By 2030, the number of Americans over 65 is expected to top 70 million. Home builders who are looking for the next big opportunity are grappling with what this all means for the housing landscape.
Many are still hedging their bets that demand for active adult communities will grow as baby boomers begin their inevitable transition into retirement age. Although the majority of the nation’s mature households do not currently live in age-qualified communities (active adult housing accounted for just one million of the 39 million 55+ U.S. households in 2007), Census data points to an incremental, yet growing interest in the niche. The ranks of buyers relocating to active adult communities increased steadily from 2 percent in 2003 to 3 percent in 2007. Nearly 20 percent of those now living in age-qualified active adult communities are under age 60.
Active adult proponents are quick to point out that for some empty nester buyers, the inclination to live near their peers is already there. A quarter of all 55+ U.S. homeowners today live in communities where the majority of their neighbors are around the same age, according to a recent report issued by MetLife and the NAHB, even if age parameters are not enforced.
Places that feel familiar and comfortable also exert a strong gravitational pull. Speaking on a PCBC panel in San Francisco last month, Ken Warner Johnson, vice president for strategic marketing for Pulte Homes’ southwest division (which includes Del Webb branded communities), noted that “core motivators” for today’s active adult buyers include the desire for cocooning, security, an active lifestyle, a nostalgic wish to revert to simpler times, and the chance to be part of a close-knit community.
Features topping Del Webb buyers’ wish lists, he said, include home offices; dual master suites; energy efficient appliances and design; the ability to live near family and friends; and activities revolving around health, wellness, lifelong learning, and volunteering.
These priorities were corroborated by presenters during a July 22 NAHB webinar on trends in 50+ housing design. Particularly the activities part.
“Residents [of today’s active adult neighborhoods] are proud to be active and they want to be seen being active,” said Cornelia Hodgson with the Cleveland, Ohio-based firm Dorsky Hodgson Parrish Yue. Times have changed and it’s now preferable to position swimming pools, outdoor recreation spaces, and walking trails in central, visible locations,” she said. “They don’t have to be tucked away in back any more.”
Fellow webinar panelist Manny Gonzalez, a principal with KTGY Group, based in Santa Monica, Calif., added that some of today's most successful active adult communities are popping up in infill settings and plugging into an existing urban or suburban fabric.
“Sometimes the best amenity is not what you build in your building, but one that exists in the community surrounding your building,” he said, reiterating a common refrain that active boomers and seniors want walking proximity to shops, restaurants, entertainment corridors, healthcare, and university campuses.
Of course, hitting the right price point is everything, the panelists acknowledged, given that many boomer buyers have seen a significant decline in income and equity in recent months. Responsive residential designs are skewing smaller and more compact, and value engineering is a part of every project. Duplex and small cottage designs are especially popular, they said.
For couples, at least. Roughly 72 percent of residents of active adult communities are married or live with a partner, according to a recent study by ProMatura Group.
But not all senior market observers are focusing on couples – or on the for-sale market, for that matter. Some see rental properties as the biggest opportunity area for builders who are looking to meet the demands of a shifting population long term.
“We know from demographic data, that starting in their late 60s, the propensity for [older Americans] to sell their homes increases rapidly and their propensity to buy homes decreases rapidly,” notes Chris Nelson, director of the Metropolitan Research Center at the University of Utah. “My hunch is that more than half of boomers, once they begin to enter their late 60s, will sell their homes and not buy. Instead they will be moving into rentals.”
Overall, senior households currently move at a rate of 5 percent per year, compared to a national average rate of 12 percent, he notes. “However, in the 20-year period from their late 60s through their late 80s, they all move. And when they do, they are not moving up; they are moving down and out of ownership. This was the trend just before the stock market crash, and now it’s going to be amplified.”
Now factor in the reality that single households increase (as a percentage of the total housing pie) with each decade of life. Singles – who currently account for more than 38 percent of 55+ households, according to Census data -- are more likely to be renters. And their numbers are growing.
As mature citizens begin to comprise a greater share of the rental market, Nelson predicts that the rate of U.S. home ownership, which peaked at 69.1 percent in 2005, will continue to decline to about 64 percent by 2012.
“That means two thirds of all new homes built between 2008 and 2015 will have to be in rental mode, or that millions of homes that were previously built for ownership will have to be converted to rentals. But that will only go so far,” he says. "There will be pressure to ramp up new construction of rental units.”
For more on boomer and senior housing trends, check out our feature, Redesigning Retirement, in the July issue of BUILDER.
Jenny Sullivan is senior editor, design, for BUILDER.
Learn more about markets featured in this article: Cleveland, OH.