RISMEDIA, February 5, 2010--(MCT)--Baby boomer buyers fueled a big run-up in U.S. home construction and sales in the 1970s and 1980s. Now beleaguered homebuilders say they're hoping aging boomers, who are just entering retirement age, will once again give them robust housing sales.
"We believe this segment of the market is going to lead the housing industry toward recovery as the market turns around," said Sharon Dworkin Bell, a senior staff vice president of the National Association of Home Builders.
The 55-plus home buyer is being targeted by builders all over the country and was a focus of the industry's annual conference recently in Las Vegas. The numbers are certainly there. By 2014, a quarter of the U.S. population--more than 85 million people--will be 55 or older. "The number of people in that age group is increasing, and there is a lot of promise out there," builders' association economist David Crowe said recently.
While more than 60% of 55-plus homeowners say they want to keep their current homes, the rest say they are interested in alternatives. Builders anticipate that buyers in this age group will account for almost 270,000 house purchases by next year. Even in the down market, some 55-plus buyers move and downsize.
"The good news is they usually have a lot of home equity and can get a mortgage," Crowe said. "The bad news is they have to sell a house." That worked out for Hunter and Judy Whitney, who sold their home in Pennsylvania just before the housing market took a downturn. The couple, both in their 60s, moved into a new house in Del Webb's Frisco Lakes development in Frisco, Texas, two years ago. "When we decided to retire and relocate, we decided on the Dallas area," Hunter said. "Two of our three kids and six of our eight grandkids live in the area."
Moving closer to family is one of the top reasons 55-plus buyers move. The Whitney's were wowed by the age-restricted Frisco development. "We looked at a lot of places--the new construction," he said. "This is more than buying a house. You end up with a sense of community." "We are one of the few places in North Texas still selling a ton of homes," said Mike Sander, divisional sales manager with Del Webb owner Pulte Homes. "We get a lot of out-of-state residents--probably 30-40%. Most of the buyers are in their early 60s, Sander said. "About 30-40% of our residents still work in some fashion," he said. "But they want to downsize and get into a nice neighborhood."
Former Plano, Texas, resident Jim Boyd and his wife downsized twice before moving into a 1,505-square-foot Frisco Lakes home in 2006. "It was at the time in our lives we had begun to consider something other than a traditional single-family dwelling," said Boyd. "We liked the quality and variety of the community."
More than 75% of 55-plus buyers say they want a home in the suburbs. But that doesn't mean they want a big house. Surveys show older buyers are more frugal about housing needs. "The 55-plus buyers are not interested in growing their house size," Crowe said. "They are asking for about a 1,900-square-foot home" on average. "They're worried about energy costs." Most older homebuyers surveyed are holding down their cost expectations, industry research shows. "When we asked the consumer, 'What are you willing to pay?' they said $190,000," Crowe said. "And when we asked the builders, 'What are you building for this market?' they said $287,000. "Obviously, there's a real big problem there."
Indeed, builders say they are in a quandary over what kind of housing to produce for 55-plus buyers. "The baby boomers are absolutely unpredictable," said Andy White, a South Carolina developer. "There is no model to say what we ought to build. If a consultant comes to you and says they know what to build, they are lying," said White, whose company has been building developments targeted to older adults since the 1980s.
White said there are many risks for builders who might design the wrong product in the wrong place. "Let's give it a few years and see what happens when the leading edge of the baby boomers reaches 70 years old, which is in 2016," he said.
Builders who aim at older buyers agree that it's a tougher sell with the recessions and housing market crash. "Don't assume at all that everyone over 55 is looking for a luxury purchase or has unlimited funds to spend," said Atlanta builder Jim Chapman. "Their existing homes are worth less," he said. "Some of them are afraid to put their homes on the market." Many of these buyers are coming from nearby. "They still want to go to the same shopping centers and see their friends," Chapman said. "The others are moving from out of the area to be near their children."
Builders who market age-restricted projects to older adults say they've seen an increase in demand for speculative houses. "They are kind of flying off the shelf to people who have sold a home and are ready to do business," said Chris Harrison of Arizona-based Robson Communities. "We are seeing more activity," Harrison said. "Texas for us did not have the big run-up in home pricing seen in other areas of the country."
(c) 2010, The Dallas Morning News.
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