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Based on recent improvements to housing, this document summarizes a few reasons why housing will continue to improve the US economy.
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Why is housing important? JOBS.
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Three segments of economic growth that benefit from a stable housing market
1 Home Building & Improvement
2 Transaction Economy
3 Finance, Origination & Servicing
1985 1989 1993 1997 2001 2005 2009 2013
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1 Home Building “About half of the jobs created by building new homes are in construction. They include framers, electricians, plumbers, finish carpenters … “ - National Association of Home Builders
§ 305 jobs § $23 mn in wage & business income § $9 mn in taxes and revenue for state, local & federal governments
NAHB analysis of the broad impact of new construction shows that building 100 average single-family homes generates:
Source: NAHB/Wells Fargo Housing Starts
New Single-Family Housing Starts (in thsds of units)
1,600
800
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1 Home Improvement
A
National Association of Realtors 2013 Profile of Buyer’s Home Feature Preferences
“… homeowners still said they would like more or larger closets and storage space. In addition, nearly half of recent buyers would prefer a larger kitchen...” - Paul Bishop, NAR VP Research
37%
41%
44%
47%
added or replaced appliances
added or replaced lighting
bathroom improvement
kitchen improvement § Within 3 months of a home purchase,
53% of buyers undertook a home improvement project.
§ The typical buyer spent $4,550 on various projects.
Demand for home improvement drives commerce & enterprise
Of buyers that undertook a home improvement project…
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2 Transaction Economy
The ecosystem of housing, provides a substantial living to many professionals
- Architects & engineers
- Attorneys
- Appraisers
- Agents & brokers
- Movers
- Escrow, insurance & title
- Suppliers of wood & concrete products
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90% of consumers start their real estate journey online (NAR)
Buy or sell:
- Houses
- Land
- Notes
- Condos
- CRE
- US & abroad
Free:
- Instant AVM
- Search listings
- Find rentals
- Market comps
2 Transaction Economy
- The ecosystem is evolving, as a function of the consumer’s desire for mobile & online platforms - Innovation is providing a new ecosystem to the transaction economy - Job growth in online real estate companies
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3 Finance, Origination & Servicing
Total RMBS issuance
The refinance boom has sustained tens of thousands of jobs with GSEs, banks, originators and servicers
$2.2T $2.0T $1.9T
$1.2T
$1.8T
$1.4T $1.2T
$1.7T
2005 2006 2007 2008 2009 2010 2011 2012
Pending refi “cliff” or “taper”? | Estimates suggest refinance share could drop to as low as 40% by 4Q13
Redwood Trust is notable for their private-label MBS issuances; however, as of 4Q12, 99% of the MBS issuance were gov’t-backed High concentration remains | Top-5 originators: WFC, JPM, USB, BAC, & Quicken Loans comprised 53% of all originations in 3Q12
Source: Inside Mortgage Finance (Dec 2012)
As of 4Q12, the refi-to-purchase ratio is 3:1
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3 Finance, Origination & Servicing
The housing finance industry requires professionals across the value chain Finance & Capital Markets - Note sales & MSR trades - Securitization - Basel III RWA Origination - CFPB/QM compliance - MLOs, Ops/fulfillment - due diligence & underwriting Servicing - Workouts, HAMP/HAFA - Specialty, Master & Sub-servicing
Mortgage debt in relation to the housing stock
Negative equity is still prevalent, estimates vary how much and how long this will remain Servicers continue to improve workout capabilities and are working through the backlog
$7.7T
$9.5T
Total US Mtg debt
Net Equity
1
2
Source: Fed Flow of Funds Accounts, Table B.100 (Dec 2012)
$17 Trn Approximate value of housing stock in the U.S.
50.8 million Delinquency rates dropped substantially YoY in 4Q12, due to improved credit quality & stronger performance of recent origination vintages
Source: OCC Mortgage Market Metrics 4Q12
First-lien mortgages