in the 55+ segment are becoming more practical when searching for a new home in the wake of the recession, with design considerations becoming less important. Instead, according to a recent study, financial concerns are becoming more prominent among “mature movers.”
While design, amenities and appearance of both the residence and the community remain important, those considerations are diminishing in the post-recession era.
The evolving preferences of the growing 55+ demographic were revealed in a joint study by the 50+ Housing Council of the National Association of Home Builders (NAHB) and the MetLife Mature Market Institute.
In contrast to previous studies, fewer 55+ buyers are depending on home sale proceeds to finance a new purchase.
The study, “Housing Trends Update for the 55+ Market,” explores housing data from the Census Bureau’s 2009 American Housing Survey (AHS). Researchers focused on households living in active adult communities, either age-qualified active adult communities where at least one resident must be age 55+, other non-age-qualified 55+ owner-occupied communities (not explicitly restricted to 55+ households but nevertheless occupied primarily by people age 55+), or age-restricted rental communities.
In 2009, only 55 percent of new age-qualified active adult home buyers reported their down payment came from a previous home sale, significantly down from 100 percent of respondents in 2005 and 92 percent in 2007. In 2005 and 2007, no active adult community buyers reported having to tap cash or savings for a down payment. That changed significantly in 2009 when 45 percent of the average buyer’s down payment came from cash or savings.
“By the year 2020, as Baby Boomers move into this age bracket, almost 45 percent of all U.S. households will include someone at least 55 years old,” said David Crowe, NAHB’s chief economist. That translates to a dramatic rise in the number of households seeking housing better suited to changing, he noted.
Relatively modest production of such housing is on the horizon, according to NAHB data. Abut 54,000 housing starts are projected in 55+ communities this year. That reflects a 30 percent jump from estimated 2010 levels. A more robust 79,000 housing starts in 55+ communities are anticipated in 2012.
Prices remain lower than 2005, when prices peaked. The analysis showed a big difference between buyers in age-qualified active adult communities and other 55+ community buyers. Average prices for 55+ homes dropped in 2007, but partially rebounded in 2009. Prices for age-qualified communities more than bounced back: they set a record with an average price of $319,000. Researchers found buyers in this group were more affluent, with average annual incomes of more than $80,000. More than one-fourth (27 percent) reported earning at least $100,000, a jump from fewer than 5 percent of such buyers in 2001.
“Most 55+ consumers—those who chose to move and those who stay in their homes—report they are happy with their homes and communities,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. She said those who moved to an age-qualified community reported the greatest satisfaction, rating their homes and communities at nine on a 10-point scale.
The desire to be near family and friends is the mature mover’s overwhelming motivation, the report noted. Buyers who fall into the 55+ age range that are moving into rental homes, both multi-family and single-family, cited a desire for less expensive housing as second in importance to living near friends and family.
Those who are able to buy are getting much more for less. In 2009, more than half the 55+ buyers said they were moving into better homes, but fewer than half reported their new homes cost more than the old ones.
“Proximity to work” was more important than in the past for those relocating to age-qualified, active adult communities. In 2009, twelve percent underscored the trend toward delayed retirement in this age group, up from 2 percent in 2001. There was also a reported increase in the share of 55+ single-family homeowners who say they work at home, a trend the researchers suggested is noteworthy for home designers.
A small, but growing share of older households is taking advantage of the ability to convert some of their home equity into a reverse mortgage or home equity conversion mortgage. They tend to be older, single-person households with lower household income and longer housing tenure. Those with reverse or home equity conversion mortgages represented more than 241,000 households in 2009, a 54 percent increase since 2007.
The report reflects trends in the American Housing Survey between 2001 and 2009. Characteristics are tabulated by the age of the occupants and structure type, as well as by community type.
“Housing Trends Update for the 55+ Market” can be downloaded from www.MatureMarketInstitute.com or from www.nahb.org/55PlusResearch.