Real Estate News from Homes101™

Wouldn't it be ironic if the people least impacted by changing real estate trends were the oldest folks in the neighborhood?

"The 55+ market is becoming an increasingly important focus of the nation's housing industry as members of the baby boom approach the traditional retirement years," says the National Association of Home Builders. "But builders hoping to entice households into new homes may find the going tough because older Americans, by and large, are happy with where they currently live."

Those above age 55 -- an age which hardly seems ancient -- play an important role the real estate. As people age they tend to earn more (because they've built up their business and job experience over time) and owe less (because their mortgage has been paid down or paid off and the children have finished school).

As to moving, those born in 1952 and before may have little incentive to change residences when a shift to another location means finding a whole new supporting cast of shops, restaurants, friends, doctors and neighbors.

Still, while the percentage of baby boomers who move is relatively small compared to their overall numbers, they nevertheless are an important part of the housing market.

In 2007, says NAHB, "the number of housing units sold to or occupied by these households will account for more than 370,000 of this year's expected 1.6 million housing starts, with 263,000 of them single-family. The estimates also show that 55+ customers this year will account for more than 190,000 of a projected 970,000 new single-family sales and more than 900,000 of a projected 5.25 million existing single-family home sales."

The housing needs of the baby-boom generation are distinctly different than the population in general. A recent visit to an "older" couple in Richmond, VA, reflected many of the values that baby-boomers prefer.

The home was not in an over-55 community. Instead, it was simply in a new project with a rec center, lake and easy access to shopping and downtown. While some baby-boomers prefer over-55 communities with their child-free environments, others find a mix of age groups interesting and stimulating.

The home itself was on a single floor which means there were no stairs to navigate. Our host -- the victim of a recent freak accident (hit by a wave at the beach which resulted in a broken leg) -- was able to easily maneuver around the house because every room and switch was accessible by someone in a wheelchair.

The square footage of the home was not massive, but then vast size is not an attraction when there is little interest in huge amounts of space to clean. What was attractive was the way space was used with great efficiency, many built-ins and high ceilings.

Alternatively, there is an attraction to over-55 communities, especially when well located. "Sixty-six percent of Baby Boomers say they plan to stay within three hours of their current location," says Del Webb, which is now developing Sun City Peachtree, a 1,726-acre property 35 miles from downtown Atlanta which is ultimately expected to have 3,400 residences.

"There's a secret weapon in our business and it's called grandkids," says David Vitek with Del Webb. "Staying close to family and friends, and maintaining links to their community are important things to them."

While many metro areas have now seen a slow-down in real estate sales and a decline in home values, such issues are largely irrelevant for baby boomers. Although home prices today may no longer be at the top of the market in many communities, baby boomers have less reason to be concerned than newer buyers.

On average, says the National Association of realtors, a typical existing home in 1987 sold for $85,600. This compares with $212,800 for February 2007, down 1.3 percent from February 2006 when the median was $215,700.

If you're a homeowner you would certainly prefer home prices to rise, but if you're a long-term homeowner like many boomers then short-term marketplace blips are largely irrelevant. Here's why: First, whatever today's price for local homes it's likely to be sharply-higher in most areas than the price paid 15 or 20 years ago.

Second, the cost-basis for baby-boomers is routinely far-lower than the monthly expense for newer buyers with similar properties. This is the result of a lower acquisition price and thus a smaller or nonexistent mortgage.

Third, many communities make local ownership attractive by offering homestead exemptions for residential property owners and special tax benefits for those aged 65 and older.

Given these factors, many boomers ask: Why move? While retirement may loom, "retirement" as defined in the old sense of sitting on the front porch is out. Many boomers want to work (at least part time), have money, like to travel, are physically fit (thanks to exercise, no smoking, little alcohol and modern medical care) and are as alert anyone in the neighborhood -- a neighborhood they know and like.

However, there is one particularly good reason why boomers may want to move, especially if the new home is nearby and represents a better property in the same neighborhood.

If they elect, boomers can often buy new homes with equity built-up over time; that is, they can move from an older property to a new one at little or no additional cost -- and sometimes at a profit.

Imagine that someone owns a $500,000 home free and clear. They could move to a $300,000 property, perhaps a condo or smaller home, and pocket huge amounts of tax-free profits from the sale of the long-term residence. The end result is a newer home, perhaps a more friendly architecture, plus cash that generates additional interest and investment income. to supplement pensions, social security and other earnings.

Increasingly builders and brokers will have to learn how to work with older citizens, individuals who are not going to move without good reason, individuals who are vibrant, informed and clear about their needs and preferences.

For more articles by Peter G. Miller, please press here.