Hunkering Down for Tough Economic Times
As virtually every segment of the nation's housing industry, 55+ housing has seen demand significantly dampened by the current housinig downturn. 55+ households have been stymied in their ability to sell their existing homes by a lack of available buyers. There has also been reluctance to sell at the rock-bottom prices it can take to be competitive in the current marketplace. A sharp decline in 401(k) and other investment retirement plans last fall was further discouraging news for these prospective home buyers.
February's surveying found a distinct minority of 55+ households identifying themselves as potential home buyers, but Crowe pointed out that these translate into substantial numbers because of the large size of the post-World War II baby boom that will be fueling increases in the size of this population in the years ahead.
Sixty-three percent of the 55+ consumers who were surveyed by NAHB and MetLife said they were planning to age in place in their current home and 26% weren't sure, leaving roughly 12% who said that they would be purchasing another home. Of those who indicated that they would be eventually moving, 8% said they planned to buy a home within three years and another 4% said they would start looking after three years.
About 56% of 55+ households currently live in communities where there is no predominant age group, the consumer survey found. Only 9% of the respondents live in an active adult, age-restricted community; 7% live in a community where there are no age restrictions but most buyers are 55+; and 28% reside in an independent living community.
The data indicated, however, that many in the 55+ age group would consider other options. Twenty-two percent of the respondents said they would consider moving to an age-restricted active adult community and 27% would consider a community where 55+ households predominate with no age restrictions. Another 28% would consider moving to an independent living community.
Survey responses found that there is some discrepancy between the cost of the 55+ product being built and the amount that the market will bear. Consumers said they were willing to pay just under a median $190,000 for their home, but builders reported they were producing homes with a median value of $287,000.
Unsurprisingly, not too many 55+ buyers appear to be in the mood for climbing further up the housing ladder. Forty-six percent of the builders surveyed said their customers were purchasing homes at the same value as those they were selling and 31% said they were buying less expensive homes than they formerly owned.
Preferences for financing were similarly conservative in this group. A 30-year fixed-rate mortgage was preferred by 41% and a 15-year fixed was the choice of 38%. Five percent indicated interest in a reverse mortgage.
However, 55+ home buyers are largely prepared to plow some of their wealth into their home purchase to scale down mortgage debt. Twenty-three percent said they would pay for their home in cash and 60% responded that they would make a high downpayment of 30% or more. Sixty-nine percent identified equity from their current home as the source of their downpayment; 28% said it would be drawn from investments.
Forty-one percent of the builders reported using price discounts last year as incentives to promote 55+ housing sales, 35% offered upgrade packages and 22% kicked in a free option, such as a third bedroom. However, 41% offered no special inducements at all.
Leading the Way on Universal Design
Survey findings indicated that builders will have to lead the way on universal design and green building, according to John Migliaccio, director of research for the MetLife Mature Market Institute, although 55+ households can be expected to become progressively more familiar with these concepts.
"Builders do get the message about the importance of universal design," Migliaccio told the webinar audience, and they are already providing the basic universal amenities, including: lever-handle doorknobs (80%), wider doorways (77%), wider hallways (72%) and separate showers and baths (65%).
But consumers clearly underestimate the value of these features, he said, rating them quite low compared to builders. Only 30% said they would be eager to get their hands on a lever-handle doorknob and less than half saw much purpose in wider doorways (48%), wider hallways (45%) and a separate shower and bath (48%).
The universal design features rated by consumers as somewhat to very important included: bigger bathrooms (64%), a full bath on the entry level (61%), extra lighting (56%) and non-slip floors (52%). Rated low were: lower electrical switches (15%), seating in the bathroom (22%), a shower without doors (23%) and higher electrical outlets (25%).
Migliaccio said that builders should keep in mind that most consumers are typically not living in a home or community designed for 55+ residents and may not have had the opportunity to experience universal design features. As they become increasingly more familiar with them, universal design features will eventually become as popular as cell phones and computers, he predicted.
Going Green
On the green home building front, many environmental features curried favor with the 55+ consumers surveyed, he said, including: energy-efficient appliances (79%), solar heating (63%), a water filtering system (58%) and allergen- and chemical-free building materials (42%).
But 55+ respondents revealed a disconnect in their willingness to pay for green amenities. About three-fourths said they would be willing to pay for high-efficiency heating, ventilation and air conditioning equipment, low E-glass, energy-efficient appliances and sealed joints. But far fewer were interested in paying for the preservation of open space (46%), low VOC paints (37%) and alternative building materials such as oriented strand board and engineered wood (37%).
Ninety-four percent of the builders reported that their buyers want more energy-efficient new homes; 55% said buyers specifically want Energy-Star rated homes.
The research in "55+ Housing: Builders, Buyers and Beyond" is the second part of a series. Released in April, the first-part, "Housing for the 55+ Market: Trends and Insights on Boomers and Beyond," includes an in-depth profile of the 55+ market based on figures from the U.S. Census Bureau's American Housing Survey from 2001 through 2007.
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