2021 q3 residential housing market review

Adkins Capital Management
“Helping Prospective Home Buyers Make A Prudent Home Purchase Decision”
U.S. Residential Housing Market Review
Adkins 60-City Home Price Index Analysis
Third Quarter, 2021

PRESENTATION CONTENTS
 The purpose of this presentation is for the founder of Adkins Capital Management
(ACM) to provide an overview and assessment of:
 The events and trends that have transpired in the U.S. residential housing market
for the third quarter of 2021:
 A review of the issues affecting residential housing construction; and
 A review of the monetary policy actions of the Federal Reserve amid the
COVID-19 pandemic and the growing threat of inflation.
 The home price level for a select group of cities that make up the Adkins 60-City
Home Price Index:
 Top Five Overpriced Cities in the U.S.; and
 Top Five Underpriced Cities in the U.S.
 Conclusion.
 Resources for Prospective Home Buyers.
 Important Disclosures.
1
Adkins Capital Management LLC. 2021 Q3 – Residential Housing Market Review

 Privately owned and independently operated company.
 Exclusive focus on residential real estate.
 ACM is not affiliated with any parties associated with
the residential housing industry.
 Our mission is to bridge the gap in the residential
housing market, where deficiencies in education,
public policy, regulation, product structure, and
personnel have created an environment where
prospective home buyers need objective information
and useful analytical tools in order to make a prudent
home purchase decision.
Adkins Capital Management LLC. 2
 More than 15 years of real estate analysis experience, more than 10 years of
institutional investment consulting experience, and more than eight years of
freelance financial writing experience.
 Author of more than 25 published articles, including publications by Forbes,
Investor’s Business Daily, Yahoo, Investopedia, Financial Edge, and more than
230 news organizations worldwide.
OVERVIEW OF ACM FOUNDER AND CORPORATION
2021 Q3 – Residential Housing Market Review

3
Adkins Capital Management LLC.
NEW RESIDENTIAL CONSTRUCTION STATSTICS
 For the third quarter of 2021, new residential housing construction was the primary topic of discussion.
 Through the third quarter of this year, building permits, housing starts, and housing completions were significantly
above 2020 levels. However, home building has cooled in recent months in the face of soaring prices for materials,
supply chain problems, and labor shortages. Fortunately, lumber prices, which have been soaring, have fallen back.
 Affirming the issues with the disruptions in the supply chain, including shortages, delivery delays in certain
building materials, and tightness in the labor market, D.R. Horton, the biggest home builder in the U.S. based on
volume, recently stated that it expects to close on fewer homes in the fourth quarter of this year than it previously
forecast. Notwithstanding, D.R. Horton has experienced strong annualized performance in excess of 22% for the 1-
3- and 5-year periods and maintains a very attractive trailing 12-month price-to-earnings ratio of 9.0.
 The following residential housing construction data were provided by the U.S. Census Bureau and the U.S.
Department of Housing and Urban Development:
 Building Permits: Privately‐owned housing units authorized by
building permits in August were at a seasonally adjusted annual
rate of 1,728,000. This is 13.5 percent above the August 2020
rate of 1,522,000. Single‐family authorizations in August were at
a rate of 1,054,000.
 Housing Starts: Privately‐owned housing starts in August were
at a seasonally adjusted annual rate of 1,615,000. This is 17.4
percent above the August 2020 rate of 1,376,000. Single‐family
housing starts in August were at a rate of 1,076,000, as
illustrated in the adjacent chart.
 Housing Completions: Privately‐owned housing completions in
August were at a seasonally adjusted annual rate of
1,330,000. This is 9.4 percent above the August 2020 rate of
1,216,000. Single‐family housing completions in August were at
a rate of 971,000.

MONETARY POLICY ACTIONS OF THE FEDERAL RESERVE
 In view of the economic impact of the global COVID-19 pandemic, the Federal Reserve
maintained the target range for the federal funds rate at 0.00% - 0.25%.
 The Federal Reserve expects that it will be appropriate to maintain the current target range for
the federal funds rate until inflation has risen to two percent and is on track to moderately exceed
two percent for some time, and when labor market conditions have reached levels consistent
with the Committee's assessment of maximum employment.
 The Federal Reserve voted to increase the System Open Market Account holdings of agency
mortgage-backed securities (MBS) by $40 billion per month.
 While it is logical to conclude that if the COVID-19 pandemic continues to curtail the U.S.
economy, mortgage loan interest rates will continue to remain low, or even inch toward more all-
time lows in order to not impede housing market sales activity. However, the increased debt
level that has been caused by the Federal Government’s stimulus packages will likely drive
Treasury yields higher, which in turn will drive mortgage loan interest rates upwards.
Nevertheless, historically speaking, mortgage loan interest rates are still at very low levels.
 In accordance with the monetary policy actions of the Federal Reserve, the national average
mortgage loan interest rate for a 30-year fully-amortized fixed rate loan began the quarter at
3.17% and ended the quarter at 3.18%.
 The national average mortgage loan interest rate for a 30-year fully-amortized fixed rate
loan reached an all-time low of 2.67% on December 17, 2020 and the all-time high of
18.63% in October of 1981.

ADKINS RESIDENTIAL HOME VALUATION ANALYZER
HOME PRICE-LEVEL ANALYTICAL METHODOLOGY
 JUSTIFIED MORTGAGE LOAN INTEREST RATE
 Represents the cost of debt for a 30-year fully-amortized fixed-rate mortgage
loan that equates the median home price level for a city with the median
household income level for the city.
 Based on the assumption that 28% of household income is the largest amount of
money that should be spent in order to repay the principal and interest costs for a
30-year fully-amortized fixed-rate mortgage loan.
5
 JUSTIFIED PERCENTAGE OF HOUSEHOLD INCOME
 Represents the percentage of pre-tax household income that would have to be
spent by the people that live in a city in order to justify the relationship between
the median household income level for the city and the median home price level
for the city.
 Based on the month-ending national average mortgage loan interest rate for a
30-year fully-amortized fixed-rate mortgage loan.
FINANCED-BASED ANALYTICAL METHODOLOGY

TOP FIVE OVERPRICED CITIES IN THE U.S.
 28 cities that make up the Adkins 60-City Home Price Index were classified as overpriced for
the quarter.
 Honolulu, San Francisco, Boston, Los Angeles, and New York City were identified as the five most
overpriced cities in the index.
 In terms of a relative price-level analysis, it is not possible to justify the home price level for the top
five overpriced cities by reducing the 30-year fixed rate mortgage loan interest rate from 3.18% to
0.0%.
 In order to classify the homes in the top five overpriced cities as underpriced, it would need to be
deemed prudent by prospective home buyers to spend more than the respective justified percentage
of household income amounts.
6
Adkins 60-
City Home
Price Index
Median
Household
Income
Level
Median
Home Price
Level
Justified
Mortgage
Loan
Interest
Rate
Justified
Percentage
of
Household
Income
Required
Median
Household
Income
Level
Justified
Home Price
Level
Honolulu $60,548 $992,500 None 86% $183,953 $326,681
San Francisco $112,449 $1,504,310 None 70% $278,813 $606,707
Boston $71,115 $799,000 None 59% $148,089 $383,694
Los Angeles $72,797 $775,000 None 56% $143,641 $392,769
New York City $68,304 $722,787 None 55% $133,964 $368,527

TOP FIVE OVERPRICED CITIES IN THE U.S.
 In order to justify the median home price level for each city, the median required household
income level would need to increase to a level within the respective range of $133,964 and
$278,813.
 Based on the median household income level, the quarter ending national average mortgage loan
interest rate, and the assumption that no more than 28% of pre-tax household income should be
spent in order to repay the principal and interest costs of a mortgage loan, the justified home price
level for the top five overpriced cities fell within the respective range of $326,681 and
$606,707.
 Prospective home buyers should use the Adkins Residential Home Valuation Analyzer in order to
assess the level of overpricing of homes in their community.
7
Adkins 60-
City Home
Price Index
Median
Household
Income
Level
Median
Home Price
Level
Justified
Mortgage
Loan
Interest
Rate
Justified
Percentage
of
Household
Income
Required
Median
Household
Income
Level
Justified
Home Price
Level
Honolulu $60,548 $992,500 None 86% $183,953 $326,681
San Francisco $112,449 $1,504,310 None 70% $278,813 $606,707
Boston $71,115 $799,000 None 59% $148,089 $383,694
Los Angeles $72,797 $775,000 None 56% $143,641 $392,769
New York City $68,304 $722,787 None 55% $133,964 $368,527

TOP FIVE UNDERPRICED CITIES IN THE U.S.
8
 Based upon the justified percentage of household income amount, 32 cities that make-up the Adkins 60-
City Home Price Index were classified as underpriced for the quarter.
 Detroit, Jackson, Saint Louis, Memphis, and Wichita were identified as the top five most underpriced cities
in the index.
 Memphis was classified as the fourth most underpriced city in the index due to its higher justified mortgage
loan interest rate amount.
 In order to classify homes in the top five underpriced cities as overpriced:
 The national average mortgage loan interest rate would have to increase from 3.18% to more than the
respective justified mortgage loan interest rate amount for each city (8.8% - 19.7%); or
 It would have to be deemed imprudent by prospective home buyers to spend as much as the respective
justified percentage of household income amount for each city in order to repay the costs of a
mortgage loan.
Adkins 60-City
Home Price Index
Median
Household Income
Level
Median Home
Price Level
Justified
Mortgage Loan
Interest Rate
Justified
Percentage of
Household Income
Detroit, MI $44,730 $58,213 19.70% 7%
Jackson, MS $38,888 $72,519 14.85% 10%
Saint Louis, MO $66,417 $161.038 11.15% 13%
Memphis, TN $43,794 $126,889 9.00% 16%
Wichita, KS $55,056 $162,242 8.80% 16%

CONCLUSION
 Given the events that have transpired in the residential housing market, and
taking into account the fact that buying a home will likely be the largest single
financial transaction that prospective home buyers will ever make, and the bulk
of their net worth will likely be tied up in their home, prospective home buyers
should subscribe to use the Adkins Residential Home Valuation Analyzer in
order to accurately assess:
 the level of underpricing or overpricing of homes in their community;
 the largest amount of money they should spend in order to purchase a home;
 the amount of money they would need to earn on an annual basis in order to
be able to afford to purchase a specific home;
 total home ownership costs expressed as a percentage of household income;
and
 how much a home would need to appreciate in value each year in order to
offset the costs associated with owning the home.
 By analyzing residential real estate from these perspectives, prospective home
buyers should be able to make a prudent home purchase decision.
9

 ACCESS THE ADKINS RESIDENTIAL
HOME VALUATION ANALYZER
 REVIEW THE ADKINS 60-CITY HOME
PRICE INDEX
 ACCESS THE STRATEGIC RETIREMENT
PLAN SAVINGS CALCULATOR
10
RESOURCES FOR PROSPECTIVE HOME BUYERS
 WATCH OUR MOVIE CATALOG OF QUARTERLY RESIDENTIAL HOUSING
REVIEWS
 WATCH OUR COMPREHENSIVE HOUSING VALUATION METHDOLOGY
MOVIE PRESENTATIONS
 WATCH OUR STRATEGIC RETIREMENT PLAN SAVINGS METHODOLOGY
MOVIE PRESENTATION
 WATCH OUR ANIMATED MOVIE PRESENTATIONS
 CONTACT ADKINS CAPITAL MANAGEMENT IN ORDER TO DISCUSS
RESIDENTIAL HOUSING ANALYSIS QUESTIONS

THANK YOU!
residentialrealestateanalysis.com
Segments Produced at the New York Public Library & Business Library
Borough of Manhattan, 5TH Avenue and Madison Avenue Locations
New York City, NY, U.S.A.
Contents of this report are the property of Adkins Capital Management. No part of this report may be reproduced,
redistributed, displayed, or transmitted without the written consent from representatives of Adkins Capital Management.
IMPORTANT DISCLOSURES

2021 q3 residential housing market review

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Similar to 2021 q3 residential housing market review

Similar to 2021 q3 residential housing market review (20)

More from Troy Adkins

More from Troy Adkins (12)

Recently uploaded

Recently uploaded (20)

2021 q3 residential housing market review