My friend Ken Perlman at JBREC consults with new-home builders primarily, but these thoughts apply to the resale market too – notably, the 65+ generation growing by 17 million people in the next ten years!
With the national housing market surging, active adults have decided it is time to participate again. As discretionary buyers, they’ve had time to “restart” their purchasing process, and many of our developer and builder clients report that with proper health precautions in place, they’ve been willing to do so. In many age-qualified communities across the nation, home sales were particularly strong in August and September.
The pandemic hasn’t changed the size of the active adult population or its motivations. The active adult buyers are a key component of housing demand, as the 65+ population will grow by a net 17 million people over the next ten years. We know one of the highest priorities for this buyer set is being close to children and grandchildren. This means that as the Great American Move takes place in hot markets from Phoenix to Southern California’s Inland Empire to Sarasota, Florida, active adult buyers are following.
They are wealthy with large homes they can sell. Our active adult developer and builder clients told us one of the biggest fears their buyers had heading into the pandemic was the negative impact on their stock portfolios and on the homes they had to sell. Those fears have largely subsided with a rising stock market where the S&P 500 is up 10% year over year (YOY) and existing home Google searches up 30% YOY, as well as the Burns Home Value Index (BHVI) up 5.5% YOY.
4 Keys to Success
Active adult buyers are ready to buy now, so make sure you have inventory. Builders we spoke with in the active adult space told us standing inventory numbers are low, and some are tripling the number of standing inventory homes they produce to satisfy demand. Some are also simplifying what they offer in their homes, a process that streamlines housing production and keeps new home prices more attainable. Despite their wealth, these buyers are still prudent about how they spend their money.
Design elements that appeal to primary buyers also appeal to active adults. Per JBREC’s Consumer Products and Insights survey, more than 70% of new home shoppers between the ages of 55 and 69 included a member who worked at least part time. Work-from-home spaces were always critical to this buyer and are even more so today. Indoor/outdoor spaces are top of mind for active adult buyers, particularly those who live in warmer climates. Opportunities to live in the “healthy” outside while still maintaining cover is a big reason why open corner sliders and outdoor living rooms are immensely popular among this buyer set.
A strong virtual presence is essential. Active adult buyers are not afraid to use technology to search for a home; they rely on it. Active adult developers and builders around the country reinforce that their buyers are doing extensive research online before ever coming to the sales office, and we’ve heard reports of conversion rates among prospects in this space tripling post-pandemic. With travel more restricted and the market expanding rapidly, some active adult buyers are tying up their lots and homes efficiently via builder websites before ever visiting the neighborhood. Empire Communities in Atlanta told us, “We leveraged our virtual platforms, created new virtual platforms, optimized our online campaigns and online sales consultant initiatives, coached the sales teams to get out of their comfort zones, and shifted into a ‘we got this’ attitude.”
Active adult buyers still want to visit sales offices before they buy. While technology is helping buyers become educated, developers were universal in their opinion that this buyer cohort still want to make its final purchase in person. This means that an on-site sales office, decorated models, and well-organized system for coordinating appointments are still critical for selling homes to this buyer profile. Our clients across the country told us that with proper safety precautions in place, active adult buyers prefer visiting sales offices or models in person.
While the first-time and move-up buyers have clearly been the headlines of the housing market resurgence, the active adult buyer is starting to reemerge. We are assessing active adult housing across the country and watching product trends and buyer preferences. Let us know how we can be a resource for you. email@example.com
Catherine asked what I thought about the next 1-2 years of real estate.
First let’s discuss why real estate in the future won’t be like it’s been in the past – we’re out of dirt. Here’s my conversation with Bill Davidson in 2012 about the future of home-building in San Diego:
This is from 2015:
“We’ll be the Bay Area in no time,” said Borre Winckel, president and CEO of the Building Industry Association of San Diego. “We can offer very few product lines for the middle-class buyer.”
San Francisco was once a quirky, counter-cultural city that was home to a bevy of activists, artists and writers. But that city is vanishing because of sky-high housing costs. Now, only the elite can afford to live in the city and, like in Manhattan, low- and middle-income workers are forced to live further afield and make long commutes to their jobs.
San Diego is not far behind. It is already the nation’s fifth most expensive housing market, according to the National Association of Realtors. Only an estimated 25 percent of households can afford the median home price.
Even more troubling, most of the apartment units under construction are higher end, catering to wealthier millennials.
“My lament is that we’re royally screwing the housing opportunity for the middle class and young people,” Winckel said.
San Diego’s population grew by 159,000 people from 2010 to 2014, but the region added only 22,000 housing units in that time, according to the U.S. Census Bureau.
With today’s supply and demand being so out of whack, the outcome is being determined by money. Our home prices have risen steadily over the last ten years (which has never happened, at least since I’ve been around), and it looks like it will continue.
It’s the basis for any forecast, and with that said, let’s explore what could happen, shall we?
There aren’t many (if any) of the larger parcels left for big developments, but if the government was an easier and cheaper component, then new infill projects and the repurposing of commercial/industrial properties into residential could benefit – an excerpt from a CalMatters commentary:
If we want to begin to climb our way out of this housing crisis, where do we start? We can begin by fixing zoning, curbing the worst abuses of legacy environmental laws and lowering the mandatory fees that stifle homebuilding at the permit counter.
“It used to be the Village by the Sea. But it’s not a village anymore when you can build buildings that are four stories tall…really five when you count the top deck.”
DeeDee Trejo was born and raised in Carlsbad. She operates Lola’s Seven-Up Market on Roosevelt Street. It was founded by her family in Carlsbad’s first neighborhood, the so-called Barrio, a historic residential area between I-5 and the Carlsbad Boulevard/101 just south of Carlsbad Village Drive. Lola’s opened in 1943, nine years before Carlsbad became a city.
Trejo’s family lives near the market. “I can’t even have a BBQ at my house and have people over because they can’t find a spot to park.”
The Carlsbad city council last week made some changes to its Village and Barrio Master Plan approved last year. But unchanged is the fact that four-story buildings (45 feet maximum) can still be built in the downtown Village business district. Village parking regularly overflows into the adjacent Barrio district.
Consider the under-construction State Mixed Use 30 development, a four-story mixed-use project on the corner of State and Oak streets. It sits on the border of the Village and Barrio districts. The first floor is designated commercial while the second, third and fourth floors will be 27 condos (14 for sale, 13 time shares). The project is being built with 33 on-site spaces dedicated to the residents. Any overflow residential parking and all the commercial parking will have to find parking space in the already overwhelmed streets of the Village and Barrio districts.
How was this development allowed to happen? Carlsbad senior planner Scott Donnell says the city planning commission signed off on it after the developer agreed to pay for 20 “in lieu parking fees.” This means that instead of providing adequate parking as mandated by law, the city allowed the developer to pay approximately $11,000 for each space into a city fund. That pot of cash is to be used by the city to acquire property for parking and/or build a parking structure.
Donnell says at present he is not aware of any plans for Carlsbad to buy property or build a parking structure.
What will it be like when there are no more new homes to buy in Carmel Valley? Pardee has been building houses steadily for 30+ years, and they will be down to their last 103 lots, once they are done here – and they’ve sold 33 of 44 so far. These are priced from $1.8 to $2.5M.
Toll hopes to sell two per month at Palomar (the image above), and they sold five in October! Altogether they’ve sold 36, which puts them ahead of schedule. They are priced from $2.5 to $3.8M.
This will probably be the last detached-home tract priced under $1,000,000 in SW Carlsbad. Solar is included on all new homes now (starting in 2020), and these are Aviara Oaks schools which goes through 8th grade, then Carlsbad or Sage Creek High Schools. Take your favorite realtor with you!
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