January 17, 2011 — Both buyers and sellers in the 55+ market have been marking time for the past few years, waiting for some positive sign that the worst of the bleeding is over. A new report, using data from the 2009 American Housing Survey and reported on by the Met Life Mature Market Institute and the National Association of Home Builders, contains some findings that might indicate things could finally start to turn around. Not that they, or we, are predicting anything like the crazy times of 2004-2006, when buyers slept on floors to be the first to bid on new homes, sight unseen. But perhaps a steady 55+ market where the long-predicted pent-up demand matches supply, and buyers can sell their existing homes and start… to look around.
Here are some of the key conclusions from the study, which is loaded with interesting facts about the 55+ housing market and its buyers:
– Age restricted and defacto 55+ home purchases amount to about 31% of the market, and that share is slowly climbing. Given the huge increases in the 55+ population that will occur over the next decades, this is a very positive trend for the future. People over 55 who live in non 55+ communities, however, still account for the lion’s share of the market (69%). Only about 3% of people aged 55 or over live in age restricted communities, although many times that number rent or own homes in communities where most of the residents are 55+.
– Prices are down slightly from their peak in 2005, when the median age restricted home sold for $320,000 (the median was $300,000 in 2009). In other 55+ communities the downside was more pronounced, going to $255,000 from $300,000. While that is good news for buyers, it is not for builders.
– Predictably, poor liquidity in the housing mark has hurt buying in the 55+ market. Whereas in 2005, almost 100% of buyers used money from the sale of another home to make the down payment of their new home, only 55% used that source in 2009. Coincident with that, almost no buyers tapped personal savings to purchase their new homes in 2005, while 55% of buyers used that source in 2009. If, and it’s a big IF, the general housing market can return closer to normal, that trend will probably translate to a more robust 55+ market, as buyers get access to a source of cash (their homes) that has been denied to all but the wealthiest buyers lately.
– The desire to be near family and friends is the overwhelming motivation for 55+ households to move. When it comes to why they choose a particular community, however, buyers have become much more practical than they were just a few years ago. Although design, amenities and appearance of the residence and the community are still very important, practical aspects of the decision such as budget are more important than they were before the recession. Renters, however, appear to be much more motivated by price.
– More people 55+ indicate that they will continue to work. Whereas in 2001 only 2% chose a community because it was close to work, 12% selected that reason in 2009. More people living in 55+ communities say they intend to work at home, as well.
– Customers who buy homes in age-qualified active adult or other 55+ communities looked at an average of 12 homes, usually in more than one neighborhood, before making the purchase. Customers moving into age-restricted rental apartments looked at only one or two housing units in only one neighborhood.
– About 54,000 housing starts in 55+ communities are projected in 2011. Although up 30% from the number estimated for 2010, this is far lower than in the boom years.
– Reverse mortgages are increasing in number, but still a very tiny % of the case (1%).
The study from Met Life Mature Market Institute and the National Association of Home Builders is quite interesting. Here is where you can download it.
The 2009 American Housing Study is funded by the U.S. Department of Housing and Urban Development and conducted by the Census Bureau every 2 years.
What do you think?
Are you an optimist or a pessimist about 55+ housing? Are you out looking, or hunkered down with your survival gear? Let us know in the Comments section below.