Which Way Real Estate?

Transcription

1 Which Way Real Estate?

2 U.S. Real Estate Returns Have Been Stellar For a Decade NAREIT (Public Real Estate) NCREIF (Private Real Estate) Russell 2000 S&P 500 NASDAQ U.S. Govt. Bonds 0% 5% 10% 15% Average Annual Return, 1997 through 2006 Sources: NAREIT; NCREIF; Russell 2000; Standard & Poor s; NASDAQ; Merrill Lynch

3 Driven By Lower Cap Rates... 11% Overall Capitalization Rate 10% 9% 8% 7% 6% 5% Industrial Suburban Office Retail CBD Office Apartment Source: Real Capital Analytics

4 Industrial Demand Has Been Solid % Absorption SF (millions) % 10% Availability Rate % Absorption Availability Rate Sources: CBRE Torto Wheaton Research; CBRE Investors

5 The Office Market Has Steadily Recovered % Absorption SF (millions) % 14% 12% Vacancy Rate % Absorption Vacancy Rate Sources: CBRE Torto Wheaton Research; CBRE Investors

6 Sales Growth Has Maintained Moderate Retail Availabilities 8 12 Retail Sales Annual Percent Change Shopping Center Availability Rate Retail Sales Growth Shopping Center Availability Rate Sources: Moody s Economy.com; CBRE Torto Wheaton Research

7 Apartment Rents Have Increased While Condo Prices Have Cooled... 20% Annual Change 15% 10% 5% 0% Apartment Rent Condo Prices -5% Sources: REIS, Inc.; National Association of Realtors

8 Residential Sales Are Dropping Year-Over-Year Sales Change Six Month Moving Average 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Existing Homes New Homes -25% Sources: National Association of Realtors; U.S. Census Bureau; CBRE Investors

9 Real GDP Growth United States, 2000 Prices Percent Change, Year Ago Source: Global Insight

10 U.S. Employment Picture Unemployment Rate & Employment Growth Percent Unemployment Rate - L Civilian Employment - R Percent Change, Year Ago Source: Global Insight

11 Real Consumer Spending United States Percent Change, Year Ago Source: Global Insight

12 Consumer Confidence Index Conference Board Index 1985 = Source: Global Insight

13 Employment Growth California vs. United States Percent Change, Year Ago California United States Source: Global Insight

14 Interest Rates Fed Funds Rate and 10-year Government Bond Percent 8 6 Fed Funds Rate 10-year Government Bond Source: Global Insight

15 Yield Curve 10-year Government Bond Minus Fed Funds Rate Percent Source: Global Insight

16 Wages and Unemployment Average Hourly Earnings and Unemployment Percent Unemployment Rate - L Average Hourly Earnings - R Percent Change, Year Ago Source: Global Insight

17 Civilian Unemployment Rate United States Percent Source: Global Insight

18 Real Estate Investment Trusts Sector Net Acquisition of Financial Assets US$ Billions Source: Global Insight

19 Foreign Purchases of U.S. Securities Net Foreign Purchases US$ Billions Source: Global Insight

20 Housing Affordability Index Seasonally Adjusted Base = Source: National Assoc. of Realtors

21 Consumer Inflation Rate Consumer Prices and Wages Percent Change, Year Ago Core CPI Average Hourly Earnings Source: Global Insight

22 Consumer Price Index Food and Energy Percent Change, Year Ago Food Energy Source: Global Insight

23 Consumer Price Index Housing CPI vs. Education CPI Index 1997= Education CPI Housing CPI Source: Global Insight

24 S&P 500 Yield Dividend / Price Ratio Ratio Source: Global Insight

25 Mortgage Rates United States Rate Year Fixed 15-Year Fixed 1-Year ARM Sources: Freddie Mac, Economy.com

26 1-Month LIBOR London Interbank Offered Rate Rate Sources: Freddie Mac, Economy.com

27 Construction Put in Place Private Residential vs. Private Nonresidential Percent Change, Year Ago Residential Construction Nonresidential Construction Sources: U.S. Census, Economy.com

28 Single-Family Housing Starts United States, SAAR Millions Sources: U.S. Census, Economy.com

29 Multi-Family Housing Starts United States, SAAR Thousands Sources: U.S. Census, Economy.com

30 Existing Single-Family Home Sales United States, SAAR Millions Sources: NAR, Economy.com

31 Existing Condo & Co-op Sales United States, SAAR Thousands Sources: NAR, Economy.com

32 Existing Median Home Price Single Family Homes, United States US$ Thousands Home Price (L) % Change, Year Ago (R) Percent Change, Year Ago Sources: NAR, Economy.com

33 Existing Median Home Price Ranked by 10-Year Growth, Home Price, US$ Thous. Rank Metro Area 1996q4 2006q4 10-Yr Growth 1 Vallejo-Fairfield, CA $147 $ % 2 Riverside-San Bernardino-Ontario, CA $113 $ % 3 Los Angeles-Long Beach-Glendale, CA $155 $ % 4 Merced, CA $101 $ % 5 Cape Coral-Fort Myers, FL $78 $ % 6 San Diego-Carlsbad-San Marcos, CA $177 $ % 7 Fresno, CA $106 $ % 8 Miami-Miami Beach-Kendall, FL $114 $ % 9 Santa Ana-Anaheim-Irvine, CA $216 $ % 10 Santa Rosa-Petaluma, CA $209 $ % Sources: NAR, Economy.com

34 Existing Median Home Price Ranked by 5-Year Growth, Home Price, US$ Thous. Ra nk Me tro Are a 2001q4 2006q4 5-Yr Growth 1 Riverside-San Bernardino-Ontario, CA $164 $ % 2 Atlantic City, NJ $132 $ % 3 Los Angeles-Long Beach-Glendale, CA $220 $ % 4 Bakersfield, CA $133 $ % 5 Fresno, CA $154 $ % 6 Deltona-Daytona Beach-Ormond Beach, FL $89 $ % 7 Miami-Miami Beach-Kendall, FL $167 $ % 8 Madera, CA $124 $ % 9 West Palm Beach-Boca Raton-Boynton Beach, FL $168 $ % 10 Orlando-Kissimmee, FL $126 $ % Sources: NAR, Economy.com

35 Existing Median Home Price Ranked by 1-Year Growth, Home Price, US$ Thous. Rank Metro Area 2005q4 2006q4 1-Yr Growth 1 Atlantic City, NJ $262 $ % 2 Boise City-Nampa, ID $169 $ % 3 Salt Lake City, UT $183 $ % 4 Trenton-Ewing, NJ $259 $ % 5 Midland, TX $104 $ % 6 Beaumont-Port Arthur, TX $108 $ % 7 Salem, OR $195 $ % 8 Cumberland, MD-WV $89 $ % 9 Raleigh-Cary, NC $199 $ % 10 Farmington, NM $164 $ % Sources: NAR, Economy.com

36 Existing Median Home Price Ranked by 1-Year Decline, Home Price, US$ Thous. Ra nk Me tro Are a 2005q4 2006q4 1-Yr Growth 1 Sarasota-Bradenton-Venice, FL $376 $ % 2 Palm Bay-Melbourne-Titusville, FL $214 $ % 3 Santa Barbara-Santa Maria-Goleta, CA $642 $ % 4 Waco, TX $93 $ % 5 Cape Coral-Fort Myers, FL $293 $ % 6 West Palm Beach-Boca Raton-Boynton Beach, FL $414 $ % 7 Chico, CA $446 $ % 8 Springfield, IL $106 $ % 9 San Luis Obispo-Paso Robles, CA $454 $ % 10 Yuba City, CA $247 $ % Sources: NAR, Economy.com

37 Existing Median Home Price Most Expensive Metros, Ranked by 2006 Price Home Price, US$ Thous. Ra nk Me tro Are a 1996q4 2006q4 10-Yr Growth 1 San Francisco-San Mateo-Redwood City, CA $320 $ % 2 San Jose-Sunnyvale-Santa Clara, CA $285 $ % 3 Santa Cruz-Watsonville, CA $275 $ % 4 Santa Ana-Anaheim-Irvine, CA $216 $ % 5 Oakland-Fremont-Hayward, CA $233 $ % 6 Salinas, CA $214 $ % 7 Santa Rosa-Petaluma, CA $209 $ % 8 Honolulu, HI $333 $625 88% 9 San Diego-Carlsbad-San Marcos, CA $177 $ % 10 Santa Barbara-Santa Maria-Goleta, CA $224 $ % Sources: NAR, Economy.com

38 U.S. Vacancy Rates Industrial vs. Office Space Percent Vacant Industrial Office Sources: CB Commercial, Economy.com

39 U.S. Vacancy Rates Office Space Markets Percent Vacant Downtown Metropolitan Suburban Sources: CB Commercial, Economy.com

40 Travel Expenditures Resident and International Travel for United States Percent Change, Year Ago U.S. Resident Travel International Travel Sources: TIA, Economy.com

41 Hotel Occupancy Rate Las Vegas Percent Sources: Las Vegas Convention & Visitors Authority, Economy.com

42 Unsold Inventory Index California Months Supply Sources: CAR, Economy.com

43 Sources: Wall Street Journal

44 Sources: Wall Street Journal

45 Highest Share of Subprime Loans Subprimes as a Percentage of All Loans Metro Percent McAllen, TX 26.8 Memphis, TN 24.0 Sharon, PA 23.1 Miami, FL 23.0 Richmond, VA 22.3 Brownsville, TX 21.6 Merced, CA 21.6 Sumter, SC 20.7 Bakersfield, CA 20.2 Jackson, TN 20.2 Sources: CNN Money, First American Loan Performance

46 Highest Share of Subprime Loans at Least 60 Days Late Percentage of Delinquent Subprime Loans Metro Percent Cleveland, OH 24.9 Detroit, MI 24.6 Jackson, MS 22.7 Jackson, MI 22.0 Youngstown, OH 21.8 Flint, MI 20.7 South Bend, IN 20.3 New Orleans, LA 20.1 Kankakee, IL 20.1 Akron, OK 19.7 Sources: CNN Money, First American Loan Performance

47 Statement of Forward-looking Information Certain information included herein and in other Company reports, SEC filings, verbal or written statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, information related to anticipated operating results, financial resources, changes in revenues, changes in profitability, changes in margins, changes in accounting treatment, interest expense, land-related write-downs, effects of home buyer cancellations, growth and expansion, anticipated income to be realized from our investments in unconsolidated entities, the ability to acquire land, the ability to gain approvals and to open new communities, the ability to sell homes and properties, the ability to deliver homes from backlog, the ability to secure materials and subcontractors, the ability to produce the liquidity and capital necessary to expand and take advantage of opportunities in the future, industry trends, and stock market valuations. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company reports, SEC filings, statements and presentations. These risks and uncertainties include local, regional and national economic conditions, the demand for homes, domestic and international political events, uncertainties created by terrorist attacks, the effects of governmental regulation, the competitive environment in which the Company operates, fluctuations in interest rates, changes in home prices, the availability and cost of land for future growth, the availability of capital, uncertainties and fluctuations in capital and securities markets, changes in tax laws and their interpretation, legal proceedings, the availability of adequate insurance at reasonable cost, the ability of customers to finance the purchase of homes, the availability and cost of labor and materials, and weather conditions.

48 Current Market Typically healthy market from and 2005 saw unsustainable rise in demand and home prices fueled by investors/speculators Post-Katrina current market oversupply from: Investors and speculators former buyers who are now sellers Many builders who built too many specs Buyer cancellations add more supply Buyers are now hesitant-waiting on the sidelines for greater incentives and further price reductions

49 Long Term Fundamentals Still Intact Population Growth/Positive Demographic Trends Low Unemployment/Healthy GDP Growth Mortgage Rates Still Below Historical Averages Entitlement Process Still Challenging in Primary Markets U.S.-Based Producers not Subject to Foreign Competitors Larger, Well-Capitalized Builders Continue to be Positioned to Grow Market Share

50 Record Housing Demand Projected for Next Ten Years Household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten. When combined with projected income gains and a rising tide of wealth, strengthening demand should lift housing production and investment to new highs. Harvard University Joint Center for Housing Studies: State of the Nation s Housing 2006 New Households 14.6 Million * 12.6 Million Source: Harvard University *Projected Over the longer term, the outlook for housing markets is favorable. With household growth accelerating and second home demand climbing housing production should average more than two million units annually over the next ten years. Harvard University Joint Center for Housing Studies: State of the Nation s Housing 2006

51 Housing Starts vs. Household Growth 140, , Average Annual Housing Starts 1.77 (mil) Average Annual Housing Starts 1.49 (mil) Average Annual Housing Starts 1.37 (mil) Average Annual Housing Starts 1.79 (mil) - - 2,400 HOUSEHOLDS (000) 100,000 80,000 60,000 40,000 Number of Households Has Grown 75% Since , HOUSING STARTS (000) 20, Source: U.S. Census Bureau Total Single and Multi-Family Housing Starts YEARS Total Households 0

52 What Will the Industry Look Like? More corporate/big builder dominance of market More difficult approvals/land scarcity European housing model Smaller houses Higher % of income Higher density living Big Builders in suburban and major cities