(Grand Rapids Business Journal) — The 55-and-up homebuyer market is heating up, according to a new report from the National Association of Home Builders.
Sales and prospective buyers increased three points during the past quarter in the 55-and-up market, while expected sales for the next six months rose another point.
Builders across the country are gearing up for the increase, as well, the report said.
“Builders have a positive outlook on the 55-plus housing market,” said Timothy McCarthy, chairman of the NAHB 55+ Housing Industry Council. “In fact, the markets for single-family, apartments and condos are all doing quite well, and we expect that trend to continue.
In West Michigan the trend is holding true, said John Bitely, president of Sable Homes in Rockford.
“Across the nation our population is getting older. There’s the baby-boomer segment — that’s a bunch of us,” he said. “Whether it’s because we’re living longer or staying healthier, a lot are looking for houses.”
A lot of the current housing activity is downsizing from “McMansions” as children move away, Bitely said.
“As kids leave or people look toward retirement, they don’t need as big of a house,” he said.
Sometimes, the older market wants to have a small place in Florida and a small place in West Michigan, instead of a single larger one.
The concept of aging-in-place also factors into the equation. Seniors may prefer buying a house in a retirement community rather than having to go into a nursing home situation later on. Bitely said houses in some developments, such as Sable’s Villas of Rosewood, may run up to $350,000, but the house still offers a lifestyle change. The yards and driveway are taken care of, similar to a condo association. Also, instead of a two-story, four-bedroom house, the houses are likely to be one-story structures with a bedroom on the main floor and maybe one or two in the basement for guests.
“A lot of these buyers are planning ahead and they realize their health may not be perfect in 10 or 15 years,” Bitely said.
Bitely also cited the ability to shrink or eliminate mortgage payments as a reason for downsizing. He said some prospective buyers never expect to pay off a mortgage completely and just view it as a budgeted payment. A lot of times, however, Bitely said the large mortgage on a big house can make up the difference on a downsized house, or at the very least, new buyers can secure a much lower interest rate.
“Some people are smart with their money and say, ‘I’m better off borrowing money at 4 percent and leaving my money in a 401(k) and whatever else,’” Bitely said. “If they start getting a 6 to 8 percent return, they start making money on their mortgage. That’s a very logical thought process.”
He said many in the 55-and-over market are looking toward new, smaller homes, and most do not foresee entering a nursing home.
“It’s not a desirable end,” he said.
Many of the homes built for the demographic are barrier free, without steps and with all amenities on one floor. Extra infrastructure is built into the house, so things like grab bars in the shower can easily be added.
Bitely said Sable Homes has implemented a new product called Freedom Foundation that allows homes to be built on concrete slabs, even in northern climates like Michigan’s. The technology uses a specially shaped foam that protects the slab from frost damage, enabling a house to be built without a basement or crawl space, enabling a zero-step platform. Building on a slab saves money and the houses can be built in the $160,000 to $170,000 range, he said.
“Here in Michigan, everyone thinks you need a basement,” Bitely said, but he said 85 percent of the nation doesn’t have basements. “We’re the weird ones,” he added.
According to the NAHB, sales to those 55 and older are the best since before the Great Recession and should continue for awhile.
“Like the overall housing market, we continue to see steady, positive growth in the market,” NAHB Chief Economist David Crowe said.
“With the economy and job growth continuing to improve gradually, many consumers are now able to sell their current homes for a suitable price, enabling them to buy or rent in a 55-plus community.”