Over-65 Segment Growing, Survey of Builders Finds : Older Homebuyers a Key Market
Builders expect a growing number of their customers in the next five years to be over 65 or homeowners buying newer, larger houses, according to a survey of delegates attending the National Assn. of Home Builders’ annual convention here.
Young, first-time buyers, who once bought most of the houses constructed by many builders, are being crowded out of the market by higher costs and tighter standards for getting mortgages, NAHB members said.
In a forecast of the future for the housing industry, the NAHB predicted that “trade-up” buyers will constitute 65% of the new housing market in the next 15 years as “the baby-boom generation moves up the (economic) ladder . . . and their income and family size increases,” according to the forecast.
Homeownership rates nationally have dropped by nearly 2% since 1980, primarily because there are fewer homeowners under 35, the NAHB said. Ownership rates overall are likely to rise from the current 63.9% of the population during the rest of the decade, “but young household trends are likely to stay where they are or get worse,” according to the association’s forecast.
Many young Americans, however, still expect to buy their first homes in the next few years. When they do, they will look for “a contemporary version of the same house (their) parents bought 25 years ago--a single-family home with three bedrooms, two baths and a yard” and located in the suburbs, according to a survey commissioned by Carole Eichen Interiors Inc., a California-based design and marketing firm, that was described at the convention.
Two-thirds of the builders taking part in the convention survey said they expect to construct more houses this year than they did in 1985 and to charge more for them. The delegates were more optimistic than the NAHB’s leaders, who issued a prediction of 100,000 fewer housing starts this year than in 1985, a drop to about 1.6 million from 1.7 million. NAHB Executive Vice President Kent Colton said he could not explain the difference between the views of the association and the members taking part in the survey.
Industry interest in building for the elderly is “exploding,” said M. Stroud Curran, a speaker at one of eight convention seminars dealing with housing for older Americans. The NAHB survey reported that 5% of the builders are now constructing housing for the elderly but that 14% expect to be in the market for the elderly by 1990. About 23 million Americans now are 65 or over, and by the year 2000 one of every three persons will be 65 or older, according to population projections cited at the convention.
Potentially Lucrative Market
The increase in the number of Americans who are growing older and remaining healthy longer is attracting some large companies to the elderly housing field, including U.S. Steel Corp., Owens-Corning and Marriott Corp., in addition to smaller builders who view senior citizens as a potentially lucrative market, according to Curran and others.
Facilities for the elderly are being opened so frequently in the United States that it is hard to keep track of their numbers, Curran said. In Philadelphia alone, he said, 30 communities for the elderly contain 6,000 units.
Lenders are so wary of putting up money for elderly housing that few of the 300 to 400 facilities now believed to be in operation nationwide had adequate capitalization when they were built, Curran said. There is a growing trend among state governments to protect deposits and down payments made by the elderly by requiring that the money be put in escrow accounts, closing it off as a source of financing for builders, he said.
Most lenders require that half of the units in a project be sold before a loan is approved, an effort that can cost as much as $1 million to $1.5 million before the builder gets financing, Curran said.
The average customer for elderly housing facilities is in the 70s and will live another 12 to 15 years, according to Barbara Kleger, director of development for Lifecare Communities Corp. in Bala Cynwyd, Pa. Two-thirds of them are single or widowed, and two-thirds of these are women, she said.
She said that salespeople, when trying to convince would-be customers to buy a unit in a community for the elderly, should remember that these persons “have recognized and admitted they are growing older, and that’s not easy for people to do. They realize this is the last move they will make, and that’s scary to them.”
Although building for the elderly is the fastest growing segment in the industry, second-time buyers are the largest group.
About 60% of the builders surveyed said they are targeting their homes to “move-up” buyers now, putting them in agreement with the findings of a study conducted by the NAHB economics division.
The convention survey showed that 63% of the builders questioned expect to target their homes for the trade-up market by the end of the decade.
David C. Smith of McDowell, Va., the incoming president of the NAHB, said the Dallas convention was “the most successful” in the association’s history, with a record attendance of more than 55,000 people. A major NAHB goal in 1986 will be “to identify the depressed housing markets” around the country “and bring them back to life,” Smith said. The association also will place more emphasis on research and developing new technology for the industry, he said.
