Presentation: How Real Estate Investors can Leverage the Latest Housing Market Trends to Land Great Real Estate Deals

LEVERAGE THE LATEST HOUSING TRENDS TO
LAND THE BEST REAL ESTATE DEALS
© 2013 Renwood RealtyTrac LLC
WELCOME

WHAT WE’LL COVER TODAY
• Latest home sales & price trends
• Latest foreclosure trends
• Trends in property flipping
– Best markets for flipping
• Trends in single family rentals/institutional investors
– Best markets for buying rentals
• The problem and opportunity of zombie foreclosures
• Leveraging the latest trends
– Knowing the markets where you want to invest
– Buying short sale, auction, bank owned

REALTYTRAC DATA PRIMER
Economic
Neighborhood
& Local
MLS
Sales &
Loan
Valuation
& Prop
Details
Foreclosure

REALTYTRAC DATA PRIMER
County-Level Public Documents
• Pre-foreclosure, foreclosure auction and REO
• Sales & Loan
• Valuation and property characteristics
MLS
• Listing status, price and other info
• Property description and more characteristics
Publicly available datasets
• Neighborhood features, amenities, red flags
• Macro housing and economic metrics

LATEST HOME PRICE TRENDS

Distressed median
prices still flat lining
Overall home prices
up annually for 17
straight months. UP
23 percent from
bottom, still 26
percent below peak.

Average Annual Pct Change YTD in
2013 is 7 percent for non-
distressed properties

LATEST HOME PRICE & SALES VOLUME TRENDS
Sales volume
increasing but low
inventory helping
to push prices up

STATE LEVEL SALES VOLUME TRENDS
Lack of for-sale
inventory may be
slowing sales in
California and
Arizona

LATEST HOME PRICE TRENDS – LOCAL MARKETS
Cash buyers increasingly
winning out in tight
credit market with low
inventory of homes for
sale

LATEST HOME PRICE TRENDS: NATIONWIDE
Seriously
underwater means
mortgage amount is
at least 25 percent
higher than
estimated market
value

UNDERWATER DATA BY COUNTY
• County-level interactive heat map
• http://www.realtytrac.com/Content/news-and-opinion/seriously-underwater-
homeowners-county-heat-map-7856

HOME EQUITY PROFILES FOR MAJOR METROS
• http://public.tableausoftware.com/shared/HTMMWH5ZG?:display_count=yes

HOME PRICES BUOYING UNDERWATER INVENTORY
4.5 million homes nationwide
would transition from short sales to
equity sales with 10 percent
increase in home prices; 8.3 million
with a 20 percent rise

LATEST FORECLOSURE MARKET TRENDS

HOW LONG WILL SHORT SALE SURGE LAST?
August foreclosure
starts at lowest level
since December 2005

LATEST FORECLOSURE TRENDS – LOCAL MARKETS
Classic U-Shaped
Recovery

LATEST FORECLOSURE MARKET TRENDS – METRO MARKETS
More of a V-
shaped recovery
but could turn into
a W-recovery

Started as U but ending
up as a V

Steady plodding

A little less steady
plodding

Still flatlining

L-Shaped recovery
with clear signs of a
U developing

LEADING THE RECOVERY

LAGGING THE RECOVERY

LATEST FORECLOSURE MARKET TRENDS
Arizona time to
foreclose less
than half the
national average
of 526 days

LATEST FORECLOSURE MARKET TRENDS RECAP
• Foreclosure activity is well past its peak nationwide
• Some state and local markets are lagging in
recovery because of lingering foreclosures
• States that have enacted more aggressive
foreclosure prevention legislation over the past
few years are susceptible to a rebound in
foreclosure activity
• For investors this means there will still be
opportunity to find discounted foreclosures going
forward in some markets over the next two years.

WHERE FORECLOSURE STARTS & AUCTIONS ARE REBOUNDING

YoY Pct Increases:
• Maryland: 365%
• Connecticut: 47%
• New York: 36%
• New Jersey: 27%
• Oregon: 59,200%

YoY Pct Increases:
• Florida: 100%
• Arkansas: 71%
• Illinois: 65%
• Wisconsin: 45%
• Washington: 21%

HOW LONG WILL SHORT SALE SURGE LAST?

• Why are foreclosure starts and auctions rebounding?
– Pent-up foreclosure activity from robo-signing, national
mortgage settlement and state legislation/court rulings
– Rising prices may be helping to motivate foreclosure
• What are implications for real estate investors?
– Clock is now ticking on delinquent homeowners
– Auctions may be good place to buy in next 6 to 12
months

TRENDS IN PROPERTY FLIPPING

FLIPPING TRENDS
U.S. property flips
increased 17 percent
from a year ago in the
second quarter

FLIPPING TRENDS
Arizona flips down 35
percent YoY. Gross
profit $21K per flip

FLIPPING TRENDS
Phoenix flips down 36
percent YoY. Gross
profit $26K per flip

BEST MARKETS FOR FLIPPING

WHAT YOU BUY MATTERS - FLIPS
©RealtyTrac Inc. 2013, Not for Distribution
Metro Numberof2012Flips AvgPurchasePrice AvgFlipPrice GrossProfit GrossReturnPct
LasVegas 1,525 $124,849 $246,347 $121,498 97%
Atlanta 1,396 $91,873 $102,096 $10,223 11%
Riverside-SanBernardino,CA 1,004 $185,429 $210,177 $24,748 13%
CapeCoral,FL 802 $98,747 $113,979 $15,232 15%
Denver 591 $223,323 $230,417 $7,094 3%
Sacramento 496 $198,369 $225,917 $27,548 14%
Miami 486 $132,476 $177,256 $44,779 34%
Orlando 480 $98,122 $205,727 $107,605 110%
Sarasota,FL 356 $116,428 $157,443 $41,014 35%
PortSt.Lucie,FL 273 $89,894 $130,380 $40,486 45%
Jacksonville,FL 271 $80,249 $119,345 $39,096 49%
Seattle 250 $220,018 $231,263 $11,245 5%
Flipping data for 3-bedroom single family homes built in 1990 or later

WHAT YOU BUY MATTERS - FLIPS
Metro Numberof2012Flips AvgPurchase Price AvgFlipPrice GrossProfit GrossReturnPct
LosAngeles 981 $247,660 $328,077 $80,417 32%
SanFrancisco 273 $251,091 $317,343 $66,252 26%
Denver 249 $149,778 $197,265 $47,487 32%
Riverside-SanBernardino,CA 201 $102,571 $131,716 $29,145 28%
Sacramento 146 $120,761 $146,443 $25,682 21%
Miami 132 $88,442 $125,562 $37,121 42%
SanDiego 119 $232,261 $310,801 $78,540 34%
Seattle 108 $152,905 $203,199 $50,294 33%
Cincinnati 107 $46,327 $48,944 $2,616 6%
Detroit 102 $57,455 $56,325 ($1,131) -2%
Portland 102 $146,713 $199,693 $52,980 36%
Atlanta 91 $68,715 $84,178 $15,464 23%
Flipping data for 2-bedroom single family homes built 1920 to 1950

TRENDS IN SINGLE FAMILY RENTALS/INSTITUTIONAL INVESTORS

RENTAL ROI STILL GOOD IN MANY MARKETS

FLIPPING & INSTITUTIONAL INVESTORS
U.S. institutional
investor purchases
increased 16 percent
from year ago in Q2

FLIPPING & INSTITUTIONAL INVESTORS
Phoenix only metro
among top 10 with
decrease in purchases
in 2013

HOW SINGLE FAMILY HOMES ARE BEING PURCHASED

TOP 25 HIDDEN GEM SINGLE FAMILY RENTAL MARKETS

TOP SATURATED SINGLE FAMILY RENTAL MARKETS
48
# Metro Area Investor %
1 Atlanta-Sandy Springs-Marietta, GA 24%
2 Charlotte-Gastonia-Concord, NC-SC 20%
3 Macon, GA 18%
4 Memphis, TN-MS-AR 18%
5 Jacksonville, FL 18%
6 Tampa-St. Petersburg-Clearwater, FL 17%
7 Winston-Salem, NC 16%
8 Las Vegas-Paradise, NV 16%
9 Lakeland, FL 16%
10 Orlando-Kissimmee, FL 14%
11 Albuquerque, NM 14%
12 Palm Bay-Melbourne-Titusville, FL 14%
13 Athens-Clarke County, GA 14%
14 Greensboro-High Point, NC 13%
15 Miami-Fort Lauderdale-Pompano Beach, FL 12%
16 Deltona-Daytona Beach-Ormond Beach, FL 12%
17 Phoenix-Mesa-Scottsdale, AZ 12%
18 Montgomery, AL 12%
19 Bakersfield, CA 11%
20 Reno-Sparks, NV 11%
21 Detroit-Warren-Livonia, MI 11%
22 Boise City-Nampa, ID 11%
23 Sarasota-Bradenton-Venice, FL 11%
24 Vallejo-Fairfield, CA 10%
25 Gainesville, GA 10%

THE PROBLEM & OPPORTUNITY OF ZOMBIE FORECLOSURES

THE PROBLEM AND OPPORTUNITY OF ZOMBIE FORECLOSURES
Nationwide vacant
foreclosures account for one
in every five properties in
foreclosure

• The problem
– More than 150,000 vacant homes nationwide, 20
percent of all homes in the foreclosure process
– Homeowners often don’t realize they still own the
property and are responsible for taxes etc.
• The opportunity
– Homeowners who have exhibited a desire to let go of
the property
– Lenders who don’t want to foreclose

LEVERAGING HOUSING TRENDS: KNOW YOUR MARKET
Recent default, auction
and REO trends
Local, state
and national
foreclosure
rates

LEVERAGING HOUSING TRENDS: FIND MARKETS WITH
REBOUNDING FORECLOSURES
Foreclosure
Inventory and
Prices
Historical
Foreclosure
Discounts
3. Know your overall market

LEVERAGING HOUSING TRENDS: FIND-OFF MARKET HOMES
Find pre-foreclosures and
scheduled auctions in your
neighborhood

LEVERAGING HOUSING TRENDS: CONTACT HOMEOWNERS
Create mailing lists of
distressed homeowners in
default or scheduled for
foreclosure auction

LEVERAGING HOUSING TRENDS: TARGET MOTIVATED SELLERS
Identify homeowners who have
vacated their homes and get
new mailing addresses

FIND MOTIVATED SELLERS WITH EQUITY

FIND MARKETS/HOMES WITH GOOD POTENTIAL CAP RATES
• Buy for $20K (possibly
less at auction)
• Rent for $1000 a month
• Est. carrying costs at
$500 a month
• Cash flow of $500 a
month
• Cap rate of 30%!

FIND MARKETS/HOMES WITH GOOD POTENTIAL CAP RATES
• Buy for $105k (REO)
• Rent for $1,284 a month
• Est. carrying costs at $514
a month
• Cash flow of $770 a month
• Cap rate of 9%

FIND HOMES/MARKETS WITH GOOD FLIPPING POTENTIAL
• List price $46,500, Est.
After-Repair Market
Value: $117,088
• Sold back to bank for
$23,600, so they are
motivated to sell low

RESOURCES FOR LEVERAGING THE LATEST HOUSING TRENDS
• Real Estate News & Reports (free)
• http://www.realtytrac.com/content
• Local Stats & Trends (embeddable)
• http://www.realtytrac.com/trendcenter/
• Premier subscription (address-level access)
• https://www.realtytrac.com/profile/Registration.aspx
• 877-888-8722
• Download data/create lists: http://mega.realtytrac.com

DAREN BLOMQUIST
VICE PRESIDENT, REALTYTRAC
DAREN.BLOMQUIST@REALTYTRAC.COM
THANK YOU!

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