Builders are slightly more bullish on the mature home buyer segment than the overall market for new homes, according to the 55+ Housing Market Index (HMI), a spin-off of the NAHB/Wells Fargo HMI introduced this week at the International Builders’ Show in Las Vegas.
But that’s not saying much. The 55+ HMI debuted with a confidence score of 16 for single family homes in the fourth quarter of 2008, compared to a dismal single digit score of 8 for the general HMI during that same time period. (An index score of 50 or higher would indicate a tipping point in builder sentiment toward the positive.)
This finding reflects a rather gloomy outlook among builders who previously had been banking on boomers and seniors to keep their businesses afloat in tough times. Plummeting real estate and financial markets have thrown many pending retirees into lock-down mode.
“Our customers are usually in a good position to buy homes because they have spent years accumulating wealth – building up equity in their current homes and establishing good credit,” Michigan builder Joanne Theunissen, immediate past chair of the NAHB 50+ Housing Council, noted during a press conference. “But in the current market, they can’t find buyers for their existing homes and many are delaying their retirements all together.”
Builders waiting for an eventual economic rebound may nevertheless be wise to keep an eye on this massive buyer segment, whose numbers are expected to top 85 million within the next five years, Theunissen advised. Individuals over 55 currently represent 23 percent of the U.S. population but head 37 percent of the nation’s 110 million households, according to Census data. They accounted for 24 percent of all new homes sold in 2007.
Half of boomers anticipate living in the same county upon retirement, with 75% expecting to at least remain in the same state, according to NAHB data.
And they’re starting to care more about green building – in part because of health concerns relating to indoor air quality, combined with mounting feelings of social responsibility. “They are starting to think about the legacy they are leaving their children and grandchildren,” Theunissen said.
Energy efficiency has also become a top of mind issue for budget-conscious boomers who anticipate living on fixed incomes once they enter retirement. “They don’t necessarily mind paying more for [higher performance homes] upfront so long as they can predict what their monthly expenses are going to be long term,” she added.
One in four baby boomer households expect to relocate from their current home in the future, according to a recent AARP study, with a majority wanting homes that are safe, comfortable, and convenient. Of those who expect to move, 59% said they anticipated moving to a home in which they could live on one level. Half said they would look for a newer home (50%) or smaller house (49%).
“Over the past two decades, active adult and service-enriched communities have become an important segment of the housing market, and this new index will help us gauge the health of that market,” said incoming chairman of the NAHB 50+ Housing Council Pat Kelley, a builder outside St. Louis, Mo.
Modeled after the general HMI, the 55+ HMI is based on survey responses from a panel of 800 builders operating in the mature buyer market. More than half of respondents (51%) in the launch survey reported building homes in 2008 that targeted 55+ buyers but were not age-restricted. Some 35% said they’d built in active adult lifestyle communities, and 28% said they built age-qualified homes last year.
The inaugural 55+ HMI score for multifamily condos was 12. The multifamily rental market targeting older buyers received the highest vote of confidence with a score of 33.
Jenny Sullivan is senior editor, design, at BUILDER magazine.
Learn more about markets featured in this article: Las Vegas, NV.