Bridging the Gap for Today s Homebuyer Stacey M

Bridging the Gap for Today’s Homebuyer Stacey M. Walker Director, Strategic Markets October 27, 2011

It’s A Great Time To Buy § Inventories are at all-time highs at lower prices, increasing affordability § Mortgage interest rates at historical low § Opportunity based on the type of supply © Freddie Mac 2011

Market Drivers Influence Purchase Patterns

Market Drivers Influence Purchase Patterns Past Few Years (2005 – 2007) Today (2011) Summary § Consumers anxious to become homeowners to catch the appreciation wave § Consumers waiting on the sidelines for prices to bottom out or the market to stabilize § The demographic profile of homebuyers has not changed. § Minimal savings required for down payment § Consumers unsure whom to trust § The value proposition of becoming a homebuyer has changed for most consumers, resulting in a change in their behavior and approach toward homeownership. § Homeownership viewed as a short-term investment (Market Created Equity) § Equity used as ATM for other purposes beyond homeownership § Consumers took advantage of exotic low initial payment mortgages § Savings now required for down payment and closing costs (5%-20%) § Homeownership a longer term investment (Homebuyer Creates the Equity) § Consumers feel unprepared for mortgage obligation § Consumers seeking simple mortgage products with no surprises § New value proposition is long-term investment versus short-term reward/ATM. Given these changes, how do we attract, prepare, and serve well-qualified homebuyers going forward? Source -- Freddie Mac © Freddie Mac 2011 4

Borrower Segments Face Challenges and Heightened Anxiety Borrower Segments First-Time Homebuyer Trade-Ups Challenges § § Universal Lack of down payment Anxiety over housing prices § Fear of making wrong choices Inability to find financing Lack of information § Fear of foreclosure § Lower equity in existing home § Challenges of selling home § Fear of declining house values § Fear of unemployment § Fear of continuing decline in home prices (investment loss) § Not the right time to buy § Monthly payment and cash upfront issues Re-entering the Market § Repairing credit § Fear of unemployment/ foreclosure § Lack of down payment § Down payment struggles § Costs are higher for credit scores from 620 – 640 Source -- Freddie Mac © Freddie Mac 2011 5

Who Are Today’s Homebuyers?

Homebuyers Today 2010 Homebuyer Profile First-time Homebuyer – Demographic Characteristics § Share increased from 47% in 2009 to 50% in 2010 § Married couples represent 48% of FTHBs § Single female buyers represent 23% of FTHBs Repeat Buyer 50% First-time Homebuyer 50% § Single male buyers represent 15% of FTHBs First-time Homebuyer Demographics Other 1% Unmarried couple 12% Single male buyers 15% Married couple 48% Single female buyers 23% Source -- NATIONAL ASSOCIATION of REALTORS Profile of Home Buyers and Sellers 2010 © Freddie Mac 2011 7

Age of First-time Homebuyers Homebuyer Age of Homebuyer 2009 2010 § First-time homebuyers are typically younger than repeat buyers. 18 -24 6% 11% 25 -34 34% 56% § More than half of first-time homebuyers were between 25 -34 years old. 35 -44 22% 19% 45 -54 18% 10% 55 -64 13% 4% 65 -74 6% 1% 75+ 2% 2% Source -- NATIONAL ASSOCIATION of REALTORS Profile of Home Buyers and Sellers 2010 © Freddie Mac 2011 8

Projected Population Increase 2010– 2025 Projected Population Increase – 2010 -2025 25% 0% White 5. 58% 5% Black 14. 65% 16. 75% 11. 23% 15% 10% (16. 06%) (33. 46%) (52. 38%) 52. 38% 33. 46% 2010 2015 2020 2025 20% 12. 02% (14. 65%) (30. 11%) (46. 44%) 7. 97% 49, 726 57, 711 66, 365 75, 772 30% 3. 92% 14, 415 16, 527 18, 756 21, 109 35% 30. 11% (5. 58%) (11. 23%) (16. 75%) Hispanic • 2010 2015 2020 45% 40% 39, 909 42, 137 44, 389 46, 594 Asian 2010 2015 2020 2025 50% Asian 16. 06% (3. 92%) (7. 97%) (12. 02%) 46. 44% 246, 630 256, 306 266, 275 276, 281 Black 2010 2015 2020 2025 Percentage Change 55% White 2010 2015 2020 2025 Population Growth 2010– 2025 Hispanic Source -- U. S. Census Data 2000 © Freddie Mac 2011 9

The Echo Boomers § Echo Boomers are the largest generation in U. S. History since the Baby Boomers § There approximately 80 million Echo Boomers between the birth dates 1982 to 1995 § Echo Boomers are also called Millennials and are part of Generation Y § Post housing collapse, Echo Boomers hold the highest unemployment rate of any U. S. demographic Source: http: //echoboombomb. blogspot. com © Freddie Mac 2011 10

Echo Boomers & Housing Do Echo Boomers want homes? "Why would I ever buy a home? You can say that renting is 'throwing money away, ' but you'll never get all the money you paid in maintenance back, so. . . " ~ One of the many skeptical Echo Boomers about homeownership A real estate agent's worst nightmare: someone who thinks homeownership is "throwing money away. " © Freddie Mac 2011 11

You Are the Critical Link § You are the critical link to helping well-qualified homebuyers achieve their homeownership objectives: » Utilize your mortgage finance expertise. » Identify and match available financial resources (government, nonprofit, private sources) with a sustainable mortgage solution. § First-time homebuyer dream realized – and more business for you – if you know where to find those affordability gap solutions. § Freddie Mac Strategic Markets is here to help. © Freddie Mac 2011 12

Building Business Opportunities Sustaining Homeownership © Freddie Mac 2011

Credit. Smart® Teaches Consumers About Credit, Money, and Homeownership Tools: § Comprehensive Instructor Guide includes speaker notes, worksheets, glossary, and more. § User-friendly workshop presentation on CD helps instructors emphasize key points. § Information-packed Consumer Workbook includes worksheets, case studies, and glossary. § Abridged curriculum provides review of all topics. Great resource for housing fairs, festivals, counseling, etc. § The Online Implementation and Promotion Guide gives instructors around-the-clock access to workshop tools, activities, games, etc. § Participants access easily customizable flyers, ads, brochures, and more. © Freddie Mac 2011 Freddie. Mac. com/creditsmart 14

Consumer Education Series Helps You Reach and Teach Tools: § Free set of consumer education brochures. § Nine-part series spans a range of topics from “Dispelling the Myths of Homebuying” to “Getting Back on Track After Foreclosure. ” § Brochures can be used individually or as a set; they can be used independently or as part of an initiative. § Brochures are easily downloadable and customizable with logo and your contact information. © Freddie Mac 2011 15

Outreach Tools: Consumer Fact Sheets and Postcard Mailers § Consumer Fact Sheets in English and Spanish – Add your logo and contact information to these pre-designed, consumerfriendly flyers and distribute them to your area Realtors so they can inform their first-time homebuyer clients. § Postcard mailers – Add your logo and contact information to these customizable postcards to advertise your down payment assistance workshops. Freddie. Mac. com/purchasemarket/downpayment. html? tab=2 © Freddie Mac 2011 16

Community Stabilization § We bring together municipalities, nonprofits, lenders, and other stakeholders in local communities. § Through these coalitions, we support comprehensive initiatives that address each area’s housing challenges and promote stable neighborhoods. § “Take Root” campaigns for use by local coalitions support new homeownership opportunities and reduce the number of vacant properties. § Solutions promote foreclosure avoidance and encourage homeowners to seek assistance so they can stay in their homes and in their neighborhoods, whenever possible. § Options to generate workforce-housing initiatives that bring together employers, lenders, and others, and encourage employees to live where they work. © Freddie Mac 2011 17

What Does This All Mean for You and Your Borrower? § The lending paradigm has shifted. § There are opportunities out there to attract and build business from first-time homebuyers. § Many well-qualified first-time homebuyers need your assistance to overcome fears. § Many first-time homebuyers will need to seek ways to bridge small gaps in down payment and closing costs. © Freddie Mac 2011 19

Resources § Housing Industry Professionals : » www. freddiemac. com/purchasemarket » www. echoboombomb. blogspot. com § Local Market Reports: » www. realtor. org » www. city-data. com » www. mybestsegments. com § Eye on the Economy: » www. nahb. org § Other: » www. takerootdenver. org » www. takerootmilwaukee. org © Freddie Mac 2011 20