New housing developments may have stalled, but one area expected see additional growth in the next few years is communities targeted at Americans 55+ and older.
David Crowe, chief economist for the National Association of Home Builders estimates housing starts for these communities will rise 30 percent from 2010. While it’s still a relatively modest production number, starts in 55+ communities are projected to increase another 46 percent to roughly 79,000 housing units in 2012.
“By the year 2020, as Baby Boomers move into this age bracket, almost 45 percent of all U.S. households will include someone at least 55 years old,” said Crowe. “The number of those households seeking housing better suited to their changing needs will therefore rise dramatically.”
A joint study by the 50+ Housing Council of the NAHB and the MetLife Mature Market Institute shows the recession has made 55+ buyers more practical when selecting a new home but financial concerns have become a bigger problem. Using data from the Department of Housing and Urban Development’s 2009 American Housing Survey (AHS), the report shows that older borrowers previously relied on home sale proceeds to finance a new home, but as the economic downturn continues, that option has been greatly diminished due to the deteriorating housing market.
In 2009, only 55 percent of new age-qualified active adult home buyers reported that their down payment came from a previous home sale, significantly down from 100 percent of respondents in 2005 and 92 percent in 2007. In 2005 and 2007, no active adult community buyers reported having to tap cash or savings for a down payment. In 2009, 45 percent of the average buyer’s down payment came from cash or savings.
“Most 55+ consumers – those who chose to move and those who stay in their homes – report that they are happy with their homes and communities,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. “But those who did move to an age-qualified community – about 3 percent – reported the greatest satisfaction, rating their homes and communities at nine on a one-to-ten scale.”
The desire to live near family friends is the overwhelming motivation for moving said the report. The design, amenities and appearance of the residence and the community remain important, but less so than before the recession. 55+ buyers moving into rental homes, both multi-family and single-family, cited a desire for less expensive housing as second in importance to living near friends and family.
The report also features an entire chapter dedicated to reverse mortgages and shows a small but growing share of older Americans are taking advantage of the loans. While less than 1% of 55+ households reported having a reverse mortgage in 2009, the share of reverse mortgages has increased each year and in 2009 was almost almost eight times greater than in 2001. Almost two-thirds of reverse mortgage borrowers are between ages 62–79, with an average age of 77. Although only about 1% of all 55+ homeowners, more than 241,000 seniors hold a reverse mortgage, a 54% increase from 2007.
“The fact that eligibility requirements become more lenient and the HECM amount increases with advanced age of borrowers explains why reverse mortgage borrowers have such a skewed age distribution,” said the report.
Despite no income requirements, the data shows that low-income homeowners are more likely to use reverse mortgages to supplement their income. According to the report, the average income of reverse mortgage borrowers is less than $35,000, while seniors with and without mortgages earn close to $81,000 and more than $53,000, respectively.
In addition, more than a third of all reverse mortgage borrowers live in 55+ communities, with roughly 7% residing in age-qualified active adult and 29% in other 55+ communities.
To view a copy of the report, see here.