Affluent Baby Boomers the ‘Sweet Spot’ in 50+ Housing Market
With today’s steep recession undermining many previous assumptions about the active adult housing market, John McKeown, president of Conemarra Partners in New York, N.Y., told attendees at NAHB’s Building for Boomers and Beyond 50+ Housing Symposium in Philadelphia on April 27-29 that there is a fast-emerging “sweet spot” in the market for those who focus on the most affluent members of the baby boom generation.
McKeown proposed a new model for developing active adult housing that shifts toward more urban environments and traditional new town development, is smaller in size and is part of a larger community.
The homes should be priced in the $400,000 to $500,000 range, he suggested, and targeted to “prime movers” with more than $100,000 in annual income and at least $400,000 in net worth — encompassing roughly one-quarter of the nation’s 46 million baby boomers.
Initial efforts should focus on today’s 52- to 62-year-old “zoomers,” whose ranks are 24 million strong, he indicated. “These are the trend setters,” he said, who represent “your key branding opportunity” and who will influence the direction taken by the 22 million 44- to 51-year-olds who constitute the second wave of boomers.
Using research indicating that 69% of the older boomers and 71% of the younger boomers will probably buy another home, high-net-worth boomers are projected to purchase 7.7 million homes through 2020, he said, and of that amount, potential demand for active-adult retirement communities boils down to 1.9 million units.
The “inflection point” when demand is expected to reach a peak, he said, will be 2012 to 2015, when two million boomers a year reach the traditional retirement age of 65. And under current projections, it looks like potential demand for active-adult housing will begin running higher than supply to a significant extent, with an estimated cumulative shortage of 350,000 units by 2020.
Boomers Reinvent Themselves Again
Builders attending the NAHB symposium were still puzzling over the repercussions of the vast amounts of wealth that have been drained out of baby boomer households by declines in retirement funds and home equity, but McKeown indicated that the displacements now occurring in the U.S. economy aren’t an entirely bad thing for more affluent boomers.
Baby boomers “are predisposed to favor lifestyle and amenities over housing affordability,” he said, “and they are about to reinvent themselves again.” The downturn has provided a catalyst that has got them thinking “about what the next stage of their life will be.”
Formerly a top executive for major book publishers, McKeown said he has seen many of his friends in New York in journalism and other businesses losing jobs and now having to decide what to do next.
“Active adult can now become a platform,” he said. “They are more flexible about where they want to live, and they are looking for a more urbanized experience; they want engagement.” Only 11% of baby boomers suffer health problems that restrict them from pursuing an active lifestyle, he said, and they command roughly two-thirds of the nation’s household wealth.
Boomers have seen a $3.3 trillion drop in the value of their real estate over the past 12 months, he said, and their retirement savings have eroded by 20%, or $2 trillion. Recovery traditionally lags in the retirement and second-home markets, he added, and retirement demand has been delayed by the downturn for two to three years. Overbuilt and high-unemployment regions will be the slowest to recover.
But as the market strengthens, the wealthiest boomers will be able to pay cash for a retirement home, he said, simplifying the sales process.
Citing the findings of a January survey of people who moved to active adult housing in the preceding two years, Margaret Wylde, president of ProMatura Group in Oxford, Miss., said that among all incomes the buyers were left with $185,000 in equity after paying off their mortgage, and many were trading up to a more expensive home. Those who bought a new home in the $450,000 to $500,000 range sold their previous home for an average of $606,000, she said.
Moving to Towns and Cities
While about half of baby boomers now live in the suburbs, said McKeown, only 28% view the suburbs as their ideal location for a retirement home. About one-fifth currently live in an urban location, and 35% say that is where they would like their home to be. Sixteen percent live in a small town today, but 21% would like to retire to one; and 12% live in a rural area, but 18% view that as the ideal place to retire.
“They want to get out of an isolated, car-dependent situation,” he said, “and they want to be in a traditional neighborhood or community” with higher density that affords them greater access to shopping and culture and provides walkability.
Wylde noted that in her recent surveys of actual retirees, the majority bought homes in the suburbs and only about 7% moved to an urban area, although the ability to walk to most services is something that has been high on their list of the things they want.
To further support his view that towns and cities will appeal strongly to well-heeled baby boomers, McKeown cited market research by Gregg Logan showing that the village or town center has replaced the clubhouse as the next significant community gathering place for active adults. McKeown also maintained that boomers are even willing to forego an onsite fitness center when one is close to the place they live, although Wylde said her studies show this is one amenity they don’t want to give up.
McKeown predicted that there will be greater geographic diversity in the location of active adult housing and he said that there will be a growing opportunity to sell homes in smaller communities — below 300 units — to affluent baby boomers. To hit this market, McKeown said that builders should also put less emphasis on age restriction and more on age targeting. A full 70% of the boomer market prefer the latter, he said.
Baby boomers will show the greatest preference for single-family homes, but acceptance is widening for condos and townhomes, he said, provided they are served by elevators. Me-centric, first-floor living, energy efficiency, low-maintenance and green-living are all housing characteristics that zoomers prefer, he said. Popular, too, are aging in place and downsizing to homes in the range of 1,500 to 2,000 square feet.
Two Case Studies
Builders interested in finding out more about McKeown’s new model for active adult communities have two recent developments where they can find many of these principles already successfully put into practice.
Award-winning Warwick Grove Village set aside 100 of its 130 acres as conservation areas for the community. The remaining area includes land for a memorial park and the Warwick Library, as well as 215 residences — 154 single-family, 31 townhouses and live-work units and 30 condominiums.
The homes were designed to play up the front porch and reference the vernacular of the architecture of the surrounding area and the town of Warwick, N.Y., a small arts and cultural center in the Hudson Valley. Emphasis on the homes’ energy efficiency, sustainable materials and superior indoor air quality were described in an August 2005 case study by the Partnership for Advancing Technology in Housing (PATH).
Thirty-seven percent of the existing households in the area had incomes higher than $100,000, making it a good match for the relatively wealthy boomers who bought new homes in the village at an average price of $547,000.
In Williamsburg, Va., a dearth of local retail space was a major impetus behind New Town, a hybrid new urban development that will include 2,000 residential units, 500,000 square feet of offices and 800,000 square feet of space for retail and services and a community lifestyle center.
New Town is being developed under a partnership between C. C. Casey Limited Company and the College of William and Mary. Sixty percent of the development’s 300 acres are being set aside as green space, largely to accommodate the endangered small whirled pogonia, an orchid.
Abbey Townhomes, the early phase of the community’s residential component, was originally expected to be filled by the area’s young professionals, McKeown said, but 70% of the homes’ occupants turned out to be empty nesters and new-arrival retirees.
With a population of 85,000, Williamsburg attracts some 3.5 million tourist visits annually, he said, and it is a big draw for retiring military as a place to live. Its 55+ population is projected to grow from 18,000 in 2000 to 33,000 by mid-2016 to 2017. Thirty percent of the households in Williamsburg have incomes exceeding $100,000.
Find Out What the 45+ Housing Market Wants
“Right House, Right Place, Right Time: Community and Lifestyle Preferences of the 45+ Housing Market,” available through BuilderBooks.com, will help determine the right design, home features and amenities to attract boomer home buyers in your market.
Author Margaret A. Wylde guides readers through the latest survey results on this important consumer group and explains what their responses mean for today’s and tomorrow’s home building industry.
To view or purchase this publication online, click here, or call 800-223-2665.