Tim McCarthy thinks it’s a “myth” that every person over 50 was financially devastated by the country’s economic collapse. “That may be true in Las Vegas, but not in our markets,” says McCarthy, who with his partner J.B. Reilly, owns Traditions of America, a 13-year-old builder/developer of active adult communities based in Radnor, Pa., that has managed to buck the housing recession.
McCarthy points out that 50-somethings were “uniquely positioned to withstand the downturn,” given that they had, on average, three times the household incomes of average Americans, and their average net worth exceeded $500,000.
However, what people over 50 did experience during all this financial turmoil, McCarthy concedes, was “an epic crisis of confidence,” especially concerning banks and builders whose reputations were tarnished during this crisis.
So what Traditions of America needed to figure out was how best it could help a consumer purchase a house. “And the answer was fairly obvious: make the transaction risk-free,” he explains. So about two and a half years ago, Traditions of America launched HomeFree, a program that helps customers sell their old homes in order to buy new.
Through this program, which was conceived before the recession hit, customers turn over the resale of their houses to the builder. “We make sure there’s a professional valuation, even if that requires a full-blown appraisal,” says McCarthy. His company mostly uses relocation brokers and pre-qualifies brokers for each of its five markets in Pennsylvania. It negotiates listing contracts and provides the owners with marketing allowances.
Last spring, retirees Linda and Albert Cronce wanted to sell their four-bedroom Colonial near Bethlehem, Pa., because, says Linda, “it was just too big,” and the landscaping was too much work to maintain. They signed a contract with Traditions of America in April to buy a townhouse in its Hanover community. Of the builder’s three preferred resale brokers, the Cronces chose Weichert Realty, whose agent Debra Andrews “was fantastic,” says Linda. They sold their house in two weeks for $350,000, which was about $60,000 less than what they paid for the house plus the upgrades they made to it.
Traditions of America gives buyers a year to sell their homes and purchase new houses at the contracted price. (They are under no obligation to buy if it doesn’t sell within this time frame.) On average, an existing house is on the market for 57 days before it’s sold, and the ratio of its sales price to list price is 97%. Of the 250 customers the company has contracted with since launching HomeFree, only five have canceled. “In a million years, I would have never dreamed we’d be at that low a cancellation rate,” says McCarthy. “I would have been happy with 25%.”
Last year, Traditions of America sold 122 homes, and it’s on track to sell at least 200 this year. The median prices for its attached townhouses vary by community, but range from $250,000 to $300,000. (Because the builder has kept its prices relatively affordable, McCarthy says his company’s homes haven’t depreciated like those in more depressed markets.)
While the Cronces were waiting for their home to be completed, they spent seven weeks in a hotel, during which Traditions of America let them use its community’s facilities, which includes a 10,000-square-foot clubhouse with a party room, bar, cafe, library, business center; a whirlpool, swim club, exercise rooms, tennis courts, and walking trails. Each community also has its own lifestyle director.
“Even people who say they don’t want to live in an age-restricted environment want to move here quickly once they see the community and meet their neighbors,” claims McCarthy. He also dispels one other myth, when he says that most active adults with whom he talks aren’t interested in downsizing to a significantly smaller house. “People aren’t squeezing down at all,” he says.
Traditions of America has a full-time designer on staff at each community who might spend up to two months with a customer before construction begins. McCarthy says his company’s revenue from options “is way up,” and that Traditions will even do complete customization if requested.
Right now, it appears that Traditions of America’s owners are content to grow within its existing markets. According to the latest Census Bureau estimates, Pennsylvania has the sixth-oldest population in the country. And while Traditions also builds in New Jersey and Delaware, McCarthy says the company probably won’t expand geographically beyond what its executives can manage.
John Caulfield is senior editor for BUILDER magazine.
Learn more about markets featured in this article: Las Vegas, NV.