Baby boomers and recent retirees have surprised the housing industry again.
So what else is new?
Just two years after a comprehensive survey showed that 60 percent of home buyers older than 50 preferred to pay cash for their next home, more and more of them have shown up at mortgage offices seeking to leverage their most precious of assets.
“Baby boomers continue to rewrite the rules of consumer behavior at every stage of life,” said Jack Haynes, executive vice president of the National Builder Division at Countrywide Home Loans. “Home builders and mortgage lenders need to be prepared to meet their changing demands.”
The down payment information was part of a 2003 national study conducted by the National Association of Home Builders and Countrywide. The survey, compiled from the responses returned to 280 builders from consumers in all regions of the country, was designed to determine what baby boomers and older home buyers want and how builders can incorporate those desires in new homes.
“The most surprising thing in the past two years since the study is that fewer people are paying cash for their next home,” Haynes said. “They are retaining cash, for whatever reason. They are helping with the education of a grandchild, buying second homes. Unlike their parents, they are very sophisticated when it comes to financing and mitigating their debt risks. They are requesting different types of loan programs that no other population segment even cared about.”
Hayes said he talks every day with seniors who are seeking flexibility and ways to maximize their purchasing power. Mortgages that offer different monthly payments have become popular, as have interest-only loans with the ability to pay down the principal at any time.
Housing officials say the inconsistent performance of the conventional financial markets is one reason older buyers are holding on to more cash.
They are not, however, shy about financing expensive upgrades that allow them to live and work more comfortably at home.
“Boomers are buying lifestyle,” said Chuck Covell, president of Greenbelt, Md.-based Bozzuto Homes. “Today’s 50-plus buyers are more affluent and crave a sense of lifestyle when buying a new home. They are not buying solely based on price or location.”
Covell noted that baby boomers will continue to work in some capacity, with many trading their primary careers for a part-time job or a job that is more like a hobby. Builders must include high-tech offices and media centers in active-adult homes to appeal to these buyers, who see themselves working well past the traditional retirement age.
Baby boomers want first-floor living space, including a master suite, high-end kitchens and baths, and high-tech media rooms.
Builders and architects say demand is growing for smaller communities with interesting streetscapes and high-end homes designed for individual lifestyles. When the first active-adult communities were launched in the 1960s, many were large in size, located in traditional Sun Belt states and shared similar community format, design and amenities. However, builders recognize that today’s buyers are open to change, demand a variety of choices and are more likely to consider a community close to home.
“For many buyers, the established concept of the active-adult community conjures up images of boring, cookie-cutter neighborhoods with no opportunities for owners to express themselves,” said Bill Feinberg of Feinberg &Associates PC, a Voorhees, N.J.-based architect and designer. “Builders understand that the active-adult industry is rapidly changing. A single community formula will no longer meet the needs of mature consumers.”
Feinberg added that main-street communities, exclusive enclaves and age-targeted villages within master-planned communities are gaining popularity. In terms of design, these youthful, individualistic buyers want diversity in street patterns and streetscapes, embrace natural features such as wetlands and open space, and favor smaller, more flexible communities.
They also may not need a large community clubhouse, preferring more informal spaces that offer different experiences and a range of social and physical activities.
The word “community” has also taken on a new connotation. While most active adult communities traditionally have been built in suburban locations, urban buyers command a greater share of the market, especially for condominiums, town homes and multifamily apartments. Many buyers are empty nesters who expect a high level of service, spend more on upgrades and are less likely to consider moving to an age-qualified community.
The surprises found in the survey two years ago were the number of boomer-seniors who indicated “wired” homes ranked very important on their list of desires as well as the desire for a single-story home with a large master bedroom. Those desires now seem to be included in most new models.
What will be the next surprise?
Tom Kelly’s new book “The New Reverse Mortgage Formula” is available in bookstores and on Amazon.com.
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