NatEquity’s initial target market is the retired workforce who purchased homes in what were new suburban areas in coastal California in the 1960’s and 1970’s, areas where homes have appreciated substantially over time. These seniors have aged in place largely because of favorable California property tax law – Proposition 13, passed in 1978 – that freezes property tax increases irrespective of increased home value, until a home is sold. These house-rich retirees live on fixed incomes that are not sufficient to qualify for traditional mortgage lending products, and are too house-rich for a HECM reverse mortgage. With a NatEquity Contract, a homeowner with a $1.25M FMV home can expect to receive $2,500 per month in tax-deferred income, which nearly triples the $1,300 average Social Security or defined benefit s/he receives today.
After WWII progressive public policy in California made state college tuition free from 1960 – 1982. The then small number of universities, state colleges and community colleges were unified into a single system that has grown to 147 campuses. Today one eighth of the U.S. population lives in California, the 5th largest economy in the world. NatEquity’s market are senior homeowners living in single family coastal suburban homes that have not been on the market for 35-45 years but will be resold over the next 10-years. During that 10-year period 62,000 contracts will be originated; 18,000 contracts will mature yielding $13.1 billion of cash flow, leaving 44,000 occupant managed contracts on home values of $42 billion. California’s prosperity owes much to its appeal as a destination for worldwide companies pursuing innovation, especially in the technology and health-care industries. Of the 5,440 corporate locations in the state, 17 percent are research and development facilities, according to data compiled by Bloomberg. These companies are almost all in coastal California’s ten diverse markets. That ratio easily beats the 10 percent for the U.S., China’s 13 percent, Japan’s 11 percent and Germany’s 16 percent .
NatEquity’s demographic are educated, independent thinkers who are careful and protective of their built-up home equity. They buy financial products because they have a need. Within specific collateral protection guidelines, NatEquity allows homeowners to determine their cash advance needs. Advances are tied to enhancing and protecting collateral. These uses may include modernizing a kitchen and baths, paying off a high cash outflow HELOC that has reset or replacing a roof.
Coastal counties in California are the initial geographic market focus, for good reason. Of the 830 top-tier cities in America with average home values over $600,000, over one-third (i.e., 281 cities) are in coastal California. These markets have enjoyed almost 6% annual compounded home appreciation for more than 25 years. This target market now and in the next five years represents 2.1 million households, age 75 or older, with well over $1.4 trillion of home value, much of it debt free. Many of these senior homeowners are aging in place because of frozen property tax payments under California’s Proposition 13 dating back to 1978. Follow-on target states for other already designed products total an additional 3 million households in FL, NY, NJ, IL, HI, MA, VA, MD, TX, with key cities and counties in these states.