These days, Tim McCarthy finds nothing relaxing about going out to lunch with prospective buyers of his age-targeted homes.
“They are going to sit there, they are going to grill me, and they are going to ask a lot of tough questions,” says McCarthy. “They are sophisticated. They’ll ask me questions about how we are financing our communities.”
But rather than reaching for a large bottle of Tums and telling his assistant to hold all his calls, the managing director of Pennsylvania-based Traditions of America encourages the lunch dates and welcomes the questions. It’s all part of a sales program that, start-to-finish, is designed to quell the considerable fear older buyers have had since the stock market’s dive in the fall of 2008.
“The significant reality is that they are traumatized by their financials in the past year,” says McCarthy. “Just a year ago, not only did they watch their stock values collapse and their home values collapse, they saw the runs on the banks. Many of them are still selling their stock and buying gold. They are afraid.”
And they are distrustful. “I think there is distrust for big banks, and I think there is distrust for big builders who just left town,” says McCarthy. “I think they want to be able to look the owner of the company in the eye and get real straight answers. They love the unvarnished truth.”
Hence, the numerous lunches and a number of other programs Traditions of America offers to calm worries, including refundable deposits, home staging, and help in pricing prospective buyers’ existing homes as well as helping them find the right listing agent. (See “Hand Holding and Tough Love,” right.)
It’s working. At the home building peak, Traditions was selling six to eight homes a month in each of its communities scattered across Pennsylvania. Now the company is closing four to five, an enviable pace even for non–age-based communities.
“It’s not about what we’re building, it’s about how we’re selling,” says McCarthy. “It’s about making the transaction risk free.”
It’s also about creating an age-targeted product that the buyers perceive to be different from the ones their parents might have favored—communities where wine tasting (and making) replace pot lucks, pickleball replaces bocce, and sky-diving replaces a round of golf.
The Big Thaw
While Traditions may have cracked the code of selling to older buyers in the current market, many other builders are still struggling and eagerly awaiting a spring thaw from the winter no one expected to occur in the 55-plus buyer market.
That market was expected to remain sunny for the next couple of decades. The theory was that the 78 million Baby Boomer “me generation” buyers’ relative wealth and free-spending ways would weather any storm in the general real estate market. Then the stock market crash came and plunged that market, too, into a deep freeze.
Before the crash, Shea Home’s active adult housing market was down 20 percent, but still performing better than its other markets, which were down 40 percent. Now they’re both equally challenged, says Rick Andreen, president of active adult communities for Shea.
“It used to be 55-plus buyers would overcome the psychological thing [of a depressed housing market] and take the risk and buy and rent out their old home,” says Andreen. “They were fine about taking risks before September of last year.”
Not now. So Shea is trying various sales tactics to overcome worries. “I think what we have to do is be better in the sales process about talking about these things,” says Andreen. “Our salespeople are so used to talking about the benefits of our housing products and lifestyle that they have a little harder time counseling someone who is 60 years old on finance. It’s difficult from a credibility perspective.”
Ultimately, Andreen sees time as the definitive cure for the over-55 market. But make no mistake, he believes there will once again be a huge market for new homes targeted for 55-plus buyers. And those builders who are able to get even a small slice of it will profit mightily.
Cha Cha Changing
Yet questions remain. Has the recent market crash fundamentally changed Baby Boomers, transforming them from carefree risk takers to cautious worriers? And, will this group of buyers, who famously fight any concessions to age, be receptive to products they perceive to be for “older” buyers?
Andreen thinks the answer is definitely yes for the latter. As evidence, he tells this story about his minivan. “When I was 27 and had been married for a year, I said I would be 6 feet under ground and horizontal before I bought a minivan,” he remembers. Four years and two kids later, Andreen not only owned a minivan, but was extolling the virtues of its comfortable roominess and many cup holders to others.
Just as his view of the world changed after having children, people’s perspectives change after retirement and when they become empty-nesters. Like their parents, it will happen to Baby Boomers, too.
“All of a sudden, the relationships that they have at work are gone after retirement, their social connections change, and their children are gone,” says Andreen.
“A big emotional thing happens, and they are going to seek a change in their lifestyle,” he says.
Empty-nester Boomers crave new connections and new experiences, he says. They become tired of taking care of the big house and begin to desire freedom, and sometimes that sends them looking for a neighborhood where the living is easier.
“That [desire for change] is something that I will argue is going to significantly offset the emotion of what’s happening to them financially,” Andreen asserts. Their smaller nest egg might lead them to choose to buy a 1,700-square-foot retirement home rather than a 2,300-square-foot one, he continues, “but they are still going to seek a change in lifestyle.”
Most Baby Boomers aren’t at that stage yet. “That psychological transition occurs when someone actually retires,” he says. And the first of the Baby Boomer generation won’t start turning 65, the traditional retirement age, until 2011. While, given the economy and their free-spending ways, many will continue working, some won’t. And, because their total numbers are so huge, even snagging a small share of the market will be significant, Andreen argues.