Market Analysis for HousingThe Economic OverviewSix Step AnalysisSlide 4Slide 5Slide 6Slide 7An ExampleProperty Productivity AnalysisArea MapAssessors Parcel MapMarket DelineationSlide 13Slide 14Slide 15Forecast DemandForecast Demand, con’tSlide 18Inventory and Forecast Competitive SupplyInteraction of Demand and Supply and Capture AnalysisSlide 21So That’s - - - Market Analysis for HousingMarket Analysis for HousingThe SubdivisionWayne Foss, DBA, MAI, CRE, FRICSFoss Consulting GroupEmail: [email protected] Economic OverviewEssential to proper analysis of highest and best useProvides data that describes the local economymust relate to economic and demographic trends that affect the use and value of properties in the same category3Six Step AnalysisStep 1: Property Productivity AnalysisAnalyze Subject AttributesPhysical and LegalAnalyze Locational AttributesLand Use TrendsLinkage and Land Use PatternsGrowth Trends (rate, type, direction)4Six Step AnalysisStep 2: Market Delineationidentify the geographic market study areathe area from which data used in the demand forecast will comeanalyze consumer profile of most likely users of subject-type housinghousing attributes this type of purchaser (renter) desires.5Six Step AnalysisStep 3: Forecast DemandAnalyze current and forecast populationCalculate Population ChangeEstimate Average household sizeEstimate number of new households in the subject’s market area for the projection periodSegment total new demand by housing typeSegment total new demand by ability to payEstimate total new demand for subject housing6Six Step AnalysisStep 4: Inventory and Forecast Competitive SupplyInventory Existing SupplyProposed and permitted supplyPotential SupplyForecast new Competitive Subdivisions (apartments)7Six Step AnalysisStep 5: Interaction of Demand and SupplyResidual Demand AnalysisSubtract total existing supply from total new demandDivide residual demand by annual, new demand to estimate period (time) required for existing supply to be absorbedStep 6: Capture AnalysisEstimate subject’s capture and absorption potential8An ExampleOwner Occupied Housing9Property Productivity AnalysisPlan No.Living Area (Sq. Ft.)Number StoriesTotal RoomsBedrooms & BathsProduction Total1 2,922 2 8 4/3 22 3,122 1 8 4/3 23 3,466 2 9 5/4 4Project Development BreakdownAP Number Address Lot Number Lot Size (SF)281-101-11 1301 Glen View Drive 1 20,028281-101-10 1311 Glen View Drive 2 19,994281-101-09 1319 Glen View Drive 3 19,994281-101-08 1325 Glen View Drive 4 34,412281-101-15 1320 Glen View Drive 5 34,325281-101-14 1316 Glen View Drive 6 19,994281-101-13 1308 Glen View Drive 7 19,994281-101-12 1300 Glen View Drive 8 20,038Physical Characteristics of the Land10Area Map11Assessors Parcel Map12Market DelineationArea 1990 1996 % Chg. 2006 % Chg.Orange County 2,410,556 2,581,641 1.15% 2,823,920 0.90%Fullerton 114,144 118,642 0.65% 124,320 0.47%Sunny Hills Estates 8,946 8,640 -0.58% 8,022 -0.74%Population Growth Characteristics1980 1990 1996 2006<21Orange County 32.2% 29.5% 29.4% 28.5%Fullerton 31.1% 28.1% 28.3% 27.8%Sunny Hills Estates 32.0% 24.4% 24.3% 23.7%21-44Orange County 39.2% 43.2% 41.2% 36.9%Fullerton 39.6% 42.4% 40.1% 35.9%Sunny Hills Estates 32.2% 30.8% 30.3% 28.7%45-64Orange County 19.2% 18.1% 20.0% 25.2%Fullerton 21.4% 19.2% 21.1% 26.1%Sunny Hills Estates 27.5% 28.2% 29.1% 28.7%65+Orange County 8.4% 9.2% 9.4% 9.4%Fullerton 7.9% 10.3% 10.5% 10.2%Sunny Hills Estates 8.3% 16.6% 16.3% 14.8%Population Age Distribution13Market Delineation1980 1990 1996 2006Orange County 2.78 2.87 2.93 3.09Fullerton 2.64 2.74 2.82 3.01Sunny Hills Estates 2.98 2.8 2.78 2.851980 1990 1996 2006Orange County 17.6% 45.3% 57.3% 76.8%Fullerton 17.0% 40.2% 54.3% 74.7%Sunny Hills Estates 39.7% 66.8% 69.0% 81.7%Average Household SizeAverage Household Income > $50,00014Market DelineationTotalUnits Pctg. Units Pctg. Units1 Unit detached & attached 20,726 92.0% 4,244 23.1% 24,970greater than 1 Unit 1,796 8.0% 14,106 76.9% 15,902Total: 22,522 100.0% 18,350 100.0% 40,872TotalUnits Pctg. Units Pctg. UnitsOwner Occupancy 20,726 83.0% 1,796 11.3% 22,522Rental Occupancy 4,244 17.0% 14,106 88.7% 18,350Total: 24,970 100.0% 15,902 100.0% 40,872Source: 1990 Census1 Unit detached & greater than 1 UnitAllocation of Total Housing by Demand TypeOwner OccupancyRental Occupancy15Market DelineationUnits Pctg.Owner Occupancy 22,522 55.1%Renter Occupancy 18,350 44.9%Total: 40,872Vacant 2,087 4.9%Grand Total: 42,959Owner Versus Renter Occupied UnitsTenure16Forecast DemandAnalyze current and forecast populationCalculate Population ChangeEstimate Average household sizeEstimate number of new households in the subject’s market area for the projection periodPopulation (Year 0) 118,642Population (Year 1) - 118,998Change½ =½356Persons per Household¸2.80Number of Households = 12717Forecast Demand, con’tSegment total new demand by housing typeSegment total new demand by ability to payEstimate total new demand for subject housingPercentage of Owner Occupied Householdsx 55.0%Demand for Owner Occupied Dwellings= 70Plus Normal Vacancy 3.0% 2Total Demand for Owner Occupied Dwellings= 72Affordability Percentage x 15.0%Demand in Price Cohort = 1118Forecast Demand, con’tSegment total new demand by ability to payTypical Home Value 450,000$ Loan to Value Ratio 80.0%Mortgage Loan 360,000$ Loan Terms7 3/4%, Monthly Pmt, 30 Year TermMortgage Constant 8.597%Loan Payment Per Year 30,949$ Real Estate Taxes 4,950$ Insurance 500$ Total PITI 36,399$ Underwriting Gross Income Ratio33.0%Necessary Minimum Gross Annual Income110,300$ Affordability< $15,000 6.0%$15,000 to $24,000 6.1%$25,000 to $49,999 25.7%$50,000 to $99,999 38.6%$100,000 to $149,999 13.0%> $150,000 10.6%Household Income Distribution19Inventory and Forecast Competitive SupplyProposed and permitted supplyPotential SupplyForecast new Competitive Subdivisions (apartments)New Competitve Supply + 020Interaction of Demand and Supply and Capture AnalysisResidual Demand AnalysisSubtract total existing supply from total new demandDivide residual demand by annual, new demand to estimate period (time) required for existing supply to be absorbedEstimate subject’s capture and absorption potentialNet (Excess)/Shortage =