U.S. Home Price Index - 2015 Q1

Adkins Capital Management
Adkins 60-City Home Price Index
First Quarter, 2015

CONTENTS
 The purpose of this presentation is to provide an overview and assessment of:
 The events and trends that have transpired in the residential housing market
for the first quarter of 2015; and
 The home price level for a select group of cities that make up the Adkins 60-
City Home Price Index.
 This presentation provides an overview and assessment of:
 Adkins Capital Management
 U.S. Housing Events
 U.S. Housing Trends
 ARĤVA Analytics Home Price-level Analytical Methodology
 Application of the ARĤVAAnalytical Methodology
 Top Five Overpriced Cities in the U.S.
 Top Five Underpriced Cities in the U.S.
 Conclusion
 Contact Information
1Adkins Capital Management, LLC.

 Privately owned and independently operated company.
 Exclusive focus on residential real estate.
 Company 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 public policy,
regulation, product structure, and personnel have
created an environment where prospective home buyers
need objective information and useful analytical tools 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 seven years of
freelance financial writing experience.
 Author of more than 20 published articles, including publications by Forbes,
Investor’s Business Daily, Yahoo, Investopedia, Financial Edge, and more than
230 news organizations worldwide.

 Our Goal: Offer prospective home buyers a comprehensive, accurate, automated,
user-friendly and affordable residential real estate analysis software application,
while providing contemporary information about the trends and events that are
taking place in the residential housing market, in an economical, efficient, and
effective manner.
 Our Commitment: Make Adkins Capital Management, the ARĤVA Residential
Real Estate Analysis Software Application, and our residential real estate
research, the premier analytical source for prospective home buyers to use in order
to make a prudent home purchase decision.
 Our Product and Service: Developer of
an Internet-based residential real estate
analysis software application.
 Adkins Residential Home Valuation
Analyzer (ARĤVA).
 ARĤVA ANALYTICS - finance-
based and expense-based analytical
methodologies.

OVERVIEW OF U.S. HOUSING EVENTS FOR THE QUARTER
 For the first quarter of this year, the results of a comprehensive Stateline analysis by the Pew Charitable
Trust titled “The Shrinking Middle Class, Mapped State-by-State,” was the primary topic of discussion.
 Comprehensive review of households that spent more than 30% of their income for housing
 Comprehensive statewide housing analysis comparing calendar-year results from 2000 against 2013
 The results of the analysis documented the following results:
 First, states with the highest percentage of households spending at least 30% of their income for
housing:
 California (44%), Hawaii (43%), New Jersey (42%), and New York (41%)
 Second, states with the lowest percentage of households spending at least 30% of their income for
housing:
 North Dakota (23%), West Virginia (23%), Iowa (24%), and South Dakota (24%)
 Third, states with the same percentage of households spending at least 30% of their income for
housing in 2000 versus 2013:
 Alaska (29%) and West Virginia (23%)
 Fourth, states with a lower percentage of households spending at least 30% of their income for
housing in 2000 versus 2013:
 None

ASSESSMENT OF U.S. HOUSING TRENDS FOR THE QUARTER
 According to Bankrate.com, the national average mortgage loan interest rate for a 30-year fully-
amortized fixed-rate loan began the quarter at 3.99% and ended the quarter at 3.88%. Since June of
2011, the national average mortgage loan interest rate for a 30-year fixed-rate loan has been less than
4.61%.
 Most financial pundits expected the national average mortgage loan interest rate for a 30-year
fixed-rate loan to remain steady or increase slightly over the quarter.
 Recent comments made by the chairman of the Federal Reserve has led most financial pundits to
believe that an increase in the key Federal Funds rate will take place by the end of this year.
This in turn will likely cause upward pressure on mortgage loan interest rates in the future.
 The future level of mortgage loan interest rates will also likely be dependent upon the operating
status of the Government Sponsored Enterprises, and their future role in the housing market.
 Prospective home buyers should closely follow the level of mortgage loan interest rates in
their community.
 A mortgage loan interest rate of approximately 5.3% will require home owners to repay to
the lender twice the amount of their mortgage loan if they make their scheduled
repayments and carry their loan to maturity.
 This fact illustrates the high cost of interest expense for borrowers over time, and
illustrates why the Federal Reserve’s interest rate policy may have a very negative
impact on the price-level of residential housing in the future.

ADKINS RESIDENTIAL HOME VALUATION ANALYZER
HOME PRICE-LEVEL ANALYTICAL METHODOLOGY
ARĤVA ANALYTICS
 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.
6
 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.
Adkins Capital Management, LLC.

APPLICATION OF THE ARĤVA ANALYTICAL METHODOLOGY
 According to the U.S. Census Bureau, median household income was $52,250 in 2013 and $30,056 in 1989.
In comparison, the median new home price was $265,092 in 2013 and $120,383 in 1989.
 At first observation of the chart above, it appears that there is a significant problem in the housing market, as
the new home price level has inflated at a much higher rate than household income (120% v 74%).
 However, the dramatic difference in the national average mortgage loan interest rate for a 30-year fixed-rate
mortgage loan in 2013 (3.98%) versus 1989 (10.32%) raises some key points to consider:
 In 2013, 29% of household income would have to be spent in order to justify the median home price
level, or the national average mortgage loan interest rate would have to be 3.7%. The spread between
29% and 28% and 3.98% and 3.7% represents the degree of overpricing of new homes.
 In 1989, 44% of household income would have to be spent in order to justify the median home price
level, or the national average mortgage loan interest rate would have to be 5.75%. The spread
between 44% and 28% and 10.32% and 5.75% represents the degree of overpricing of new homes.
 Therefore, in 1989 (2013), based on the justified percentage of household income amount, and the justified
mortgage loan interest rate amount, the median home price level for new homes was significantly (only
slightly) overpriced nationwide.
7
$0
$200,000
$400,000
Median Household Income Median Home Price
2013
1989

ARĤVA ANALYTICS - TOP FIVE OVERPRICED CITIES IN THE U.S.
 26 cities that make up the Adkins 60-City Home Price Index were classified as overpriced.
 It is not possible to justify the home price level for the top five overpriced cities by reducing the mortgage loan interest rate
from 3.88% 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 justified percentage of household income in order to repay the costs of a
mortgage loan.
 In order to justify the median home price level for each city, the median required household income level would need to
increase to the respective range of $84,647 and $149,563.
 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
$176,087 and $347,874.
8
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
Bridgeport, CT $35,379 $421,300 None 67% $84,647 $176,087
Honolulu $57,479 $677,600 None 67% $136,142 $286,082
New York City $49,461 $549,000 None 63% $110,304 $246,175
San Francisco $69,894 $744,400 None 60% $149,563 $347,874
Los Angeles $46,148 $481,900 None 59% $96,822 $229,686

ARĤVA ANALYTICS - TOP FIVE UNDERPRICED CITIES IN THE U.S.
 34 cities that make up the Adkins 60-City Home Price Index were classified as underpriced.
 Sioux Falls South Dakota ranked as a more underpriced city than Little Rock Arkansas due to its
higher justified mortgage loan interest rate.
 Three cities tied as the fifth most underpriced city for the first quarter of this year.
 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 3.88% to more
than the justified mortgage loan interest rate for each city; or
 It would have to be deemed imprudent by prospective home buyers to spend as much as the
justified percentage of household income in order to repay the costs of a mortgage loan.
9
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 $25,193 $31,450 19.70% 8%
Wichita, KS $44,184 $128,900 8.95% 17%
Sioux Falls, SD $50,470 $162,400 7.90% 19%
Little Rock, AR $40,976 $135,600 7.60% 19%
Wilmington, DE
Omaha, NE
Oklahoma City
$38,325
$45,536
$42,955
$130,200
$155,400
$151,200
7.30%
7.25%
6.95%
20%
20%
20%

CONCLUSION
Given the events that have transpired in the residential housing market this century, 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 ARĤVA Residential Real
Estate Analysis Software Application 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.

residentialrealestateanalysis.com
 REVIEW THE ADKINS 60-CITY HOME PRICE INDEX
 ACCESS THE ADKINS RESIDENTIAL REAL ESTATE
ANALYSIS SOFTWARE APPLICATION
CONTACT INFORMATION

THANK YOU!
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.

U.S. Home Price Index - 2015 Q1

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U.S. Home Price Index - 2015 Q1