Youth may be wasted on the young. But one thing young adults do not monopolize is the affordability challenge when it comes to housing.

If new home builders and residential developers think that the only--or even the biggest--asking price disconnect is with young adult prospects, you'd better think again.

Here, from the National Association of Home Builders economics team's recently featured Housing Trends Report is glaring proof that attainability challenges do not discriminate by age. More than three out of four adults--of all generational cohorts--believe they can afford fewer than half the homes available for sale.

So, looking again at NAHB HTR data, it should come as no surprise that fewer than one in 10 (7%) Baby Boom adults in its sample universe purports even to be actively planning to buy a new or resale home in the next 12 months.

Not the active "active adult" demand trend many would have expected, especially among Baby Boomer retirees and about-to-be retirees, who've made it a lifelong practice essentially to get what they want.

The fact that the NAHB's latest sentiment index for the 55+ housing segment has backslid from a cycle high in Q4 2017, and fell 6 points sequentially from 2nd quarter to third quarter last year might evidence erosion of builder confidence in 55+ segment momentum would also seem to follow.

So, if location, price, and product tend to be seen as the three most reliable determinants that tie together supply, demand, and pace, then where's the likely disconnect? To recognize and address which factor(s) have become the show-stopper would--one would think--be an opportunity.

Setting aside for a moment location and product as primary factors, let's unpack the price issue a bit.

First, one can perhaps first benefit from recognizing that the myth of an entire cohort of aging Baby Boom adults with discretionary means to spare, clamoring for retirement meccas or high-end exclusive enclaves with connective access to children and grandchildren, vs. hard reality may be a tough pill to swallow right now. Especially, when recession may be brewing up, and having a customer stream not so reliant on wages and working income trends would be really nice to have right now.

Here, former Senator Heidi Heitkamp, predicts a full-on retirement crisis based on bad planning and constrained savings ability on the part of many people newly in and nearing retirement, the current 55+ sweet spot. She writes here:

More than one-third of all private sector workers do not have access to a workplace retirement plan. Projections show that 44 percent of Baby Boomers and Gen Xers risk running short of funds for retirement. And 40 percent of American adults would be unable to come up with $400 for an emergency expense account, without borrowing money or selling a possession.

What may bring that home more clearly than to look, now, at the number of older people who can not afford not to work. Here, from New Strategist Press editorial director Cheryl Russell, is a nugget extracted from the Bureau of Labor Statistics, showing the stark contrast among 65+ year-olds fully participating in the labor force in the past 20 years. The outlook, Russell notes, is for continued, galloping growth among people who need to work later and later in life.

Between 1998 and 2018, the number of workers aged 65 or older more than doubled (up 161 percent) because of the double whammy of rising labor force participation rates and the aging of the baby-boom generation. These increases will continue, according to the Bureau of Labor Statistics. The labor force participation rate of men aged 65 or older is projected to rise to 25.9 percent by 2026, and women's rate should climb to 18.3 percent. The number of workers aged 65 or older will expand by another 46 percent between 2018 and 2026.

And when you look at this variable, you have to look not only at the "cost of entry" related to loan-to-value, income, down payment, and other issues, trade-offs on the "cost of exit" issues figure importantly as well. What's the current interest rate Boomers are enjoying on their current property, based on a high likelihood of refinancing during dirt-cheap mortgage days of yore? Are they going to be able to sell their current property, and buy a new one without taking on a whole lot more freight in terms of mortgage interest payments?

That matters.

Even after solving for a cost-of-moving factor, new home pricing--thanks to the fact that any new home comes laden with fees, impact assessments, code costs, and permitting expense that existing homes don't have--can be daunting, even for folks who've ostensibly reached the point in their lives where they "should have the home they've always wanted."

This is what is compelling about the concepts D.R. Horton's Freedom line, Dan Ryan Builders' recently introduced Elevate communities, and Epcon Communities long-time positioning as developer of attainably-priced, low-maintenance, pocket-style neighborhoods for 55+ buyers.

They--each in their way--crack the code of blending desirability with attainability, not just on the first-cost level, but on the operating, "total-cost-of-ownership" plain as well.

Now, here's a couple of "out-on-a-limb" calls we're willing to make, given that some builders and developers have positioned themselves well, with strong, opportunistic exposure to the "affordable 55+" segment, whereas some have not, believing that this customer segment would "come to them."

  • One is this. We'll continue to see erosion of barriers--in planning, zoning, permitting, and community design--between age-targeted, age-restricted, and otherwise age-segmented neighborhoods.
  • Two, just as a number of builders amped up their 55+ strategies in the past half-dozen years, and followed that by escalating their land, operations, design, and sales efforts against the entry-level price segments in their footprints, now we'll see the combination of those two trends. If builders only have a move-up and second-time move-up style option for 55+ customers, we'll see more of them creating an "entry-level" version of their 55+ lines.
  • Three, M&A. Strategics, the Japanese acquirers, and financial players will be keen to form alignments with local market powers whose strength is in land-positions, marketing, ops, and product design for the lower-price tiered 55+ buyer.

That's where the volume is. And everyone knows, it's a volume game, at least in most markets.