The move-down market is really moving across … and it’s keeping its money closer to home.
Homebuyers age 55 and over are seeking homes approximately the same size as their present home and, unlike six years ago, they no longer prefer to pay cash. In 2002, 60 percent of builders reported that buyers paid cash, while only 23 percent of builders in 2008 described their customers as cash buyers.
Fixed-rate loans dominate a new 55-plus buying market study with adjustable-rate mortgages running neck-and-neck in popularity with reverse mortgages. Nearly half of the 55-plus respondents (41 percent) prefer a 30-year, fixed-rate loan when purchasing a new home, followed by a 15-year, fixed-rate loan (38 percent.). A small number (5 percent) preferred a reverse mortgage, some type of adjustable rate loan (5 percent), or an interest-only loan (3 percent).
The down-payment information was part of a new national study conducted by the National Association of Home Builders and MetLife Mature Market Institute, a research subsidiary of MetLife Inc., the huge insurance provider. The survey, compiled from the responses returned to builders from 1,500 consumers in all regions of the country, was designed to determine what today’s baby boomers and older homebuyers want and how builders can incorporate those desires in new homes. Some of the emphasis was on green building, universal design and energy efficiency.
Nearly half of builders (46 percent) reported that 55-plus homebuyers are buying homes in their communities that are about the same value as their previous home, 31 percent reported buyers are buying homes that are less than the value of their previous home, and 23 percent of builders reported that buyers are buying homes that are more than the value of their previous home.
“The McMansion Revolution is over,” said Steven Bomberger, a member of NAHB’s 55-Plus Housing Council. “There’s not as much spending on glamour glitz. Gone are the heavy marble, big Jacuzzi tubs and built-in wall ovens.”
In each of the past six NAHB 55-plus surveys, the size of the home requested by 55-plus buyers continued to be about the size of their previous home. Depending upon where these buyers were from, they wanted homes between 1,600 square feet and 2,400 square feet. This year’s data showed the most popular size at 1,900 square feet — and 79 percent wanted that space on one floor, up from 17 percent in 1970.
“The demand for a single-story home increases as the age of the respondent increases,” said David Crowe, NAHB’s chief economist. “Yet those who desire a two-story home still want the master bedroom on the first floor.”
The median price respondents expect to pay for their next home is $189,426, which is less than the median price of $198,119 paid by those respondents who bought a home within the last three years. This compares with their current home, which has an average market value of $267,401.
Previous studies have clearly shown that a majority of older homeowners choose to age in place, and the most recent NAHB data echo those desires. Nearly two-thirds of the respondents (63 percent) plan to age in their current home, while 12 percent plan to buy another home. The remaining 26 percent are not sure
John Migliaccio, director of research for MetLife Mature Market Institute, said the biggest disconnect regarding what builders are providing and what buyers are willing to pay for has to do with green building and universal design. Builders seem to be doing a very good job of including more amenities such as lever-handle door knobs, wider doors and hallways, separate shower and bath, but consumer preferences do not reflect an equal appreciation.
“It continues to be an education process,” Migliaccio said. “Buyers simply don’t know what they don’t have.”
For example, only 12 percent of respondents said they would pay more for an environmentally friendly home. They are willing to pay an average amount of $6,732 (median $4,000) if it would save $1,000 annually in utility costs. While another 23 percent said they are concerned about the environment, they said it does not drive their decision to purchase. Consumers also have some clear preferences for features such as nonslip floors, larger medicine cabinets, lower kitchen cabinets, and emergency call buttons, which many builders see as less important.
The five features rated most important were: washer and dryer in the home/unit, storage space, windows that open easily, master bedroom on the first floor in a two-story home, and easy-to-use climate control (thermostat).
Conversely, buyers are willing to pay for services such as interior and exterior home repair, transportation, housecleaning, etc., in an attempt to move toward a maintenance-free lifestyle. However the study revealed that builders are clearly reluctant to move too far from their primary business of construction into community services.
Tom Kelly’s book “Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border” was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com.
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