In this column written originally for Builder, editorial director John McManus looks at new Census Bureau data regarding the relationship between aging Americans and the homes they live in.
There are 3,143 counties (or equivalent regional districts) in the United States. Only 13 qualify for both of two population pattern rules. Rule one, 6 in 10 or more of the area's households must be headed by someone aged 55 or greater; and rule two, the county must have 20,000 or more of such households (headed by someone 55+).
Ten of the 13 counties that fit the bill are in Florida, two are in Arizona, and one is in the Commonwealth of Massachusetts. Here's a look at the geography of how all those counties filter down to 13, using those two criteria together.
National Association of Home Builders (NAHB) analysis of American Community Survey data on counties with 20,000 or more 55+, and 60% share or more of 55+ households.The fact that only 4 one-thousandths of the total share of U.S. counties fit those two criteria is less important, however, to home builders and developers than this: one in five households in all 3,143 U.S. counties--or county equivalents--is headed by someone 55+.
And, according to this important piece of analysis of the Census' American Community Survey by NAHB economist Paul Emrath, in 99% of the counties--that is, 3,111 of the 3,143--the 55+ household accounts for 30% or more of all households. Emrath notes that nationally about 42% of households are headed by someone age 55 or more. Here's Paul Emrath's key take-away:
The 13 counties in Figure 3 are probably of special interest to developers and others looking for exceptional 55+ housing markets. However, as the first two figures have shown, 55+ households are spread across the entire country. The 55+ age bracket accounting for over a third of the households in every state and over 30 percent in 99 percent of the counties. This suggests that, if you can build housing with the right amenities at the right price (not a trivial undertaking), successful 55+ communities (including those that are explicitly age restricted as well as those with features like walking trails, a clubhouse or an outdoor maintenance service suspected of appealing especially to 55+ residents) should be possible pretty much anywhere population density is sufficient to support development with significant community amenities.
Well, guess what, you haven't seen anything yet, because all of those numbers will be jumping the demographic fences like deer into gardens for the next decade or more.
This should tell us some important things underlying the news flow about housing data as this tricky, mixed-signals market progresses into early Spring selling. And, more importantly, it should sharpen homes builders' and residential developers' understanding and action items on a per new home per new community per month basis.
Among the things it should tell us, is 1) if we're waiting for a reversion to norms around the share of first-time home buyers (historically, 40% of the market), we're going to be waiting a long time. That's true, not in the least because the absolute number (and percentage share) of second-, third-, fourth- and even more, -time buyers in the 55+ market will figure as a significant offset to first-time buyers as a percentage of the whole market.
2) three key drivers conspire as fundamentals suggesting huge immediate and sustained opportunity in the 55+ category: a) changing job economics make full-time career employment past age 60 or so a growing challenge; b) house value gains have and continue to relieve negative equity for more borrowers, freeing people from an economic "house trap," and allowing them a mobility option; and c) they need to operate their homes on a lower, more-predictable operating budget.
3) for builders and developers, thoughts should be around 55+ as an entryway into a life-stage, rather than as a final dwelling. Many 55+ will need to work, perhaps in the "sharing" or "gig" economy even though their career jobs are no longer an option to them. Many have older parents or young adult children to help take care of. Many of them have sorer, less supple joints, cocktails of "meds", accessibility issues, and more nights at home, but at the same time, no loss of appetite in many areas one equates with more youthful periods of life. You can well imagine.
Our Hanley Wood sibling Metrostudy data shows that as of 2015, fewer than one in five new homes is built and sells to 55+ households, indicating a massively under-served market of people with greater household wealth, discretionary means, better credit, and, most importantly, big motivation to move into homes that are better-suited, healthier, safer, more durable, more comfortable, more efficient to operate, and more-connected to the resources, needs, and desires people feel they've earned for the next stage of their lives.
We know that no fewer than five or six big public builders that did not have formalized "active adult" community development strategies two years ago now have them, operating at full-speed to move aggressively into that underserved market.
We know that, for many, eyes are on what Millennials will do when they reach the buy or rent fork in the road at about age 35, which is the age the oldest Millennials turn this year.
But this month, next month, and solidly for the next 24 to 36 months ahead, it's what happens in the 55+ market that will make or break most of the new-home players, based on their ability to meet that under-served need. The home builders who are already all-in on this game are optimistic, as the 2015 Q4 NAHB 55+ Housing Market Index survey shows.
When you look at and listen to broadly-drawn predictions of modest, steady growth for single-family new home sales and closings for 2016 and 2017 and probably beyond, it will be in 55+ segment that will account for more than its share of the lift. Of that, builders say they're pretty confident as well.
Follow the money. Lead the pack.