for clarity… · 2020. 4. 19. · [email protected]. howard marks, oaktree a...
TRANSCRIPT
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FOR CLARITY…
There Are A Lot Of Different Types
If Investors On This Call
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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
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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.
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WE ALL JUST WANT TO GO BACK TO NORMAL
WHEN WILL THAT HAPPEN?
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Can You Survive…
THE GAP?
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IS THE CORONA VIRUS THE PROBLEM…
Or Is It Revealing The PROBLEM
TOUGH QUESTION…
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• 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
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Marcus Crigler
What To Do When Your P & L Is In The Green
But Your Bank Account
Is In The RED
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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?
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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?
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TODAY’s AGENDA
• Where Will We Be In 6 Months?
NORMAL…RECESSION…DEPRESSION?
• DISPOSITONS During A PANDEMIC… Dispo Is KING
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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
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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
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COVID-19 continues to wreak havoc in Washington.
January 21 – 1st confirmed case in the United States
Rising cases
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COVID-19 continues to wreak havoc in Washington.
February 29 – 1st confirmed death
Rising deaths
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The worst hot spots are in the East.
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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.
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Hardest Hit Industries
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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!
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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.
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Federally
Elected
Officials
The FedMortgage
Policy
GNMA / FHFA
3 Arms of Federal Government Coming to the Rescue
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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
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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
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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
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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.
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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
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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
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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
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-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%.
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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 %
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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
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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)
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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%)
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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
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We introduced a new Friday email as a great way to
end the week.
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www.2020HousingPredictions.com
HOW WILL MARKET VALUES BE IMPACTED
Across The Country And For How Long?
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www.2020HousingPredictions.com
How Long Will It Take For HOUSING TO RECOVER...
After Shelter-At-Home Is Lifted?
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www.2020HousingPredictions.com
What Is The Overall IMPACT of The
"MORTGAGE PAYMENT HOLIDAY"?
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www.2020HousingPredictions.com
WHERE IS SAFETY FOUND
In The Home Building Sector?
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www.2020HousingPredictions.com
How WILL RENTS BE EFFECTED
And For How Long?
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www.2020HousingPredictions.com
Will The Wall Street SECONDARY CAPITAL MARKETS
Return To Main Street And If So...When?
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www.2020HousingPredictions.com
Will The Wall Street SECONDARY CAPITAL MARKETS
Return To Main Street And If So...When?
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www.2020HousingPredictions.com
Have iBUYERS PACKED UP THEIR BAGS...
Short Term Or Long Term?
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www.2020HousingPredictions.com
Are We Going To Experience a
U SHAPED...V SHAPED...OR L SHAPED RECOVERY?
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www.2020HousingPredictions.com
Where Will We Be In 6 Months?
NORMAL…RECESSION…DEPRESSION?
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www.2020HousingPredictions.com
DISPOSITONS During A PANDEMIC…
Dispo Is KING
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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
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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.
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IF YOU’D LIKE TO LEARN MORE ABOUT US…
www.LearnMoreAboutCG.com
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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
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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….
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Things Can Get Hairy and it can get difficult to know…
WHAT’S MINE
&
WHAT’S NOT
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5 Different Accounts In My System