1. Top 75 Brokers
November 5, 2016

2. Master the Housing Mosaic
Apartments
Title Insurance
Banking
Single-Family Rentals
Building Products
Real Estate Services
Demographics
Zelman Research
Mortgage Insurance
Homebuilding
Homecenters
Mortgage Credit
Housing Policy

3. Key Themes of the Housing Recovery
Take Advantage of Shifting Demographics - 4
We Believe the American Dream is Alive and Well - 13
We Believe the Mortgage Market is Open for Business – 25
How to Succeed in a Tight Inventory Market - 28
How the Single-Family Rental Market Fits Into the Big Picture – 33
Capitalize on Acceleration in Entry-Level Demand – 36
Knowledge and Preparation Equal Success in a Downturn - 40

4. Take Advantage of Shifting Demographics

5. Millennial Cohort a Multi-Year Tailwind For Housing Demand
76 Million Baby Boomers
75 Million Millennials
66 Million Generation X
Source: Census Bureau, Zelman & Associates analysis

6. Millennials Aren’t Going to Live at Home Forever (We Hope!)
Household Formation was Delayed as Millennials were Hit by Recession
Over 3 Million Jobs Lost in Year Old Age Cohort
Unemployment Rate Surged to Nearly 13%
Positively, Unemployment has Fallen and Income Growth is Accelerating
Sub-6% Unemployment Rate Driving ~2% Wage Inflation
Zelman Analysis Suggests Pent-Up Demand of ~1.0 Million Households

7. Incremental Housing Demand Significantly Intertwined with Young Adults
Source: Census Bureau, Zelman & Associates analysis

8. Unwind of Pent-Up Demand Already Evident With Accelerating Household Growth
Source: Census Bureau, Zelman & Associates analysis

9. Household Formation Benefits All Types of Shelter
~50% Single-Family
~35% Traditional Rental
~15% “Other”
2-4 Unit Rentals
Manufactured Housing
Multi-Family Condos

10. Adapting to the Millennial Consumer’s Preferences
Nine Out of Ten Millennials Use Online Searches
Over 60% of Millennials Will Use Their Smartphone to Search for Housing
But They Still Want Hands-On Interaction and Site Visits at Decision Time
This Generation Values Responsiveness and Trustworthiness Above All Else
Millennials are the Most Open to New Construction
Majority of Millennials will Purchase a Home within a Community with Amenities
See Their Home as Personal Reflection Rather Than a Financial Investment
Source: Zillow Group 2016 Report on Consumer Housing Trends, Zelman & Associates analysis

11. Hispanics and Asians are the Fastest Growing Demographic and Homeowner Groups
From , Number of Caucasian Households Grew 4%....
….While Both Asian and Hispanic Households Increased Nearly 50%
Minorities are Expected to Become the Majority of Population by 2050
Hispanics: 30%, Up from 18% in 2015
Asians: 8%, Up from Just 5% in 2015
Caucasians: 46%, Down from 65% in 2015
Source: Census Bureau, Zelman & Associates analysis

12. Leverage This Ethnic Shift to Grow Your Business
Position Yourself to Go After These Fastest Growing Segments
Hire Bilingual Agents and Learn Another Language Yourself
Appreciate Cultural Differences that Affect Housing and Tailor Your Approach
Research Buyers Interest in Multi-Generational Living
Do Grandparents Typically Live with Immediate Families?
Do Extended Families Live Together?

13. We Believe the American Dream is Alive and Well

14. Financial Crisis Responsible for Some of Push to Multi-Family; This Portion will Reverse
Share of Married Adults Living in Multi-Family Units Above Normal Levels
Nearly 14% in 2014, Up from Just 10% in 2000
Some of Increase Certainly Secular in Nature Given Shifting Preferences

15. Birth Rates Accelerate from Recessionary Lows
Source: Center for Disease Control, Zelman & Associates analysis

16. But Children are a Strong Catalyst to Get on the Single-Family Curve, and Likely Stay There for Decades After
Source: Census Bureau, Zelman & Associates analysis

17. The American Dream is Alive and Well
Recent Data Shows Recessionary Impact Beginning to Unwind
Single-Family Ownership not Purely a Financial Decision, Lifestyle Driven
Families Require More Space – And a Backyard!
2-Bedroom Apartment with Kids, NOT Healthy for a Marriage
School-Aged Children are the Typical Catalyst for Moving to the Suburbs

18. Recent Survey Shows Single-Family Home Selection Still Highly Dependent on Traditional Factors
Most Important
Within Buyer’s Budget
Move-In Ready
Energy Efficiency
Proximity to Local Transit
Least Important
Source: Zillow Group 2016 Report on Consumer Housing Trends, Zelman & Associates analysis

19. Apartment Contacts Continue to Cite Increasing Move-Out to Buy Activity
Source: Zelman & Associates Apartment Survey

20. Continuously Rising Rents Have Driven Rent-to-Income Levels to Cycle Peak and Above Long-Term Average…
Source: Axiometrics, Zelman & Associates analysis

21. …Leaving the Cost of Ownership Versus Rents More Favorable Than History
Source: Axiometrics, Zelman & Associates analysis

22. It is a Great Time to Be a Buyer; Affordability is at Record Levels
Monthly Payment as a Percentage of Income
“Today”
“Normal”
32%
Rates Would Have to Reach 6% Just to Get Back to Normal
4% %
Mortgage Rate
42%
Source: Census Bureau, CoreLogic, FHA, Freddie Mac, NAR, Zelman & Associates analysis

23. Proprietary Data Shows Underwriting Stringency Has Eased
Source: Zelman & Associates Mortgage Origination Survey

24. Although Homeownership Rates have Declined, Single-Family Households Remain Stable
Source: Census Bureau, Zelman & Associates analysis

25. We Believe the Mortgage Market is Open for Business

26. Improvement Widespread Across Categories
Source: Zelman & Associates Consumer Survey

27. Mortgage Market is Open for Business, Credit Box is Reasonable
Educate Renters: Only % Needed for Downpayment
Consumers Need to Know You Can Purchase Despite Low FICO Score
Government Exploring Various Programs to Increase Homeownership Rate
Consideration of Monthly Credit Habits for Borrowers with Limited History
Inclusion of Multiple Residents’ Incomes
...Think Outside the Box!
Finally, Lenders are Starting to…

28. How to Succeed in a Tight Inventory Market

29. Lack of Inventory Continues to Challenge Transactions
Source: Census Bureau, NAR, Zelman & Associates analysis

30. Baby Boomers Move Less Frequently But Millenials’ High Mobility Supports Expected Improvement in Turnover
Source: Census Bureau, Zelman & Associates analysis

31. How Can Brokers Combat a Low-Turnover Environment?
Tailor Message to Married Renters in Traditional Apartments
Become the Broker of Choice for Builders
Be Persistent as It Takes the Average Seller 4 – 6 Months Before Listing
Educate Tenants on the Economics of Renting versus Owning
Walk Them through the Math - 20% More Favorable Nationwide!

32. How the Single-Family Rental Market Fits Into the Big Picture

33. 16 Million Households are Single-Family Renters, Up from Only 10 Million Prior to Recession
2005:
2016:
68 Million SF Owned
67 Million SF Owned
22 Million MF Rentals
28 Million MF Rentals
10 Million SF Rentals
16 Million SF Rentals
Source: Census Bureau, Company data, Zelman & Associates analysis

34. The Single-Family Rental Market is Here to Stay
How do Brokers Capitalize on this Part of Shelter Mosaic?
Expand into Property Management
Knock on Doors, Meet Future Buyers
Educate Renters on Rent versus Buy Economics
Reduce Misperceptions of Mortgage Credit Availability
Provide a For-Sale Roadmap
Show Them Where Homes are in Their Price Points that are Available

35. Capitalize on Acceleration in Entry-Level Demand

36. New Single-Family Homes Less Than 1,800 Square Feet
Homebuilders Had Been Reluctant to Invest in Entry-Level Projects Due to Perceived Risk…
New Single-Family Homes Less Than 1,800 Square Feet
1990s Average:
Now
40%
21%
Source: Census Bureau, Zelman & Associates analysis

37. That is Starting to Change as Entry-Level Product Gains Traction
D.R. Horton: Express Homes
Ryan Homes: Simply Ryan
Meritage Homes: Entry-Level Plus
Lennar: Everything’s Included

38. Year-Over-Year Shifts in Months’ Supply Highlights the Tale of Two Markets of Late
Source: CoreLogic, CAR, FAR, MIBOR, MRIS, Zelman & Associates analysis

39. More Supply Welcomed as Entry-Level Existing Listings Struggle to Keep Pace While Luxury Inventory Mounting
Source: CoreLogic, CAR, FAR, MIBOR, MRIS, Zelman & Associates analysis

40. Knowledge and Preparation Equal Success in a Downturn

41. Transactions Still Occur in a Downturn
Source: HMDA, Zelman & Associates analysis

42. Home Prices Remained Positive in Non-Housing Led Downturns
Source: Zelman & Associates analysis

43. Significant Amount of “Skin in the Game” for Today’s Owners, Which Mitigates Risk
Source: CoreLogic, Zelman & Associates analysis

44. Zelman Forecasts Solid Growth in 2016-18 Transaction Volume
Source: Census Bureau, CoreLogic, NAR, Zelman & Associates analysis

45. Ways to Remain Profitable in a Downturn
Remember the Three D’s (Death, Divorce and Default)
Stay in Touch with Your Customers Constantly
Know Your Buyer’s Vacation Spots and Second-Home Locations
Stay on Leading Edge of Tech and Understand What Disruptors are Doing
Zillow, Compass, Redfin
Homesnap, Opendoor
Upstream, Public Broker Portal

46. Master the Housing Mosaic
Apartments
Title Insurance
Banking
Single-Family Rentals
Building Products
Real Estate Services
Demographics
Zelman Research
Mortgage Insurance
Homebuilding
Homecenters
Mortgage Credit
Housing Policy

47. Master the Housing Mosaic
zelmanassociates.com/trial

48. Appendix

49. Appendix: Macro Housing Forecasts
Source: Zelman & Associates analysis

50. Appendix: Macro Housing Forecasts
Source: Zelman & Associates analysis