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MortgageReal Estate

The 55+ housing market is booming

Builder confidence in this sector reaches record high

The 55+ housing market is thriving right now as more Baby Boomers look to invest in a new nest to live out their retirement dreams.

With scores of older adults looking at new single- and multifamily builds, homebuilder confidence in this market has soared to a record high.

According to the latest from the National Association of Home Builders, builder confidence in the 55+ market reached 76 in the first quarter of 2019 – up six points from the previous quarter and the highest score since the index started more than a decade ago.

All three components of the index in both the single- and multifamily categories posted gains in Q1, with present sales, expected sales and prospective buyer traffic climbing, the NAHB revealed.

"Favorable demographics and recent declines in mortgage rates have helped support demand for 55+ housing," said NAHB Chief Economist Robert Dietz. "We expect continued growth in the 55+ housing market, provided builders are able to manage the challenges of regulatory, land acquisition and construction costs." 

Karen Schroeder, chair of NAHB's 55+ Housing Industry Council, said the market is strong, but not without its challenges.

“Overall, demand for homes in 55+ communities remain strong as more buyers and renters in that market search for simpler living arrangements," said Schroeder. "However, there are still headwinds that are impacting the market.”

Schroeder pointed to rising construction costs and a lack of skilled labor as problems for builders, factors that could drive up costs for buyers.

In order for the 55+ plus market to realize its potential, building affordable homes that appeal to this demographic is key.

Some mortgage professionals point out an answer in a little-known financing option that is specifically designed for older homebuyers.

It’s called a Reverse for Purchase or, using the official product name Home Equity Conversion Mortgage, a HECM for Purchase.

It allows an individual 62 or older to purchase a primary residence and obtain a reverse mortgage in a single transaction. With one set of closing costs, they can purchase a new home without incurring a monthly mortgage payment.

The deal requires a significant down payment, often more than half the purchase price and that equity is then used to generate the reverse mortgage.

Michael Banner, a long-time HECM for Purchase advocate and the president and CEO of Professional Mortgage Alliance, said builders that are not promoting this financing option in their marketing are missing out big time.

“You will sell a more expensive house if your client is getting a Reverse for Purchase, there is no doubt about it – statistics prove that,” Banner said. “The clients will buy more extras, and more expensive extras, due to the simple fact that they are not going to have a mortgage payment.”

Banner said builders should get in touch with a local HECM specialist for details on the product and should make sure they’re working with someone knowledgeable.

“Ask, ‘How many Reverse for Purchases have you and your company done?’ They’ve got to ask that question because this is a specialized product. If that answer is not satisfactory, they need to contact a true HECM for Purchase professional. Look on Google, YouTube, or contact the National Reverse Mortgage Lenders Association,” Banner said.

“Bottom line, you will sell more expensive homes, you will most certainly sell the higher options and extras, which, let’s face it, that’s where the builders profit.”

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3d rendering of a row of luxury townhouses along a street

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