By John Schleimer
They move down in size, but not too far down. Nearly half pay all cash. They want options and upgrades. Forget two-stories ... they want single-story. And you'd better offer a tantalizing new lifestyle and homes with low upkeep.
These are the "snapshot" findings of a new survey of 4,000 recent new-home buyers in age-restricted active adult communities. The mail-in survey, conducted by my firm, Market Perspectives, of Roseville, Calif., asked questions and probed opinions about more than 100 demographic, product, feature, amenity, and lifestyle issues.
We sent the questionnaire to 17 active adult communities in 11 states encompassing all but the northernmost region of the nation. As of this writing, we had received 998 surveys, a response rate of about 25 percent, good for a 3.5 percent margin of error.
The survey responses paint a clear portrait of the people who are buying into active adult communities, one of the hottest growth opportunities of the decade. The data provide empirical support for many notions of what motivates these buyers, and also identify new opportunities in high-density and, in some cases, even two-story development.
Married and comfortable
The vast majority of respondents, 82 percent, are married. The singles break down as 14 percent female and 4 percent male, which may explain why single men become such sought-after commodities in active adult communities. Most respondents, as you would expect, are older than 55--44 percent are 55 to 64 and 41 percent are 65 to 74. These people are definitely not living on food stamps. In fact, 64 percent indicated annual gross household incomes of $50,000 and higher. Twenty-one percent have an annual income of $100,000 or above. What's more, they have considerable equity in their homes.
The vast majority of new-home buyers in active adult communities are previous owners (99 percent) of single-family detached homes (81 percent). Those homes, typically three- or four-bedroom, carried an average selling price or value of $260,722. Almost 66 percent of the homes were 2,000 square feet or larger, with 26 percent at 3,000 square feet or more.
The single-family detached home remains the preference for these active adults (84 percent). While they moved down in size, it wasn't by as much as you might think. The average size of the home they bought was 1,948 square feet, though 52 percent bought a home with 1,900 square feet or more.
Although 39 percent said they purchased a two-bedroom home, 57 percent indicated that a two-bedroom plus den or three-bedroom plan was their choice. The question might be, What are they doing with all these bedrooms? The survey results suggest that buyers use them as specialty rooms for hobbies, for workouts, or even to store memorabilia.
Many builders tend to stereotype active adults as the buyers of great-room plans. Fifty-three percent of respondents, however, said they bought a home with a separate family room, exclusive of the living or dining rooms. And forget them accepting just one-car garages: More than 90 percent bought two-car garages, many of which include bonus space or room to store golf carts.
We asked detached-home buyers whether they would have considered an attached dwelling if it had the right floor plan design, unit size, and price. About 40 percent said they would have definitely or maybe given some thought to such a home. Thus, there may be unsatisfied demand for attached housing within these communities.
We also probed for a willingness to accept two-story plans. While some buyers would have considered a two-story home had
the master bedroom been downstairs and the guest bedroom(s) upstairs, 60 percent would not have.
The average price of the new home purchased by the survey respondents (excluding options and upgrades) was $188,474, though a robust 41 percent spent $200,000 or more. Unsurprisingly, this is a trade-down market; buyers keep more than $70,000 from the sale of their previous home. Many no doubt use that money to buy a second home somewhere.
In many cases, their previous home is completely paid off. So it shouldn't come as a surprise that, when it comes to down payments, 43 percent paid all cash. Another 17 percent paid more than 50 percent of the purchase price.
Neither are these buyers timid when it comes to upgrades and options. They spent an average of $28,309 on such items, and 50 percent paid $30,000 or more. In reality, they are spending almost 15 percent of the total purchase price in upgrades and options.
When asked which they would choose if they had to choose between a slightly smaller home with more custom options or a larger home with fewer custom options for the same purchase price, almost two out of three respondents said the smaller home. Clearly, here is another great profit center for builders with the right upgrade-and-options program.
Why do they spend so much? The answer is that these buyers want the higher level of quality and durability that is often associated with upgrades and expensive options. They do not want upkeep or maintenance problems from appliances or other features in their homes.
Free to be
One of the most telling survey findings stems from the response to a question asking buyers to identify their primary motivations for moving to an active adult community. More than one-third said their top motivator was the lifestyle of their new active adult community. This finding supports that of nearly every seniors housing consultant.
The second biggest motivation for choosing an active adult community was that respondents' previous home was too large and required too much maintenance. Third was the ability to make new friends in a community with extensive amenities.
When it came to the two rooms respondents evaluated the most in selecting their new home, the kitchen was number one, at 36 percent, and the master bedroom a distant second, at 18 percent. Asked how they determined the quality or workmanship of their new home, buyers said the key factors were the materials and construction techniques (25 percent) and the builder's reputation (24 percent).
What other factors figured prominently in respondents' decision to buy? The top vote getters were having access to a clubhouse with a swimming pool and an exercise room, living in a master planned community that is age restricted, and being close to medical services and shopping.
If you want to reach active adult prospects cost-effectively, be sure you have solid product design and excellent customer service, and stand behind your warranty program. Why? Because 38 percent of respondents said their primary source of information about their community was a friend or relative who lived there, or via "word of mouth."
In deciding which particular home to buy, touch and feel are very important to active adult buyers. More than 40 percent of respondents said viewing furnished models was one of the most valuable aids their builder provided. That was followed by brochures showing floor plans and features.
This promising market knows what it wants. To the savvy builders who provide it go the spoils.
John Schleimer is president of Market Perspectives, a Roseville, Calif.-based real estate research and consulting firm that provides services to many of America's top building firms. The firm specializes in product positioning and consumer preference work across the country and provided similar services to the NAHB's 1999 Master Planned Community of the Year, Orenco Station in Hillsboro, Ore.
[Initial publication, February 2001]