Boomers’ shifting demands reshape lending industry
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% of home buyers over age 50 preferred to pay cash for their next home, more and more of them have showed 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 Assn. of Home Builders and Countrywide. The survey was compiled from the responses returned to 280 builders from consumers in all regions of the country. It was designed to determine what baby boomers and older buyers of homes want and how builders can fill those desires.
“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 both flexibility options 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.
“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 an avocation. Builders must include high-tech offices and media centers in the homes of active adults to appeal to these buyers. Baby boomers want first-floor living space, including a master suite, as well as high-end kitchens, luxurious master suites 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,” said Bill Feinberg of Feinberg & Associates, a Voorhees, N.J.-based architect and designer. “A single community formula will no longer meet the needs of mature consumers.”
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.
Tom Kelly, former real estate editor for the Seattle Times, is a syndicated columnist and talk show host. Send questions to news@tomkelly.com.
