Jan ‘11 as now. Even with significant economic recovery,

economists generally agreed that massive private lending expansion required, which is clearly not evident right now

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And Finally…

Altos Research RE Derivatives Report Stats Datasheet for the fellow “data geeks”

out there Invitation to view of Data & Market Analytics

Platform Attending the American Securitization Forum

next week? Let us know. Check out http://blog.altosresearch.com

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Give us a callScott Sambucci, VP, Data Analytics scott@altosresearch.com (415) 931 7942 - direct http://blog.altosresearch.com Twitter: @AltosResearch

Scott Macwhinnie, Sales Manager, Institutional & Corporate Markets scottm@altosresearch.com 646-435-1100- direct