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March 31, 2014
Steven Bomberger
50+ Housing Council Chair
50+ Housing eSource
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2014 Economic and Market Forecast for the 50+ Housing Industry

50+ Housing professionals got a fact-filled start to their 2014 International Builders’ Show (IBS) experience in Las Vegas this past February by hearing the most up-to-the-minute information about the state of the sector’s market and economics that are driving that niche market. The addition of current demographic and consumer preference information gave the attendees a clear look at the economy, their market and their clientele — information that will serve them well as they plan for 2014 and beyond.

The entire presentation — slides and audio — is available on CD from Mobiltape (presentation number 001), but here are the highlights for members who couldn’t make it to IBS.

Gregg Logan, from the Robert Charles Lesser & Co. (RCLCO) in Atlanta, concluded his presentation with a startling projection of demand for new 55+ homes — but it’s also a good place to start. His firm’s estimate of demand for new homes among buyers aged 55 to 74 started at 175,000 for the current year, rising to 204,000 in 2015, and to 230,000 in 2016. The rate of growth then slowed somewhat, hitting 248,000 in 2020 and topping out at 252,000 in 2025, remaining at or near that level through 2030. That’s more than a decade in which about 20% of all new homes will be built for or bought by people 55 and older.

Demographics

Logan’s complete presentation began with the demographics information behind that market prediction. He pointed out that in 2010, there were about 38 million people aged 60 to75, and by 2014, that group will increase by almost eight million more members. Another seven million will join them by 2020, and by 2025 there will be 56 million people in that age group. He also noted that while the current average retirement age is 62, the average for members of this approaching age wave is projected to be age 65 or older.

He looked at people 55 and older moving to another state, and found that in 2008-2010 fewer than 20% of people in the Midwest and Northeast moved away, but in the West, anywhere from 18-30% moved, with the percentage rising with age. In the Southeast (excluding Florida) the percentages ranged from 22% to 29%, with those in the 65-69 age group most likely to have moved away.

Why do they move? Cost of housing and climate were the two most important factors. Among the top 10 retirement destinations, Sunbelt and just north of-Sunbelt states had the largest share. Suburban mixed-use locations are the most popular destinations for the boomer market, followed by rural locations and small towns. The Eisenhower generation (60+) had similar preferences, in stronger numbers.

Amenities

Logan presented data from his firm’s national survey of preferences for amenities, which showed that 83% of boomers with a preference ranked walking as their top choice, with nearby shopping coming in second with 67%. Also ranking high were water-related amenities — a beach (62%) or other swimming opportunities (60%). Bicycling came in at 51%, and in the 40% range, boomers listed waterfront areas (46%), gardening opportunities (44%) and golf (42%). A gated community and boating opportunities tied at 35%, and only 11% preferred a private golf club.

Other RCLCO data was more specific, with rankings for recreation and fitness amenities. Parks/green spaces were the high scorer, followed by a paved trail system for walking, jogging, biking or skating. The next two options had similar scores: a Main Street village center with retail and cafes and an outdoor resort-style pool. Not far behind were a facility for cardiovascular equipment and free weights for fitness training, and a natural (unpaved) trail system for hiking and walking.

Logan cited National Association of Realtors data concerning preferences of home style, and found that all buyers older than 48 had similar preferences, with around two-thirds of all the age subgroups indicating a preference for detached single-family homes. He noted that the preference for townhomes was low for the 48 to 57 age group, grew in the 58 to 66 group. And the preference for apartments and condos in buildings with more than five units came in at 11% for the 48 to 57 group, and grew to 20% in the 67 to 87 group.

Age Restriction or Not?

Age restriction is always a question for developers of 50+ communities. Logan’s data showed that 45% of the 55+ households that responded didn’t have a preference, but most of those who did, preferred all-age communities. A Pulte survey of boomers reported that only 5% thought that age-restriction to those 55 and older was very important (a score of 5 on a 1-5 scale). An additional 36% rated age restriction at a three or a four, and 19% gave it a two. The largest single share — 40% — gave it a score of one, or not important. That survey also showed that older groups considered age restriction more important than younger groups, but even in the 65-70 category (the study’s top age bracket), only 27% considered it important.

Logan finished by commenting on market demand (as noted above) and presented a list of characteristics of successful active adult communities, stressing the importance of a “combination of product, price, and amenities” that incite prospective buyers to take action.

The 50+ Housing Economy Is Improving

Paul Emrath, NAHB’s vice president for survey and housing policy research, presented data from the association’s 55+ Housing Market Index, in which scores below 50 indicate worsening conditions and those over 50 indicate improving conditions. The index was launched in the fourth quarter of 2008, and that index value was predictably low, at 16. It hovered in that vicinity through the fourth quarter of 2011, but rose to 28 in the fourth quarter of 2012. The Q42013 score, released at IBS, showed a score of 48 for single-family homes sales, with a score of 62 for expected improvement in the next six months.

New 55+ rental production scored 43 in this latest survey, and demand for existing rentals scored 54. Even condos, which had been in the single digits through much of 2011, is now at 35. The 55+ HMI has been shown to be a leading indicator of actual market performance, so Emrath advised the crowd that a certain amount of optimism was appropriate.

Share of the Housing Market

Emrath estimates that about 14% of the recent movers in the current housing market (based on the 2011 American Housing Survey) are 55 or older. At that time, the 55+ age group was 11.9% of the rental market, and 21.9% of the total home buying market. Boomers and seniors were 21.8% of the existing home market and 24.3% of the new home market. They represented 27.4% of the new production home market, and 17.3% of the new custom home market.

The number of age-restricted housing starts has grown. In 2009 there were about 9,000 single-family starts in age-restricted communities, and about 8,000 age-restricted multifamily units started. Multifamily starts grew to 16,000 in 2010, 18,000 in 2011, and 17,000 in 2012. Age-restricted single-family starts stalled out at about 13,000 for 2010, 2011 and 2012, but Emrath’s projected final number for 2013, based on a strong first six months, was 21,000 age-restricted single-family homes.

His data also showed that the median size of age restricted single-family homes was remarkably stable throughout the downturn and in his projection for 2013, ranging between 2,200 and 2,300 square feet. He reported a similar lack of downsizing among all buyers, with non-age-restricted homes coming in at about 200 square feet larger for 2013, based on the first six months of data.

He pointed out that in 2013, 42.7% of U.S. households are headed by people 55 and older. That percentage is projected to grow to 46.6% by 2020. Of course, that means that the 55+ market sector will be growing as well.

Consumer Preferences

Emrath also presented some survey results from NAHB’s “What Home Buyers Really Want” report, in which data for the two older age groups — baby boomers (born 1946 to 1964) and seniors (born 1945 or earlier) can be pulled out for a closer look.

It’s been clear for a long time that older buyers are interested in energy efficiency — they generally have fixed incomes and they see energy-efficient homes and appliances as a way to mitigate rising energy costs and keep monthly expenditures low. The survey data shows that while a high percentage of all age groups value efficiency, boomers and seniors led the pack.

The combination of essential and desirable ratings showed that 91% of boomers and 92% of seniors endorsed Energy Star-rated appliances. For Energy Star-rated homes the percentages were 92% and 94%. For higher levels of insulation than required by code, the percentages were 83% and 86%. In all cases, the older the group, the higher the percentage that rated the features essential or desirable. Results were similar for Energy Star-rated windows (91% and 92%), windows with triple-pane insulating glass (70% and 74%), and windows with low-e insulating glass (72% and 74%).

The survey also showed some design preferences. While most age groups preferred hinged or French doors to a patio, seniors preferred sliding doors. While about half of the other age groups described wood-burning fireplaces as essential or desirable, only 35% percent of seniors agreed. Nearly half of boomers and seniors listed gas fireplaces as essential or desirable. Boomers and seniors are fans of ceiling fans. While 41% of Gen Y buyers and 46% of Gen X buyers rated them essential, half of boomer buyers said they were a must, as did 52% of seniors.

Seniors indicated less interest in many kitchen features than other groups did. They were less likely to rate as essential or desirable a central island, special-use storage, a breakfast bar, a central island with a range, or a recycling center. Boomers also showed less interest in a central island with a range, and a recycling center, but the difference from the younger generations wasn’t as great. Other areas where seniors showed less interest were contemporary style cabinets, sensor-operated faucets, engineered stone countertops, a trash compactor, a butler’s pantry, glass-front cabinets, a warming drawer, or a separate cooler for wine. Boomers also showed less interest in sensor-operated faucets, trash compactors, ceramic tile countertops, and a wine fridge. Only about a third of the youngest group — Gen Y — preferred laminate countertops. Of the other three groups, only about 20% called them essential or desirable.

The study also asked if there were features that buyers did not want — features that would make it less likely that they'd buy a home that included them. About a third of boomers did not want glass-front cabinets or ceramic tile counters. A quarter of them didn’t want a warming drawer and nearly half didn’t want the wine fridge or laminate counters. While seniors were a bit more willing to accept ceramic tile or laminate counters, a third rejected glass-front cabinets and warming drawers, and more than half said no to the wine fridge.

But the oldest three groups shared put most of the same kitchen features at the top of their lists. The main difference is that while all three groups like wood cabinets, the Gen X group didn’t put them in their top five.

Seniors and boomers also had strong preferences concerning the bathroom. They were less likely than others to want multiple shower heads in the master bath, to insist on a separate dressing/makeup area, or to want a cultured marble vanity.

But close to half said it was essential that the master bath have both a shower stall and a tub. Around 40% said a linen closet was a must, and ceramic tile walls were essential to 18% of boomers and 23% of seniors.

The features the respondents really didn’t want were his and hers bathrooms (34% or boomer, 36% of seniors), skylights in the master bath (25% of both groups), and a whirlpool tub in the master bath (18% of boomers, 25% of seniors).

Visit BuilderBooks.com to purchase the full report on consumer preferences.

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