Housing and the 55+ population

Prepared for the REALTOR University Speaker Series

June 17, 2016
A Better Freddie Mac
and a better housing finance system
For families
...innovating to improve the liquidity, stability and
affordability of mortgage markets
For customers
...competing to earn their business

For taxpayers
...reducing their exposure to mortgage risks

Economic and Housing Research Freddie Mac 2

Overview

Setting the scene: current economic & housing situation

Freddie Macs new survey of the 55+ populations attitudes and

intentions toward housing

Future directions of research on older Americans and housing

Economic and Housing Research Freddie Mac 3

Macroeconomic conditions

Weak growth, but growth rather than recession

Very low interest rates

Fed in a quandary

Economic and Housing Research Freddie Mac 4

 Weak Economy

Real Gross Domestic Product (Annual Percentage Change, Q4/Q4)

Source: Bureau of Economic Analysis, Freddie Mac.

Economic and Housing Research Freddie Mac

The weakest expansion since 1946

Economic and Housing Research Freddie Mac 6

Lower labor force participation accounts for
the improvement in the unemployment rate

Economic and Housing Research Freddie Mac 7

 The decline in labor force participation
has accelerated

Source: BLS

Economic and Housing Research Freddie Mac 8

The housing sector

Strong, but unbalanced, growth

Limited inventory of houses for sale

House prices passing previous peakswhat lies ahead?

Economic and Housing Research Freddie Mac 9

Strong Housing, but

Economic and Housing Research Freddie Mac 10

 supply remains tight

Economic and Housing Research Freddie Mac 11

Tight supply is propping up prices

Source: FHFA, Purchase only House Price Index (SA)

Economic and Housing Research Freddie Mac 12

Home price performance by state
Peak (June 2006) to Current (March 2016)1
U.S. -5% -13%
-4% NH
7% -4%
VT
WA ME
10% 53%
MT ND
-9%
6% MN -6%
22% -8% -3% MA
OR -4% NY
ID SD WI -11% RI -21%
12% MI -4%
WY 9% NJ CT -21%
9% PA
IA -5% -20%
NE DE -12%
-29% -18% 3% OH
NV IL 4%
13% 31% IN -9% MD -19%
-8% WV
UT CO 10% -1% VA
CA KS MO KY 6% DC 43%
NC 3%
TN 9%
17% 2%
-20% OK 0%
-10% SC 10%
AZ AR
NM -3% -2%
0% 0 to 9%
AL GA
MS
9% 10% -10 to -1%
37%
AK LA -21%
TX -11%
9% FL
HI

1
The Freddie Mac House Price Index for the U.S. is a value-weighted average of the state indexes where the value weights are based on Freddie Macs single-family
credit guarantee portfolio. Other indices of home prices may have different results, as they are determined using different pools of mortgage loans and calculated under
different conventions. The Freddie Mac House Price Index for the U.S. is a non-seasonally adjusted monthly series. Percent changes were rounded to nearest whole
percentage point
Source: Freddie Mac

Significant Variability by Region & State Since the Peak

Economic and Housing Research Freddie Mac 13
Are house prices getting too high?

Sources: NAR, Moodys Analytics

Economic and Housing Research Freddie Mac 14

 A possible watch list

Three state and 10 metro areas were above threshold in 4Q2015

Note: Data compiled by Economic & Housing Research. Metro area median prices are Moody's Analytics seasonally adjusted median house values, based on NAR data. Metro
area median incomes based on Moody's Analytics forecasts and interpolations of Census data. The historical range is quarterly data from 1993Q1-2003Q4.

Watch list clusters in three states and the West Coast

Economic and Housing Research Freddie Mac 15
Key questions about house price risk

Are there non-financial reasons for unusually-high price/income

ratios?
High demand/constrained supply
Increase in income inequality skews the PTI metrics

Is credit quality deteriorating?

Credit scores of recent originations
Indexes of mortgage fraud

Is leverage increasing?
Re-emergence of affordability products
LTV of recent originations
Cash-out refinances; HELOC origination and utilization

Economic and Housing Research Freddie Mac 16

Homeowner equity increasing, MDO flat

$ Trillions

Value of US Housing Stock 1

Record: $12.5
$13.3 Trillion Trillion
(2006)
U.S.
Home
Equity 2

U.S. Single-family Mortgage Debt Outstanding $9.5

Trillion

1
Value of U.S. housing stock includes homes with and without underlying mortgages.
2
U.S. home equity is the difference between the value of the U.S. housing stock and the amount of U.S. single-family mortgage debt outstanding.
Source: Federal Reserve Boards Flow of Funds Accounts, March 10, 2016, Table B. 101. Data as of December 31, 2015.

Economic and Housing Research Freddie Mac 17

Keep on eye on cash-outs and HELOCs

Economic and Housing Research Freddie Mac 18

Survey of the 55+ population

What is it?
Freddie-commissioned study to gain insights into the housing attitudes and intentions
of older Americans
Nationally-representative sample of roughly 6,000 individuals including both
homeowners and renters
Sample included roughly 4,900 homeowners used for the results presented today
Oversampled Asians, Hispanics, and African Americans

Why focus on older Americans?

55+ comprise a quarter of population but own two-thirds of the housing wealth
Impact of longer life spans, aging-in-place on housing demand and supply
Expecting large growth in the share of 55+ households from households aging faster
than younger generations are forming new households

Economic and Housing Research Freddie Mac 19

As many Boomers as Millennials

Economic and Housing Research Freddie Mac 20

Demographics of 55+ homeowners:
Race/Ethnicity

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 21

Demographics of 55+ homeowners:
Household composition

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 22

Demographics of 55+ homeowners:
Years in current residence

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 23

Fact or myth: Housing choices

We want to age in place

Were going to downsizeas soon as we ditch the kids in the

basement

No more maintenance. The next move is an apartment or condo

So long snow, were headed West (or South)

Economic and Housing Research Freddie Mac 24

We want to age in place: FACT

63% of 55+ homeowners would prefer to Majority of 55+ homeowners are very satisfied"
stay in their current residence with their community (59%) and home (65%)

Source: Freddie Mac 55+ Survey

But will we be able to age in place?

Economic and Housing Research Freddie Mac 25
 Retrofitting may be a financial challenge

23% of 55+ homeowners would need major Among those that need major renovations
renovations in order to stay in their home for only 19% say they are very confident that
the rest of their life they could afford to make those renovations

Source: Freddie Mac 55+ Survey

But that leaves 37% planning to age in another place

Economic and Housing Research Freddie Mac 26
Approximately, 18 million 55+ homeowners
prefer to buy another house
72% of 55+ homeowners that plan to move
again say they are most likely to buy a
home instead of renting
Among those that plan to move again, younger
homeowners are most likely to buy a home
instead of renting

Source: Freddie Mac 55+ Survey

And 3 million 55+ renters expect to move again and buy a house
Economic and Housing Research Freddie Mac 27
 Were going to downsize as soon as we ditch
the kids in the basement: MYTH
Only 15% of 55+ homeowners have adult
children over 18 years old living with them
Only 20% of 55+ homeowners think it is very
important for their next move to downsize
their home

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 28

But affordability is a concern and many want
to move closer to family

Affordability is the top concern when deciding on a move

Economic and Housing Research Freddie Mac 29
 No more maintenance: FACT

41% of 55+ homeowners say less maintenance 30% of 55+ homeowners say not having to
is very important when deciding whether to care for property is very important when
move and where to live deciding whether to move and where to live

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 30
So long snow: FACT

Similar desire for moving to a warmer climate across incomes, but expectations differ across
income groups

Source: Freddie Mac 55+ Survey

But can they afford the move?

Economic and Housing Research Freddie Mac 31
Fact or myth: Financial issues

We paid off our mortgage before retirement

Im not sure we can afford to retire

Kids and parents are not moving in with us

The Bank of Mom and Dad is the primary source for Millennial down
payments

Economic and Housing Research Freddie Mac 32

 We paid off our mortgage: MYTH

Retired 55+ homeowners are less likely to Of those with mortgages, a majority
have a mortgage, but 36% still have one have more than 10 years until their loan
is paid

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 33

 Not certain they can afford retirement: FACT

Only 20% of those still in the workforce are 34% of those already retired say they strongly
very confident that they will have a financially agree that they feel financially secure
comfortable retirement

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 34

 Kids and parents are not moving in with us:
FACT
56% of 55+ homeowners with children say it
is not at all likely that their children will
move in with them in the next 5 years
82% of 55+ homeowners say it is not at all
likely that their parents will move in with
them in the next 5 years

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 35

Mom and Dad primary source for down
payments: MYTH
Down payment transfers between generations occur for 20% of 55+ homeowners
22% have provided their children with money for a down payment
20% have received money from their parents for a down payment

Source: Freddie Mac 55+ Survey

Economic and Housing Research Freddie Mac 36

Snap quiz: What are the top neighborhood
amenity preferences of each generation?

Millennials Gen X Baby Boomers Seniors

Economic and Housing Research Freddie Mac 37

Q1: Which generation is this?

Top 8 community amenity preferences

Typically suburban

Park area

Walking/jogging trails

Near retail space

Lake

Swimming pool

Exercise room

Playgrounds

Economic and Housing Research Freddie Mac 38

A1: Generation X

Millennials Gen X Baby Boomers Seniors

Typically suburban

Park area

Walking/jogging
trails

Near retail space

Lake

Swimming pool

Exercise room

Playgrounds

Economic and Housing Research Freddie Mac 39

Q2: Which generation is this?

Top 8 community amenity preferences

Typically suburban

Near retail space

Walking/jogging trails

Park area

Outdoor maintenance service

Lake

Swimming pool

Exercise room

Economic and Housing Research Freddie Mac 40

A2: The Silent Generation

Millennials Gen X Baby Boomers Seniors

Typically suburban Typically suburban

Park area Near retail space

Walking/jogging Walking/jogging
trails trails

Near retail space Park area

Outdoor
Lake
maintenance service

Swimming pool Lake

Exercise room Swimming pool

Playgrounds Exercise room

Economic and Housing Research Freddie Mac 41

Q3: Which generation is this?

Top 8 community amenity preferences

Typically suburban

Near retail space

Park area

Walking/jogging trails

Lake

Outdoor maintenance service

Swimming pool

Exercise room

Economic and Housing Research Freddie Mac 42

A3: Baby Boomers

Millennials Gen X Baby Boomers Seniors

Typically suburban Typically suburban Typically suburban

Park area Near retail space Near retail space

Walking/jogging Walking/jogging
Park area
trails trails
Walking/jogging
Near retail space Park area
trails
Outdoor
Lake Lake
maintenance service
Outdoor
Swimming pool Lake
maintenance service

Exercise room Swimming pool Swimming pool

Playgrounds Exercise room Exercise room

Source: National Association of Home Builders

Economic and Housing Research Freddie Mac 43

All Generations

Millennials Gen X Baby Boomers Seniors

Park area Typically suburban Typically suburban Typically suburban

Typically suburban Park area Near retail space Near retail space

Walking/jogging trails Walking/jogging trails Park area Walking/jogging trails

Playgrounds Near retail space Walking/jogging trails Park area

Outdoor maintenance
Near retail space Lake Lake
service

Outdoor maintenance
Swimming pool Swimming pool Lake
service

Lake Exercise room Swimming pool Swimming pool

Exercise room Playgrounds Exercise room Exercise room

Source: National Association of Home Builders

Economic and Housing Research Freddie Mac 44

For More Information

Economic and Housing Research:

www.freddiemac.com/news/finance
Contact:
chief_economist@freddiemac.com
Follow us:
@Freddiemac

Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac's Office of the Chief Economist, do not necessarily represent the views of Freddie Mac
or its management, should not be construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. Although the Office of the Chief
Economist attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose.
Information from this document may be used with proper attribution. Alteration of this document is prohibited. 2016 by Freddie Mac.

Economic and Housing Research Freddie Mac 45