2013 Governor’s Housing Conference

The Future of HomeownershipMaking Homeownership Affordability

September 27, 2013

Daniel Whitehurst ofClark Turner Homes

IntroductionClark Turner Homes (www.clarkturner.com)Small-Mid sized builder headquartered in Harford County Townhomes to Large Luxury CustomsLand Developers General Contractor

Daniel Whitehurst President of Clark Turner CompaniesMount St Mary’s University – BusinessJohns Hopkins University – Masters in Real EstatePresident of HBAM – Harford and Cecil County

Outline

I’ve been asked to talk about:– The Housing Recovery–Who are the buyers today–What do buyers want today–My take on the housing

outlook

The Recovery… Nationally

• Jobs… Jobs… Jobs…

• Mortgage Interest Rates

• Realization of values

• Frugal Fatigue • Stock Market

% of Job Losses during Recession

RECOVERY

# of New Home Sales

RECOVERY

Leading Indicator: Auto Sales

RECO

VERY

RECOVERY

Who are the buyers?

• Who is left to buy?– Move Up Buyers ?

Move ups: Functionally Obsolete

Proceeds form Sale available to payoff mortgage.

Sellers 90% Mortgage

Negative Equity or “Underwater”

Negative Equity or “Underwater” – much better after 6 years of payments

Who are the buyers?

• Who is left to buy?– Move Up Buyers – Many are stuck– Empty Nesters

Rate Locked and Anchored

Move in 1-2 YearsExisting Similar Downsize

Homes Value: $500,000 $500,000 $375,000 Downpayment: $0 $190,000 $196,250 Closing Cost: $35,000 $25,000 $18,750 Mortgage: $250,000 $310,000 $178,750 Mortgage Rate: 3.35% 5.50% 5.50%Payment: $1,102 $1,760 $1,015 Proceeds from Sale: $215,000

Difference: ($658) $87

Why make the move?

Who are the buyers?

• Who is left to buy?– Move Up Buyers – Many are stuck– Empty Nesters – Interest Rate Anchor– Own vs. Rent -

Affordability: Home Price

Decline in Home Value: 22.5%

Affordability: Payment

Decline in Home Payment: 39.7%

Own vs. Rent

$600.00!!

New Local Apartment Complex

Payment: Average 3 Bedroom Townhome Harford County

New Apts = Tough Competition

Monroe Street Apartments - A Bozzuto Project

Who are the buyers?

• Who is left to buy?– Move Up Buyers – Many are stuck– Empty Nesters – Interest Rate Anchor– Own vs. Rent – Very competitive– Relocated Workers ?– First Time Buyers ?

Who are the first time buyers?

• Gen y “Millennials”– Age today: 14-32– In 5 Years: 19-37

A 36 Year old Gen Y was 29 years old in 2006 when market was hot. They are prime candidates to be underwater on their homes.

GEN Y

GEN Z

GEN X

Baby Boomers

Buyers ConsiderationsFinance

Product

Location

Community

Perfect Home

Finance

• Considerations:– Monthly Payments (Price and Interest Rate)

– Property Taxes

– Down payment Requirement

Finance

Product

Location

Community

Perfect Home

Case Schiller Home Price Index

3% Growth

TODA

Y

Median Income & Current Interest Rate Index

TODA

Y

$67,9743.41%

$39,9396.83%

Product

Large lot or

small lot

Finance

Product

Location

Community

Perfect Home

Single Family or

Townhome

Product

Size vs. quality

Finance

Product

Location

Community

Perfect Home

Hot Trend: Living Triangle

Hot Trend: Large Islands

Hot Trend:Drop Zones

Eliminating the Living Room

Hot Trend: Outdoor Living

Hot Trend: Exposed Wood Beams

Hot Trend: Large Showers

Eliminating the Tub

Location & Community

• Urban or Suburban• Location vs Dream House• Schools• Amenities (Walking Trails, Pools, Fitness, etc)• Wine Clubs• Overall Quality of Life

Finance

Product

Location

Community

Perfect Home

The uncertain recovery• Interest Rates• Student Loans

% of Households with Student Debt

Total Student Debt

The uncertain recovery• Interest Rates• Student Loans• New Const. Regulation • Sequestration• Mortgage Tax Deduction

Any Questions?

To end with positive news…• New Car Sales UP!• Stock Market UP!• Home Pricing UP! (slowly)• Unemployment Rate DOWN!