A new report shows similarities between the growth in popularity and demand for 55+ communities and reverse mortgages in those communities.
While the frenzy to build magnificent housing developments that sprawled across the country has taken what seems to be a leave of absence, there is one apparent bright spot in the residential home building market: active adult communities.
In a new report, the chief economist for the National Association of Home Builders, David Crower, estimates that housing starts for communities targeted at active adults aged 55+ will rise as much as 30% from 2010 and by as much as 46% by 2012. Why the sudden rush?
Crowe explains that because baby boomers are now moving into that age bracket, “the number of those households seeking housing better suited to their changing needs will therefore rise dramatically.” A new report by the 50+ Housing Council of the NAHB and the MetLife Mature Market Institute confirms that trend. The report shows that the recession has made 55+ buyers more practical when selecting a new home but that financial concerns have become a bigger problem.
The report also featured data that shows a growing share of Americans are participating in reverse mortgages, and that more than a third of all borrowers live in 55+ communities, whether they are age-qualified communities (one occupant must be at least 55 years old), or non-age qualified (while not required, most occupants are 55 years or older).
But while baby boomers seem to be enthusiastic to give up their long-held homes and make the transition into these popular and practical age-appropriate communities, they may not be as easy to get into as they once were. The study found that only 55% of new age-restricted home buyers used the proceeds from the sale of their home for the down payment on a unit in these communities, down from around 90% in 2005 through 2007.
That’s primarily due to home value depreciations and a sour selling market that’s wiping away gross proceeds from the sale of baby boomers’ homes, the report found. Despite the economic barriers of entry, these age-appropriate 55+ communities are getting a lot of attention from homebuyers and retirees.
“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%– reported the greatest satisfaction, rating their homes and communities at nine on a one-to-ten scale.”
So what kind of impact does the reverse mortgage industry play in these glamorized communities? While it’s so far been a small impact, it’s growing by leaps in bounds. Consider this: less than 1% of 55+ households reported having a reverse mortgage in 2009. It’s important to note, however, with the popularity of reverse mortgages increasing each year, that figure is almost eight times greater than it was in 2001.
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