Winning With the 55+ Age Segment

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Copyright © 2015 by HouseCanary, Inc. All rights reserved.

The Changing Face of the New Housing Market

Southern California 55+ Council

January 15, 2015

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Copyright © 2015 by HouseCanary, Inc. All rights reserved. 2

President, Strategic Real Estate Products (Big Data, Investment Strategy, Consumer Targeting)

Area VP of Strategic Marketing (Investments, Consumer Strategy, Architecture)

Product Manager (Development, Research, Strategic Planning)

Big data company focused on real estate investors hone capital deployment

& consumer targeting strategy using 20,000 zip code level price forecasts & advanced analytics

Primary clients: Builders, Developers, Mortgage Banks, Hedge Funds

JP Ackerman

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Summary

Most future growth will come from 55+

Weak growth expected from young consumers

Winning requires a segmented & focused approach

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~90% New Homes will be from 55+ and Peak Earners

12% 12% 12%

39% 39% 39%

49% 49% 49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016 2017

55+

Peak earners (35-‐54)

Young adult (20-‐34)

Kids (15-‐19)

32% 31% 31%

13% 8% 8%

53% 59% 59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016 2017

55+

Peak earners (35-‐54)

Young adult (20-‐34)

Kids (15-‐19)

% Breakdown of Growth % Breakdown of Growth

Source: HouseCanary, BLS, Census Bureau, Nov 2014

Breakdown of Household Growth Breakdown of Growth in New Homes Built for Sale

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Longer-term Household Growth Driven by the Boomers Growth in Household Requirements (by segment)

(5,000,000)

-‐

5,000,000

10,000,000

15,000,000

20,000,000

1970 1980 1990 2000 2010 2020 2030 2040 2050

65+

45-‐64

20-‐44

Mix of Growth

in Household

Requirements

(by segment)

Entry level Move-up Senior Age segment

Ages 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 2010-2020 2020-2030 2030-2040 2040-2050

20 - 44 37% 64% 56% 20% -11% 32% 25% 28% 40%

45 - 64 34% 12% 15% 66% 84% 10% -6% 28% 23%

65+ 29% 23% 29% 14% 27% 58% 81% 43% 38%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Source: HouseCanary, Census

Across time, following the Boomers has been a successful strategy

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Shift in Household Growth Has Strategic Implications

For the mid 70’s to 80’s to 90’s, majority of growth driven by households that were in the 20 – 44 age group

•  Supported significant first time market

•  Move up grew as we got into the 90’s

For the 90’s to ’00 to ‘10 period, majority of growth driven by households in the 45 – 64 age group

•  These are the peak earners

•  Significant wealth amassed by this segment supported move-up market

•  20 – 44 age group represented very little of the growth during this period

Over the next two decades a majority of the growth will be driven by households in the the 55+ age segment

•  Approximately 20 – 30% of the growth in households will be driven by new household formation in the 20 – 44 age group needing first time housing

•  Very little growth expected in the 45 – 54 peak earner segment which has often been behind the move up market

Entry level

Move-up

Senior

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Households

Current Households (Million)

Future 2030 Households (Million)

Avg. Wealth of segments ($k)

Homeownership rate of segments

Boomers: Growing, Wealthier, and Own Homes

$802k

42%

62%

77%

20

21

38

$65k

$573k 24

25 - 34

35 - 44

45 - 54

55 - 75

$217k

Source: Census Bureau; HouseCanary. Note: Bubble Size is shown to scale

12 $678k n/a 75+

72%

23

26

61

10

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Decline in Homeownership Except Among Oldest Cohorts

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1980 1990 2000 2010

65+ years

15 – 24 years

25 – 34 years

35 – 44 years

45 – 54 years

55 – 64 years

Home ownership rate by age of householder

Source: HouseCanary, Federal Reserve Bank of New York, Equifax, Census

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The Wealth Factor Separates the Age Cohorts

High net worth of older cohorts offsets

the impact of rate hikes by enabling

larger down payments

Younger cohorts already hitting limits

of DTI given lower wages and increasing

debt load

Younger cohorts will be further

devalued in an increasing interest rate

environment 3.5%

10%

20%

35%

50% 50%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

Ages <35 Ages 35-44 Ages 45-54 Ages 55-64 Ages 65-74 Ages 75+

Sources: HouseCanary, Federal Reserve, Census Bureau 2013

Typical Down Payment % Median Annual HH Income & Net Worth (K)

X%

Net worth (K)

Annual HH Income (K)

Avg down payment %

Major Risk: Forecasted Interest Rate Increase - 4.3% to 6% Other Risks

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Age Group Personal Balance 4.3% Rate 6% Rate Impact to Demand Rationale

Millennials (15-34)

Income $59k Worth $10k Debt Equity

30% 35% -36% •  No/low savings •  Anemic income/career growth •  No / low gain from stock & housing

rebound •  Heavy debt load (school, personal) •  Hard to underwrite given QM

Young Gen X (35-44)


21% 25% -24% •  Rocked by housing downturn •  Limited savings •  Heavy debt

Old Gen X (45-54)


18% 21% --% •  Home equity •  Stock market rebound •  High income/career trajectory

Boomers (55+)


17% 19% --% •  Large savings & net worth •  Limited housing / personal debt •  Large down payments •  Large equity investments

% Income Used for Housing

Source: HouseCanary, BLS, Census Bureau, Nov 2014

Young Households Greatly Impacted by Rate Hikes

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Pinpointing Migration of 55+ is Critical for Investment

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Product Optimization Example

Value of Additional Garage Count Value of Additional Bedrooms

Price / SF

$125

$143

$151

$100

$110

$120

$130

$140

$150

$160

2 3 4

+20%

+14%

+6%

Garage Count

$160

$136

$129

$122

$100

$110

$120

$130

$140

$150

$160

2 3 4 5

Price / SF

-5%

-5%

-15%

Bedroom Count

+23%

-10%

Consumers place an exceedingly high value on incremental garage space But, bedroom count appears to diminish value

Leverage data to discern exactly what local consumers value and what they will pay

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Capturing 55+ Demand Requires Targeted Execution

•  Discriminating consumers moving to areas throughout region

•  Migration patterns don’t mirror where consumers live today

•  Amenities in the area as critical as those within the community

•  Age-appropriate designs that ease the challenges of everyday life

•  Value equation must enable purchase from within the equity of current home

•  New home still viewed as an investment

•  You are selling against the home they are presently in

•  Floor plans that better enable the things they love (entertaining, indulging)

•  Community placement & design that enhance connectivity to existing networks (social, medical, religious, etc.)

•  Enable social platform within the community (clubs, social direction, etc.)

Location

Life Enhancing

Lifestyle

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JP Ackerman President, Real Estate Products HouseCanary, Inc.

300 Brannan St. #501 San Francisco, CA 94107

office: +1-866-729-7770 mobile: +1-949-444-3600 email: [email protected]