‘Downsizing’ a Dirty Word for Aging Baby Boomers
Much to their detriment, home builders who are waiting for the first wave of the 77 million baby boomers born between 1946 and 1964 to start retiring may be missing out on a growing market force in the housing industry, according to speakers at NAHB’s Building for Boomers and Beyond Seniors Housing Symposium, which was held May 16-18 in Chantilly, Va.
The 50+ population is looking for new housing, but not within the context of retirement traditionally associated with this age group, symposium panelists said. And although it is difficult to make generalizations about this independent-minded generation, they said, by and large aging boomers do not see themselves trading down but instead expect to be moving up to the best housing they have ever had, even if it means taking out a hefty mortgage to finance their lofty housing aspirations.
“It’s onward and upward all the time” for this oversized and affluent demographic group, said Jack Haynes, executive vice president of the National Builder Division at Countrywide Home Loans.
“Probably the most striking thing we’ve found over the last few years is that many home buyers over 50 are not simply cashing out the equity they’ve built in their family home, nor are they downsizing into a less expensive house or apartment,” Haynes said.
A study conducted by Countrywide in conjunction with NAHB two years ago found that one-fourth of home buyers aged 50 and older were paying more for the home of their golden years than for their previous home, and their new homes were likely to feature next-generation amenities like structured wiring and exterior maintenance services, Haynes said. That trend now appears to be intensifying.
Haynes observed that boomers want a one-story home, which will cost more to build because it takes up more land, an increasingly precious and scarce commodity in many of the urban areas where boomers currently live and expect to stay even as they trade up to new housing. Builders will be able to make up for those higher construction costs, he said, by providing the “extravagant” options and upgrades that boomers demand and will be more than willing to finance.
On the financing side, where Countrywide has expanded into a wide range of mortgage products geared to providing flexibility and enabling buyers to maximize their purchasing power, Haynes said that boomers “aren’t going to be looking to pay cash for their final house.” Even though they will be plunking down large downpayments because of the impressive amounts of equity they have accumulated in their homes in the boom market of the past few years, they will also be trying to retain as much cash as possible to pay for health costs, education or for whatever the reason.
Haynes said that it is surprising for purchasers to be so highly leveraged at this point in their lives, but the boomer generation “is not intimidated by finance.”
Requesting ‘Strange’ Things
Chuck Covell, president of Bozzuto Homes, based in Greenbelt, Md., said that his company discovered the boomers’ propensity for more rather than less quite by accident, when prospective 50+ customers wanted to combine two of the average 1,000-square-foot units available in the first of the four-story elevator buildings that Bozzuto added to its product line in the late 1980s.
Covell said that his empty-nester customers started to request “strange things,” like putting a shower in the master bath and getting rid of the tub.
In preparation for the second building pitched to older buyers, Covell said that he realized that Bozzuto had missed the mark on its standard features. “You have to be a good listener,” he said, “and you have to focus on things you never heard before.”
Unit size remains a critically important factor in the empty-nester housing Bozzuto is building today, said Covell. At a maximum size of 3,600 square feet and a per-square-foot selling price of $500, the condo side of the builder’s Spinnaker Bay project on Baltimore’s Inner Harbor puts the cost of enjoying an urban lifestyle as high as the $1.5-$2 million range, he said, although prices start in the $600s, and the side of the building facing away from the waterfront is rental.
Bozzuto is building age-targeted housing and age-restricted, but baby boomers are not at the age where they see the restricted product as appropriate. There is roughly a seven year difference in the ages of those who are buying the two products, Covell said.
In a market where higher density is being driven by land shortages, moving older buyers to duplexes and condos is not an easy sell because most still want to move to a single-family home. And most of the 50+ group don’t want to move now, he said, because “they haven’t gotten to the point where the home is a burden they can’t handle.”
Concierge services, valet services, dog walkers, elegant finishes and upscale amenities can help create the lifestyle that will draw reluctant boomers, he said. Looking at the homes they will be moving from “provides indications of price points and products they will buy,” he said.
Not Thinking of Retirement
Sharing information that they have gleaned from a three-year focus-group study of baby boomers in the 47-58 age group who are looking to move sometime in the next three years, William Feinberg, president of Feinberg and Associates, an architect and designer based in Vorhees, N.J., and Myril Axelrod, president of Marketing Directions Associates, indicated that the concept of the active-adult community has little appeal but there are approaches that will successfully tap into this market. There are about 30 million Americans who today constitute the leading edge of the baby boom.
“Those on the leading edge aren’t ready to move and they aren’t thinking of retirement,” said Feinberg. “They are looking at real estate as an investment and because they need to move to a new home.”
The idea of retiring and “doing nothing is not for them,” Axelrod said of the boomers, and even if they wanted to retire, only 20% of them are in the financial position to be able to do so, according to AARP. “They’re a Peter Pan generation,” she said. “They feel they’re going to be young forever,” and they are especially averse to moving into a community where they will have to adhere to rules and regulations.
Life Without Chores
Attached housing is problematic for this group, Axelrod said, because they started out their adult lives in apartments and townhouses and have since moved on to “real houses.” The biggest hook for making the difficult sell, she said, is to provide “life-without-chores” services such as a concierge, dry cleaning, window washing and housekeeping. “They know they can’t get this with single-family” and they want to free up their time at a point when they are changing the way they live.
“Their age group has had a tremendously pressured life and they are now entitled to having things easy,” Axelrod said.
Leading-edge boomers are not interested in moving to a smaller home, she said, but they do want to get rid of any parts of the house that are not being used so that they can enjoy bigger spaces in the rooms they use the most. Lots of open space, fewer walls and plenty of flow are selling points.
Buyers from the leading-edge of the boomer generation are also looking for kitchens with lots of light that double as the social center of the home for informal entertaining. “The men are as interested as the women in the kitchen,” Axelrod added. “Kitchens with two work areas give them a chance to get into the act.”
Flex space providing buyers with the opportunity to individualize their home is also a plus, and boomers will spend freely for customized design and amenity features. The only concession that these buyers are willing to make to getting older, she said, is putting all primary living on one floor, and it’s a requirement.
And boomers want to stay close to their home base. “They rejected what their parents did so much,” she said, “but now they are thinking back to what they miss in the hometowns they were running away from. It used to be so much fun when they could go downtown and meet everybody.” This translates into strong demand for social centers, rather than club houses, where they can get together and meet their friends and neighbors before they go out to dinner.
Residents who are working in their homes will be looking for business centers where they can hold business meetings.
Living on Main Street
“We did not hear the word downsizing in any of our focus groups,” said Feinberg. “They were looking for a new home as something to treat themselves with.”
By and large, Feinberg said that the research identified interest in Main Street and village communities located on the fringes of areas in which boomers already live. Architecture must be distinct and diverse. Also viable options for boomers are enclave communities of 25-50 homes that are up-scale and exclusive.
Boomers aren’t interested in sports clubs, but they are enthusiastic about physical outdoor activities such as hiking, biking or fishing built around a natural feature, he said.
Although boomers are opposed to segregating themselves from other age groups in the community, builders are going to have to wait and see if they really want younger generations living next door or two doors away. “How are they going to feel when they have screaming babies and out-of-control teenagers as their next door neighbors?” Axelrod asked. “This is up for grabs.”
The focus group research also identified people who don’t want to live side by side with younger families, but “want to be in the same community where we are all on the same page and have something to share,” she said.