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By virtue of the increasingly large number of baby boomers who are moving into their retirement years, the active adult housing market is poised for a recovery that will be a bit faster than the upturn in the housing market overall, according to economists participating in an April 13 webinar presenting a forecast for this segment of the industry.
However, the recovery in 55+ housing won’t be “a lot faster” than improvements in housing in general because “people are looking to sell their existing home, and to the extent they have trouble, it will slow down the recovery in this part of the market,” said Paul Emrath, NAHB’s vice president of survey and housing policy research.
“Why 55+ buyer households have been holding back is that they think they can’t sell their existing home at a favorable price,” Emrath said.
The market is at a stage now, he said, where housing prices largely “have gotten back to what should be normal, but over the short term we have to worry about the psychology. Until that gets washed out, it will have a depressing effect on new home construction sales and remodeling.”
But Peter Dennehy, vice president, John Burns Real Estate Consulting, said that the nation’s slowly improving economy — with brighter prospects for jobs, stock market gains, growth in personal income, higher household savings and lower consumer debt — is putting these discretionary customers back on their feet.
“Look for improvements in housing generally in the next 12 to 24 months,” said Dennehy. “Active adult housing will be participating in this recovery.”
Many buyers in the 55+ market have “gotten used to the reality” of today’s lower home prices, Dennehy said.
“If they can’t sell for what they thought they would get, they are benefitting from a lower priced marketplace when buying,” he said.
Mortgage rates are expected to remain favorable through 2013, Dennehy added, and with very little being built, the supply of new homes is close to being depleted — more encouraging news for those trying to sell a home.
The 55+ sector has not been immune to the credit crunch that has curtailed lending to builders and made it more difficult to qualify for a mortgage to purchase a home.
However, 55+ buyers are in better shape to withstand the squeeze on mortgages, webinar panelists said.
While buyers of homes in 55+ communities often do need to sell their existing homes to move on to their next purchase, a significantly greater share of these buyers than in the recent past have demonstrated that they don’t need to sell one home first to proceed to the closing table, said Emrath.
Data from the 2009 American Housing Survey from the Census Bureau and the Department of Housing and Urban Development show that 54.6% of home buyers in age-qualified active adult communities used the sale of a previous home for their downpayment, leaving 45.4% who were able to pay their upfront costs from savings or cash on hand.
As recently as 2007, 92.1% of the buyers in those communities derived their downpayments from the proceeds of selling their home.
Bucking the Down Market Trend
From the builder’s perspective, the 55+ market is well worth pursuing, according to Dennehy, and in many markets adult projects “have actually bucked the market trend. Active adult projects are some of the best-performing in the nation, have held their value and have outsold” conventional homes, he said.
The best-performing master-planned active adult project in the nation last year was located in Orlando and rang up more than 2,200 sales, he said.
Citing research from Hanley Wood, Dennehy said that in Riverside County, Calif., active adult communities outsold homes in conventional developments by 2.4 times last year, at an average price per square foot of more than $160, compared to about $130 for conventional.
Looking for opportunities around the country, he said that:
- Active adult housing will lead the market recovery in Las Vegas.
- Phoenix is shaping up as a refuge for Californians.
- Austin enjoys a prime location, with 2.6 million of the 9.8 million people who are within a three hour drive of the city in the 50+ category.
- Orlando is a stand-out Sunbelt location in Florida.
- The Carolinas are the “gold coast” for active adults in the East.
- Lifestyle is a driver for “big city” Seattle; “hidden gem” Portland, Ore.; and “rural but evolving” Boise, Idaho.
- Smaller markets showing promise in the Pacific Northwest include Tacoma and Spokane, Wash.; and Salem and Eugene, Ore.
Based on a national consumer survey conducted by his company last fall, Dennehy suggested that new home shoppers aren’t finding what they are looking for in the current market.
Great rooms, more covered outdoor space, attention to design and energy-efficient features are all on the wish list, he said, and so are bigger homes.
“Home sizes are shrinking,” he said, “but most want to buy a larger home, or at least stay the same size, in their next purchase.”
Buyers in the 55+ market will be looking for small communities and more infill where they can enjoy the amenities of the surrounding area, he said, and they will want to be close to their families and friends.
“There are lots of willing home buyers out there,” said Dennehy. “You have to figure out what they want and what they are looking for and what will motivate them to move.”
Buyers in the 55+ age group should constitute a sizable force in the housing market that emerges in the next few years, the panelists said.
According to Dennehy, 55% of baby boomers say they will move when they retire.
And NAHB is forecasting that 55+ households will grow from 40.2% of all U.S. households this year to a 44.8% share in 2019, Emrath said.
Looking at short-term projections, NAHB is forecasting that 36,000 single-family starts this year will be in age-qualified or other 55+ communities, and another 113,000 single-family starts this year will be attributable to 55+ households in the general housing marktplace.
The 55+ market will additionally drive about 35,000 multifamily starts in 2011.
For more information on 50+ resources available from NAHB, email Erin Grant, or call her at 800-368-5247 x8557.
“Right House, Right Place, Right Time: Community and Lifestyle Preferences of the 45+ Housing Market,” available through NAHB BuilderBooks, 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.