Can the 55+ market for new homes and communities pick up the recent slack in new home orders and deliveries?
The confluence of direct cost increases, regulatory expense, and rising interest rates has played havoc, both with bringing on new neighborhoods with lower-priced entry-level houses and with the monthly-payment tolerance points of more and more would-be buyers.
So, while fundamental demand in the entry-level segment would continue to be a powerful driver of a continued housing recovery, all things being equal, things are no longer "all things being equal."
This means builders and developers might--in near- and mid-term tactics, anyway, that can impact 2019 budgets and order models--turn to greater emphasis on 55+ offerings, where buyers might continue to bring greater discretionary resources, and an equally strong motivation to buy homes that will help them live healthier, more connected, more energy-efficient lives.
One recent mover--from the old farm house she and her husband lived in for 25 years and raised children to a newly constructed home nearer to an urban downtown area--was giddy over the fact that her first energy utility bill had come in and it was less than $100.
We've found in original research related to our KB Home ProjeKt initiative that people are looking at healthy home features and functionality not just as a "nice-to-have" dimension of living, but as an economic and financial need. They see indoor air quality, room air comfort, pure water supply, natural lighting, reduced noise levels, and other design and engineering features adding up as a way to actually save money on medical bills in the present and future.
The 55+ market has continued to score solidly among builders as they take stock of current and future demand for their new home offerings, and the addition, more recently of a number of both geographical and price spectrum variances on the theme of moving 55+ buyers into large, semi-isolated age-restricted islands of residents has freshened the concept of active adult community living.
Now, new data is emerging that suggests that life expectancy--which, generally has been trending older--is doing so for married couples as well as for individuals. In other words, a married couple that reaches the age of 60 together can expect longer joint life expectancy than ever before.
This has implications for the 55+ market, considering that--in the case of a couple where both husband and wife who reach age 60 are college graduates--the joint life expectancy is now just shy of 19 years.
Given that the average amount of time people who buy a new home tends to gravitate around 8 or 9 years, this means that 55+ actually might serve as a threshold for not one but two entirely distinct age cohorts as they move into, through, and post retirement.
Cheryl Russell, editorial director for demographic consultancy New Strategist Press, explores new research on joint life expectancy here, noting:
Joint life expectancy for wife at 60 and husband at 62 (and probability wife will be survivor)
- Blacks: 15.45 years (63%)
- Hispanics: 18.79 years (65%)
- Non-Hispanic Whites: 17.66 years (63%)
- Neither is a college graduate: 15.53 years (65%)
- Only wife is a college graduate: 17.17 years (68%)
- Only husband is a college graduate: 18.31 years (59%)
- Both are college graduates: 18.99 years (63%)
Joint life expectancy has expanded over the decades as individual life expectancy has grown, the researchers find. For non-Hispanic White couples, joint life expectancy has stretched from just 12.06 years in 1950 to the 17.66 years of 2010. Black couples can look forward to 15.45 golden years, up from just 9.99 in 1950.
This data suggests that there are not one but two separate and distinct 55+ age cohorts, one ranging from age 55 to about 70 and one from 70 and beyond, as a current need that builders and residential developers could be serving with new homes and neighborhoods.
While costs and price challenges continue to throttle the ability of the market to meet the need for entry-level home offerings, this opportunity might serve as a safety valve to keep order pace and volume robust through the next couple of years.
