Housing Trends Presented by: Matt Mullins February 20, 2020 - PowerPoint PPT Presentation

Housing Trends Presented by: Matt Mullins February 20, 2020

Maxfield Research & Consulting We are a full-service real estate advisory OVERVIEW company providing strategic value to our private and public sector clients’ real ✓ 35+ Years Experience estate activities. ✓ Diverse Client Base ✓ Multi-sector Capable ✓ Market Driven Strategies ✓ Recommending Highest & Best Uses ✓ Provide Actionable Plans

Demographic Update Baby Boomers & For Sale Market Aging In Place Twin Cities Outlook

Big Picture: MN is Aging; Especially Rural MN 2019 ▪ 5.7 million ▪ Millennials overtaking Boomers ▪ 16% pop. 65+ ▪ Metro: 48% of MN 65+ 2040 ▪ 6.1 million ▪ 21% pop. 65+ ▪ Metro: 75% of MN 65+

Outstate MN Aging Faster than Metro Area…For Now Metro vs. Non-Metro Population Distribution: 2019 2019 Age 100% 7 - 22 90% 22.4% 22.1% Gen Z 80% 70% 23 - 38 Gen Y 21.8% 25.0% 60% 50% Gen X 20.6% 39 - 54 22.4% 40% 30% 55 - 73 25.7% Boomers 20% 23.0% 10% 73+ Silent Gen. 9.8% 7.1% 0% Metro Area Non-Metro MN

Millennials Have Recently Overtaken Boomers Age Distribution 2019: Twin Cities vs. Remainder of MN 250,000 Non-Metro MN 200,000 Twin Cities Metro 150,000 100,000 50,000 0 0-4 5-9 10-14 15-19 20-24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+ Source: ESRI, Inc .

! Twin Cities 65+ Population +98% by 2040! Metro Area 65+ Population 1,200,000 30.0% 1,000,000 25.0% 800,000 20.0% Pctd. 65+ 65+ Pop 600,000 15.0% 400,000 10.0% 200,000 5.0% 0 0.0% 1980 1990 2000 2010 2015 2020 2025 2030 2040 Year 492,000+ New Seniors (2020 to 2040)

Metro Area Seniors Pass Non-Metro in 2020 65+ Population: Metro vs. Non-Metro 1,000,000 Non-Metro Twin Cities 900,000 800,000 700,000 65+ Population 600,000 500,000 400,000 300,000 200,000 100,000 0 1980 1990 2000 2010 2015 2020 2025 2030 2040 Year

18% Growth Rate Projected Through 2040 Historic & Projected Population: Brooklyn Park 120,000 100,000 80,000 60,000 40,000 20,000 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

Strong growth in 65+ population in Brooklyn Park Projected Population Growth by Age Group: Brooklyn Park 2019 - 2024 75+ 28.9% 65 to 74 15.1% 55 to 64 -5.6% Age Group 45 to 54 -0.4% 35 to 44 12.9% 25 to 34 1.7% 20 to 24 -0.5% Under 20 3.1% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Incomes Peak for Millennials/Gen X Growth & Income Trends by Age of Householder: Brooklyn Park 7,000 $100,000 $90,916 $90,037 $90,000 $80,923 6,000 $80,000 $66,867 5,000 $70,000 $58,915 2019 Med. Income No. of Households $60,000 4,000 $50,000 $41,109 $36,210 3,000 $40,000 $30,000 2,000 $20,000 1,000 $10,000 0 $0 Under 25 25-34 35-44 45-54 55-64 65 -74 75+ Age of Householder 2019 2024 2019 Median Income

Homeownership Rates Peak for Boomers H/O Rate by Age: Brooklyn Park, 2010 & 2017 100.0% 2010 2017 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 15 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65 - 74 75 - 84 85 + Age Group

Baby Boomers & For Sale Market Aging In Place Twin Cities Outlook Demographic Update

Older Adult Housing Continuum

Age Targeted vs. Age-Restricted Age-Targeted Age-Restricted Age Restriction None - but caters to older adults Typically 55+ Price Points More expensive, larger homes More price sensitive Age of Buyers Early empty nesters Propensity increases with age Lifestyle More independence More Social interaction Visitor Policy More flexibility for all ages More restrictive visitor policies

Baby Boomers (56-74) - 75 Million Strong! ➢ 10,000 baby boomers turn 65 every day in the US until 2030 ➢ Healthier, savvier than previous generations ➢ Highest spending power (70% of disposable income in US) | 71% of all net worth in the U.S. ➢ 50%+ of baby boomers support their adult children ➢ 65% of boomers plan to work past age 65 ➢ 45% of boomers have no retirement savings ➢ Boomers and seniors carrying more debt: 40% of 65+ population carry a mortgage ➢ 45% of boomers purchased their 1 st home between 25-34 (37% Millennials today) ➢ Boomers 80% Home ownership rate | 20% of the new construction market ➢ Accumulated substantial home equity | $6.3 Trillion!

Boomers & Seniors: 39% of All Home Purchases Boomers 21% of Population | 32% of Sales Percent of Home Sales: 2019 40% 37% 35% 32% 30% 24% 25% 20% 15% 10% 7% 5% 0% Millennials Gen X Boomers Silent Generation Source: NAR Home Buyer & Seller

3/4’s of Older Adults Still Buying SF Home Type of Home Purchased by Age: 2019 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 54 to 63 64 to 72 73 to 93 Detached SF Home TH/Rowhouse Apt./Condo 5+ units Duplex/Apt./Condo 2-4 units Other Source: NAR Home Buyer & Seller

Older Adults/Seniors Still Desire Square Footage Older Adult Buyers Home Size Preference 35% 54 to 63 64 to 72 73 to 93 30% 25% 20% 15% 10% 5% 0% <1,000 sq. ft. 1,001 to 1,500 1,501 to 2,000 2,001 to 2,500 2,501 to 3,000 3,001 to 3,500 sq. ft. sq. ft. sq. ft. sq. ft. sq. ft. Source: NAR Home Buyer & Seller

Older Adults Moving Further Away Distance between Home Purchased & Previous Residence 35 30 30 30 25 Median Miles 20 20 15 15 11 10 10 10 5 0 All Buyers 28 & younger 29 to 38 39 to 53 54 to 63 64 to 72 73 to 93 Age Source: NAR Home Buyer & Seller

Market for One-Level Living Product Single-level Living Products in Demand from Boomers: ✓ Rambler single-family homes ✓ Detached Townhomes & Twinhomes, villas, etc. ✓ Condominiums ✓ Single-level and walk-out lower level townhomes ✓ Cooperatives ✓ Active Adult Rentals ✓ General-Occupancy Rentals ✓ Retirement Communities

What about Condos? ✓ Condo market soft since recession ✓ MN State Statute 515 (“MCIOA”) modified in 2017 to ease construction defects language…but still difficult ✓ Most development in DT Mpls. or wealthier suburbs (Wayzata, Edina, Minnetonka, etc.) ✓ Strong demand; but developers focusing on apartment sector due to risk ✓ Most new product $500k+ | $400+ PSF

Age Restricted For-Sale Communities Bellwether Del Webb (Pulte Homes) ▪ Age-restricted Villa Development ▪ Build- out 400 Homes…potential for future phases ▪ Base Pricing: $320k to $450k; w/upgrades up to $600k ▪ Avg. $227/PSF ▪ Floor Plans from 1,222-1,953 sq. ft. ▪ Strong Absorption ▪ Amenities: clubhouse, indoor and outdoor pool, fitness center, bocce ball, pickle ball, multi-purpose rooms, community room, commercial kitchen, walking paths, social clubs, lifestyle director

Margaritaville

Desired Home Features for Older Adult Home Buyers ✓ Proximity to family and grandkids ✓ Desire smaller, lower-maintenance....yet higher-quality than their current home ✓ Prefer single-family detached product; but many will consider attached products ✓ 90% consider a 1-story; but 1/3 rd would still consider a two-story ✓ Prefer master bedroom and laundry room on main floor ✓ No-Step entry preferred, wider doorways & hallways, lever-style handles ✓ Abundant storage | Guest bedroom/hobby space ✓ Adequate lighting with sensors or timers, home automation, security, smart technology

Aging In Place Twin Cities Outlook Demographic Update Baby Boomers & For Sale Market

Aging in Place ➢ Only 3.5% of all U.S. homes are Considered Accessible ➢ AARP Home Preference Study (2018): • 76% of 50+ would prefer to remain in their current residence • 77% would like to stay in their community as long as possible • Proximity to health care, grocery stores, and transportation very important • 31% would consider building an ADU (i.e. granny flat) • About one-third of older adult homeowners anticipate home improvement modifications needed to stay in their home

Requested Modifications o Installing grab bars o Lever door handles, rocker light switches o Walk-in-showers/curb less o Varied height cabinets and shower countertops o Slip-free flooring o Smart home technology o Widened doorways/pocket o Touchless faucets doors o Chair lift o Eliminating steps/ramp o Motion activated lighting construction o Lower wall switches and raised o Raised toilets electrical outlets o Adjustable shower heads

Boomers Creating Housing Gridlock? ➢ 55+ owns 53% of all homes in the U.S. ➢ Longer tenure in home: ▪ 70% 10+ years ▪ 47% 20+ years ➢ Senior Turn Over Rate is Slower than Previous Generations ➢ Lack of Inventory for Downsizing ➢ Affordability Concerns ➢ “Wait and See” if Housing Prices Continue to Rise

Lack of For-Sale Product Driving Apartment Sector General Occupancy Market Rate Apartment Units Online Twin Cities Metro Area: 1990 to 2020 10,000 1990s - 7,815 units 9,000 2000s - 13,071 units 9,132 2010s - 32,168 units 8,000 7,000 Number of Units 6,000 5,674 5,521 5,000 4,820 4,000 3,818 3,803 3,782 3,000 2,000 2,445 2,042 1,818 1,823 1,727 1,691 1,696 1,485 1,000 1,357 1,311 262 102 1,133 1,061 1,021 393 738 304 694 591 568 516 0 478 380 1990 91 92 93 94 1995 96 97 98 99 00 01 02 03 04 05 06 07 08 09 2010 11 12 13 14 15 16 17 18 19 20