The 50+ housing market is beginning to see some positive signs but business remains relatively slow in general and builders continue to hold on by downsizing their product and changing their operations, according to panelists participating in an NAHB webinar on Oct. 20.

Frank McKee, president of The McKee Group, said that sales volume in his market area of Delaware, Pennsylvania and Maryland is about double what it was a year ago but still less than half of its level before the recession.

“It feels to us like we’re in the seventh inning right now,” said McKee. “We think we have another couple years of things being just about where they are now.” He said his company does not foresee much improvement next year and does not expect to be getting back to normal until 2012 and into 2013.

For the time being, McKee has needed to expand into first-time buyer homes because he is finding insufficient activity in age-qualified housing to sustain his business. Overall, he has scaled down home building by 50% or more. “The business feels different,” he said, with much of the competition gone. “These are definitely extremely challenging times,” comparable to the late 1970s.

Nanette Overly, vice president of sales and marketing for Epcon Communities, said the 50+ market is picking up strength in some unexpected places, such as Pittsburgh; Dothan, Ala.; Grand Rapids, Mich.; Chapel Hill, N.C.; and Columbus, Ohio.

However, Overly noted that the industry has gone through a sea change and things currently “feel very different from other recoveries,” when there was considerably more momentum. “This is going to be a longer, slower, more drawn-out recovery from everything we can see and feel,” she said.

Dan O’Malley, vice president of product development for M/I Homes, said the market has been “robust” in Raleigh, N.C., and a couple smaller communities in the vicinity of Tampa, Fla., have been doing surprisingly well. In those spots, the national public builder is seeing almost as much activity in the 50+ market as it is experiencing with first-time buyers.

While the market is still “very tentative,” O’Malley added that “across the board 50+ has been better, a good bright spot for us.” Buyers, for instance, have been relocating to Raleigh, “leaving much larger homes far away,” he said. “They are interested in getting the price down a bit but not negotiating on options” and still looking for higher-end features.

M/I Homes also recognizes “that business looks so much different than in 2004,” he said, and its focus has shifted to research through consumer focus groups and interviewing the sales staff about what they are seeing on the front lines. The company is adapting to smaller plans. Also, like other builders, it is turning to smarter and green technology for a competitive advantage that will diminish as it is increasingly required in building codes.

“The winners are those who are looking forward at innovation and not trying to lead with products and techniques we had before,” said O’Malley.

Finding New Hot Buttons

In the Pacific Northwest, one of the last regions of the country to join the national housing downturn, Brian Gentry, president of Landed Gentry, reported that 50+ is trailing in the housing market. His local area of Burlington, Wash., has received some support from the military, which has been “a consistent employer for the last few years.” The local job base also relies on aerospace technology.

“We are preparing for lower volume and smaller margins and we are trying to build the company around the economic realities,” Gentry said.

Gentry said he has pared down his crew, which had been approaching 50 employees, to a core group that is “a great team.” And his current focus is “refining the product to provide the value consumers are looking for.”

A key consideration for the buyer today is price. The 50+ home buyers of the past “were looking for a major upgrade, everything they always wanted,” he said. Now it is up to the builder to determine what features — such as granite countertops — should be given a new priority in the home. “We are figuring out what the hot buttons are.”

Jim Chapman, president of Jim Chapman Communities in Atlanta, said he closed on 38 and 39 active adult homes in 2008 and 2009, respectively, and this year is headed for 55 to 60 closings. He said he sees stabilization in his local 50+ market as prospective buyers see that they are now able to sell an existing home more easily or at least are able “to stomach the fact that they might buy ours and hold two.”

“We don’t know that volume or profits will go up drastically in the next two years,” Chapman added, “but we will be pleased if the bleeding has stopped and we can hold our own.”

While age-restricted housing has caught on in most of the surrounding counties of Atlanta where it has been built, Chapman said that trend is now moving to age-targeted product within a master-planned community providing multigenerational housing.

If the homes are priced right and in a viable community, 50+ can be robust, he said. “There are pockets of success all around Atlanta” where lot and home prices have been reset so that they compete equally on a square footage basis with resales, including foreclosures.

More Realistic 50+ Buyers

Webinar panelists noted that the psychology of older consumers has been improving despite their uncertainties over the future course of the economy.

“People are now more realistic” than a year ago, when they were hanging on until their home increased in value, said McKee. Today, “they realize that the home they have is not worth what it was. Our job is to convince them that if they’ve been there for 15 or 20 years or more, the home is still worth more than they paid for it and they are getting a great deal in the home they buy.”

McKee said that need is what is motivating 50+ buyers, who, for instance, are looking for a home where they no longer need to negotiate stairs.

Overly said that her customers are no longer preoccupied with finding deep sales price discounts. Their biggest concern is the sale of their existing home. As a result, at least 50% of Epcon’s sales contracts are contingent upon the sale of the existing home.

Among the panelists, contingency agreements as a share of sales contracts ranged from a low of 30% to a high of 75%.

“There is a fear that runs deeper about the future as a whole and what it will look like when this is all over,” Overly said. Her company is seeing buyers who are motivated by need for the most part. “Something in their life or physical health has changed, or they are relocating to be closer to family, children and grandchildren.”

Overly said that older buyers are also downsizing to provide extra protection against an uncertain financial future.

Epcon Communities introduced a new product line in September 2008, and “it has gone a long way in helping us continue on a strong path through a couple of rough years,” she said. The homes include four new attached designs and three detached homes. This is the first time the company has offered detached homes, and “they have been our bread and butter for the past couple of years, clearly outpacing the attached in sales.”

Epcon’s product line continues to evolve, she said, with new features, upgrades and enhancements.

O’Malley said that his company’s homes are 200 to 300 square feet smaller than they were four or five years ago, with the focus on the quality of the space, and a smaller room count and more open feel, and particular attention to master bedroom and kitchen suites.

“A small house does not necessarily mean a small kitchen,” he said, adding that “a great line of sight to outdoor living space feels good. Don’t shirk on important spaces and keep conveniences in mind.”

For information on 50+ resources available from NAHB, e-mail Jeff Jenkins or call him at 800-368-5242 x8292.

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