16 th Annual Fisher Center Real Estate Conference Financial Markets Supply/Demand.

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Presentation transcript:

16 th Annual Fisher Center Real Estate Conference Financial Markets Supply/Demand

Conforming vs. Jumbo Mortgage Rates

Conforming/Jumbo Spreads

What Rates Don’t Show Much higher pricing for the default option 25%-35% down-payment requirements (as opposed to 20% before) to get the best rate. No loans with less than 20% down-payment No loans without income verification, and ability to cover the payments, independent of LTV Very hard to get bridge loans when buying and selling property simultaneously.

What Rates Don’t Show (continued) Securitization market is still dead. The ratings agencies are irrelevant, no substitutes yet. The substitutes that are coming up are likely to make the marketplace even less able to transact efficiently. The loans are held in bank’s own portfolio, hence there is a great variability in bank’s appetite for the loans – the loan marketplace has become extremely heterogeneous.

Existing Homes Sale Rate

Months of Inventory

Affordability Source: LPS Applied Analytics Source: LPS Applied Analytics

Percentage of people who can afford medium priced house STATE/REGION/COUNTYQ Q US69 66 S.F. Bay Area39 36 Alameda35 34 Contra-Costa (Central County)30 25 Marin27 24 Napa48 44 San Francisco25 21 San Mateo28 22 Santa Clara37 34 Solano74 70 Sonoma47 40

What Housing Inventory and Affordability Don’t Show The real affordably is even considerably greater than implied since the average price is much higher than the medium (the latest is about 190%). Increasing REO inventory; REO liquidation will continue depressing the prices 20% of non-agency borrowers can’t afford to buy because of the increased down-payment requirements. It will take time to build up savings.

Source: Lender Processing Services11 Five Million Borrowers Are Delinquent HAMP and other loan mods cause delinquencies to dip slightly in 2010

Source: Lender Processing Services12 Fewer Current Loans Are Falling Behind

Source: Lender Processing Services13 Significant REO Volume For a Long Time

Source: Lender Processing Services14 Who Originated All These Bad Loans?