2020 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, 2020

PRESENTATION CONTENTS
 Adkins Capital Management (ACM) is a housing advisory services company.
 The purpose of this presentation is for the founder of 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 2020:
 The unexpected housing market activity for new- and existing-
home sales across the U.S. amid the COVID-19 pandemic; and
 The monetary policy actions of the Federal Reserve in response
to the current and anticipated economic environment across
the U.S. amid the COVID-19 pandemic.
 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.
1Adkins Capital Management LLC. 2020 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 AND ITS FOUNDER
2020 Q3 – Residential Housing Market Review

PERPLEXING U.S. HOUSING MARKET ACTIVITY
 For the third quarter of this year, the unexpected U.S. housing market activity was the primary topic of
discussion.
 New and existing home sales in the U.S. have proven to be counterintuitive to what most economists and
financial experts thought would transpire in an economy disrupted by a pandemic.
 U.S. home sales have surged in recent months to the highest level in more than a decade.
 Many experts believe that the conundrum between the widespread lock-down of many business segments
of the economy and the high national unemployment rate that is evidenced by more than 30 million
people being out of a job, in conjunction with the relatively steady new home sales activity and a rebound
in existing home sales activity is a result of the COVID-19 pandemic having a much larger impact on
lower income Americans.
 Lower incomeAmericans typically rent rather than own their homes.

PERPLEXING U.S. HOUSING MARKET ACTIVITY
 Based upon research and analysis conducted by Adkins Capital Management, prospective home buyers
need to assess the following housing trends before deciding to purchase a home:
 The disproportionate impact of the COVID-19 pandemic on lower income Americans will
undoubtedly disrupt the rental housing market in the near future. This in turn may make
renting a home a very attractive housing option from a financial perspective.
 Very high rental tenant eviction rates and significant financial strains on both the landlords
managing rental properties and their financial lending institutions will transpire unless a national
government bailout that is similar to what was put into place for small businesses is implemented.
These events will likely make rental properties financially attractive to people looking for a place
to live.
 A moratorium on rental housing evictions and financial bailouts for the lenders providing
financial capital to rental properties will likely be required in order to maintain a stable
society.
 While the cost of mortgage lending debt is at an all-time low,ACM does not believe that it is
the driving force behind the new and existing home sales activity that has transpired during
the pandemic.
 The 60 basis point interest rate reduction that has taken place over the last 12 months (see
the chart on prior page) only saves borrowers about $100 per month on a $312,000 loan.
 According to the St. Louis Federal Reserve, as of September 24, 2020, the median
new- and existing- home sales prices were $312,800 and $310,600 respectively.
 The Federal Reserve has stated that it will maintain accommodative monetary policy for
the near future. This in turn means that the cost of mortgage debt will remain at a very low
level, thus removing the pressure for people to rush in order to purchase a home.

MONETARY POLICY ACTIONSBY 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 this target range
until labor market conditions have reached levels consistent with the Committee's
assessments of maximum employment and inflation has risen to 2 percent and is on
track to moderately exceed 2 percent for some time.
 The Federal Reserve also stated that it will increase its holdings of Treasury securities and
agency mortgage-backed securities at least at the current pace to sustain smooth market
functioning and help foster accommodative financial conditions, thereby supporting the flow of
credit to households and businesses.
 Going forward, 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.
 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 2.95%
and ended the quarter at 3.09%.
 The previous all-time low of 3.31% was reached in November of 2012 and the all-time high of
18.63% was reached in October of 1981.

ADKINS RESIDENTIALHOME VALUATIONANALYZER
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.
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.
FINANCED-BASED ANALYTICALMETHODOLOGY

TOP FIVE OVERPRICED CITIES IN THE U.S.
 21 cities that make-up the Adkins 60-City Home Price Index were classified as overpriced
for the quarter.
 San Francisco, Los Angeles, Honolulu, New York City, and Boston 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 3.09% 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 amount.
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
San Francisco $96,265 $1,373,630 None 74% $251,384 $526,018
Los Angeles $60,197 $713,617 None 61% $130,597 $328,933
Honolulu $60,548 $703,448 None 60% $128,736 $330,851
New York City $57,782 $647,115 None 58% $118,427 $315,736
Boston $66,758 $634,481 None 49% $116,115 $364,784
Adkins Capital Management LLC. 2020 Q3 – Residential Housing Market Review

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 $116,115
and $251,384.
 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 $315,736 and $526,018.
 Prospective home buyers should use the Adkins Residential Home ValuationAnalyzer in
order to assess the level of overpricing of homes in their community.

TOP FIVE UNDERPRICED CITIES IN THE U.S.
 Based upon the justified percentage of household income amount, 39 cities that make-up the Adkins
60-City Home Price Index were classified as underpriced for the quarter.
 Detroit, Jackson, Baltimore, Saint Louis, and Indianapolis were classified as the top five most
underpriced cities in the index.
 Although Detroit and Jackson had the same justified mortgage loan interest rate amount, Detroit was
classified as the most underpriced city in the index based upon its justified percentage of household
income amount.
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 $26,249 $34,814 19.7% 7%
Jackson, MS $33,080 $45,917 19.7% 8%
Baltimore, MD $77,394 $148,073 14.45% 10%
Saint Louis, MO $61,571 $124,919 13.55% 11%
Indianapolis, IN $59,566 $148,858 10.75% 13%
Adkins Capital Management LLC. 2020 Q3 – Residential Housing Market Review

TOP FIVE UNDERPRICED CITIES IN THE U.S.
 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 3.09% to more
than the respective justified mortgage loan interest rate amount for each city (10.75% -
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.

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.

 ACCESS THE ADKINS RESIDENTIAL
HOME VALUATION ANALYZER
 REVIEW THE ADKINS 60-CITY HOME
PRICE INDEX
 ACCESS THE STRATEGIC RETIREMENT
PLAN SAVINGS CALCULATOR
12Adkins Capital Management LLC.
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

2020 Q3 Residential Housing Market Review

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