2013 Governor’s Housing Conference The Future of Homeownership Making Homeownership Affordability September 27, 2013 Daniel Whitehurst of Clark Turner Homes

Introduction Clark Turner Homes ( Small-Mid sized builder headquartered in Harford County Townhomes to Large Luxury Customs Land Developers General Contractor Daniel Whitehurst President of Clark Turner Companies Mount St Mary’s University – Business Johns Hopkins University – Masters in Real Estate President 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 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 Years ExistingSimilarDownsize Homes Value:$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% 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 Considerations FinanceProduct LocationCommunity Perfect Home

Finance Considerations: – Monthly Payments (Price and Interest Rate) – Property Taxes – Down payment Requirement FinanceProduct LocationCommunity Perfect Home

Case Schiller Home Price Index 3% Growth TODAY

Median Income & Current Interest Rate Index TODAY $67, % $39, %

Product Large lot or small lot FinanceProduct LocationCommunity Perfect Home Single Family or Townhome

Product Size vs. quality FinanceProduct LocationCommunity 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 FinanceProduct LocationCommunity 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!