Custom
Research
REAL
ESTATE CONSULTING
STP Advisory Services studies the full spectrum of real estate markets:
residential and commercial, domestic and international. Our assessments of
the trends and policies affecting real estate investments help the media,
businesses, and the public to better understand the risks and opportunities
in the market place. Our research is also used by state and county policymakers.
Below, you will be able to sample the outcomes of our research.
STP Advisory Services can provide a case study about your company, imprinted
with your logo, highlighting your ability to stay in the forefront of the
industry, for use in your marketing program. We also provide specialized
research, under exclusive contract, that can be branded to support your real
estate business.
Did you know? The demand for housing will not be held
back by rising interest rates until the 30-year mortgage reaches 7.75%. For
the complete analysis, download “Housing Affordability in Three Dimensions:
Price, Income and Interest Rates” free of charge from http://papers.ssrn.com/author=272819
Homebuilders: An Industry Restructured
Even a
cursory glance at the behavior of new home starts and new home sales over
the last thirty years reveals evidence of a dramatic change. The industry
has virtually eliminated risk and uncertainty from cash flow prediction.
The new business model has been operating in the residential real estate
market for ten years. We are just beginning to see the impact of this as
the boom/bust cycle of home prices disappears. The new business model dramatically
changed the financial performance of homebuilders by lowering the risk of
carrying an inventory of completed homes (speculative building). It also
smoothed cash flows. The result is dramatically improved earnings predictability.
However, because the financial markets have not fully recognized the change,
homebuilders remain seriously undervalued for both debt and equity financing.
In some cases, this has resulted in unfairly limited access to capital, which
has the potential to ultimately choke off the supply of new homes to the
detriment of housing affordability and regional economic growth.
STP Advisory Services can provide a financial analysis that will allow
you to present your company to lenders, both private and public, in a way
that can dramatically improve your chances for success and potentially
lower your cost of capital.
Education:
The Missing Demographic Link
While the link between income and home prices may seem self-evident on the
national level, we suggest that the interpretation of comparative statistics
within a region can be misleading. Education plays a critical role in analyzing
the potential housing demand in a geographic area because education levels
could display greater stability than income alone.
Income
can change dramatically in a region that has an economic dependency on an
industry that suffers an exogenous shock. For example, the housing market
in Houston suffered in the 1980s from the volatile nature of oil prices because
jobs, and hence incomes, were tightly associated with the industry. Conversely,
San Francisco has sustained some of the highest home prices in the country
despite the fact that nearby Silicon Valley suffered a tremendous shock to
incomes from the dot.com bubble. San Francisco has one of the highest ratios
of college graduates to high school dropouts (brains to brawn ratio) in the
nation. We believe the higher level of education relates specifically to
sustainable higher levels of income, which in turn support higher home prices.
The figure plots the disparity in income growth by education level
in comparison to the disparity in home prices in selected cities
with divergent average education levels. Where the supply of housing in a
particular price range exceeds the needs of the population in the relevant
income/education bracket, the local real estate market will be challenged.
Opportunities for homebuilders exist where the housing supply falls short
of the needs of the population within specific price ranges. Having this
information could put you ahead of the competition in your region.
STP Advisory Services can tailor studies to analyze the link between
education and home prices in your area; or to analyze the mix of housing
supply in your region to identify new opportunities.
For further information contact us at the following location.
Susanne Trimbath, Ph.D.
STP Advisory Services
2118 Wilshire Blvd., #596
Santa Monica, CA 90403
(310) 285-8153
Susanne@STPAdvisors.com
Susanne Trimbath is Senior Research Economist, specializing in research
on capital markets and corporate finance, plus mergers and acquisitions.
She holds an MBA in Management and received her PhD in Economics from New
York University.
