It’s a niche market that’s getting the attention of investors and developers. The National Association of Home Builders says there’s strong demand in the 55+ housing sector, but when it comes to satisfying that demand, there’s no “one-size-fits-all” solution.
The association says that builder confidence in the single-family 55+ housing market rose 11 points in the last quarter, to a reading of 66. It’s also the 13th consecutive quarter that this Housing Market Index, or HMI, has been above 50. So, the housing market for active adults has been showing strength for at least three years, and it’s continuing. The reading is based on a median of 50, so anything above that indicates that more builders feel conditions are good.
The HMI is comprised of three components based on a survey of builder sentiment. Builders are asked what they feel about current sales, prospective buyer traffic, and the expected strength of sales over the next six months. The association says that all three of those factors were “up” for single-family sales within this group. The figure for expected sales over the next six months hit an index high of 80.
Multi-family condominium sales are also strong among active adults. That HMI rose 7 points to 53 in the last quarter. All three components posted gains, but they weren’t as strong overall as builder sentiment for single-family 55+ homes.
There are four HMIs tracking the multi-family rentals side of this market. Two track current and expected future demand, while the other two track current and expected future production. They all posted gains in the second quarter.
NAHB Chief Economist Robert Dietz says the strong numbers are the result of favorable market conditions. Among them, record highs for the stock market and rising home prices.
Housing Preferences Among Older Buyers
The demand is there, but developers also need to know “how” these active adults want to live, and where. Many choose to downsize or move to a new location once the children are gone, but with people living longer, healthier lives, the options are not limited to age-restricted retirement communities, although they are becoming a popular choice.
Construction Dive writes that, according to NAHB, one in three choose to live in a community of their peers. Paul Emrath of NAHB was quoted as saying that there used to be a stigma associated with a housing development designed specifically for older adults. He says, “We’re past that now. People look at active adult communities today as nice places to live.”
The Dive article says these communities offer residents an easy path to friendship. It cites “Where to Retire” editor Annette Fuller as saying that people pull up their roots and leave friends behind, but these age-restricted communities are providing a way to “build back a support system.”
According to a readership survey by “Where to Retire”, 58% said they prefer a master planned community. This survey shows even more strength for MPCs, but the people surveyed had a wide variety of preferences for the “type” of MPC. Some want traditional neighborhoods, others want condos, and some prefer MPCs that are not “age restricted”.
Developers Need to Cater to Many Desires, and Price Points
Price matters. Many communities designed for the older crowd have lower-priced homes. The Dive writes that a 2017 list of the best MPCs have homes ranging from $80,000 to as much as $3 million. While the buy-in can be less expensive, residents pay for the amenities they so dearly love, with HOA fees.
Size also matters. The Dive writes that many buyers are downsizing to homes with two or three bedrooms. They don’t need multiple bedrooms for all the kids, but they want at least one extra bedroom for guests. In this case, smaller is typically better.
Other features popular among older adults, as with most buyers today, are energy-efficient homes, walking trails, parks, shopping, and a low crime rate. Many older adults also want thomes with just “one” floor and those that don’t require a lot of maintenance. Being near a hospital is also a big selling point for these buyers.
Most Profitable Housing Types for Older Adults
The common denominator for a large majority of retiring baby boomers, is a desire for “community”. The National Real Estate Investor says the big winner in the coming years will be active adult communities.
The blog cites Lee Everett and his colleagues at CoStar Portfolio Strategy as being very bullish on 55+ developments. Everett says baby boomers are less interested in traditional housing and are looking to move into a more social environment, and he expects to see explosive growth for this kind of lifestyle in the near future.
Amenities for Greystar’s Overture communities in Texas include a long list of features for social activities. Among those amenities, are fitness centers, yoga studios, coffee bars and bistros, pools with jacuzzis, billiard rooms, hair and nail salons, outdoor kitchen and grill stations, and great rooms for large events and gatherings. They even offer cooking demonstrations, wine pairing events, and other educational workshops.
Joanne Broadway at Zillow, who works with Greystar, says that individuals in this group have a “desire to connect and socialize.” She says that’s “driving their decision for a new apartment home, which ultimately is based on choice versus needs.”
The winner for senior care over a much longer term will be the continuing care retirement community. Those communities offer a continuum of care from independent living to assisted living and skilled nursing. Demand is expected to ramp up over the next 20 to 30 years, as boomers continue aging. The NREI says they have a high retention rate because residents can move from one level of care to another, as they age.
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