Baby Boomers’ Housing Needs May Pave the Way for H4P

Although the preferences of younger buyers will ultimately shape the future of the housing market, homebuilders must also pay attention to the housing needs of Baby Boomers and the challenges they face when buying a new home, a recent study suggests.

Homeownership is one of the most important life decisions a person can make, regardless of demographic or generational background. While Boomers and Millennials may not necessarily see eye-to-eye on music or the latest fashion craze, housing may be the one thing both generations can agree upon, according to the results of a recent survey from the National Association of Home Builders.

When buying a home, buyers of all ages say they are looking for homes with separate laundry rooms, energy-star appliances and windows, exterior lighting and a patio—to name a few preferences highlighted in the survey of potential homebuyers.

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“What they don’t want are rooms with cork flooring, elevators, pet washing stations, expensive outdoor kitchens and fireplaces, and two-story entryways and family rooms,” noted NAHB. “And their countertops should be granite, but never laminate.”

In terms of housing type, 65% of all buyers said they want a detached, single-family home. This sentiment rises to 72% among Gen X-ers (born between 1965 and 1979, but falls to 55% among adults born before 1945.

The NAHB survey, which was conducted online, was sponsored by top-10 industry lender Reverse Mortgage Funding, in efforts to better understand the home buying preferences of Baby Boomers and older adults, and how a reverse mortgage, particularly the Home Equity Conversion Mortgage for Purchase (H4P), may help them with their purchasing decisions.

“The boomer generation is currently experiencing a transition to their next phase of life, so the home building and finance industries should commit to better understand the wants and needs of this generation to offer the best possible solutions for them,” said RMF President David Peskin in a prepared statement.

In a previous announcement, RMF said it hoped to use its involvement in the survey, as well as its attendance at NAHB’s International Builders Show this week in Las Vegas, as a means to raise awareness of the HECM for Purchase product not only for homebuilders, but economists and personal finance professionals, too.

“Our presence at this marquee event will help these parties understand and appreciate how a Home Equity Conversion Mortgage for Purchase loan can increase the buying power of older Americans, providing them with the financial flexibility to purchase the home they really want, including the amenities they need or desire,” said RMF’s Chief Marketing Officer Jean Noble back in November, when the company first announced its involvement with the survey. 

The H4P, considered by some as the “sleeping giant” of the reverse mortgage industry, presents a huge opportunity in the senior real estate market. However, the H4P market remains largely untapped, and for a number of reasons.

Perhaps by better understanding the personal preferences of older homebuyers, and having a place at the table during national trade shows, the industry may finally be able to drum up some more awareness and interest in the H4P product. 

“The results of this important survey shed light on the buying preferences of older Americans, and confirm that an uneasiness over finances is one of the primary reasons they are hesitant about relocating to a new residence that better suits their needs,” Peskin said. “At RMF, we are committed to helping home owners age 62 and older meet their financial needs, so this data will be informative to the way we educate consumers about our Home Equity Conversion Mortgage for Purchase product.”

Written by Jason Oliva

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  • No one believes any of the interviewees referenced in the blog above have any intention to chum or lure as explained below but there is nonetheless a message underlying the summary of the presentations contained in the blog above.

    8 years ago in the heat of the battle for President and also during one of the peak years of annual endorsements for the industry, the Florida state Democratic Chairwoman spoke out against the McCain campaign comparing it to “preying on seniors like a bogus reverse mortgage peddler.” We must be careful of the message we bring or that description will once again be used to describe what we as originators do.

    From a senior advocate’s point of view, a message to the building community and Realtor associations that HECMs can be used to help seniors obtain higher priced homes is like stating that the builders will see higher profits and Realtors higher commissions through the use of HECMs yet without sending a message about being concerned about the long-term cash flow needs of those buyers.

    Since neither Realtors nor builders have any measurable duty to care for the future cash flow of buyers, senior advocates could easily accuse the message in the blog above as nothing more than chumming the waters with builders and providing lures to Realtors to increase their commissions on sales made to seniors.

    Let us be clear that the purpose for adding H4P to the HECM products was for the distinct purpose of reducing costs. Before H4P seniors had to wait until after buying a new home to get a HECM. To eliminate a number of duplicate transaction costs in those situations, H4P was added. Not long after implementation in 2009, it became clear that seniors could buy up using a HECM.

    Since day one, there has also been a strong promotion of the idea that the best model for a H4P transaction is getting a fixed rate HECM (and currently use at least 90% of the loan amount to pay mandatory obligations, which can include a significant portion of the purchase price of the home). No doubt that helps originators whose commissions are based on the initial closing balance due and also TPOs generally.

    Let us not become so desperate for sales that we create a message that looks more like chumming and providing lures than caring for those who are in a protected class.

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