Home Equity Growth Fuels Record Confidence for 55+ Homebuilders

Builders operating in the 55+ housing market have never been as confident in current and future market conditions as they were in the third quarter, according to recent data from the National Association of Home Builders (NAHB). And that has largely to do with continued gains in home equity.

Compared to the third quarter of 2013, the single-family portion NAHB’s 55+ Housing Market Index (HMI) jumped nine points to a level of 59, which NAHB notes is the highest third quarter reading since the index’s inception in 2008 and the 12th consecutive quarter of year-over-year improvements.

“The consistent rise in home equity has contributed to the strong gains in the 55+ housing market,” said NAHB Chief Economist David Crowe in a written statement. “Many consumers who had been sidelined due to the inability to sell their current homes at an acceptable price are now in a position where they can sell their homes, enabling them to rent or buy in a 55+ community.”

The 55+ HMI is broken down into two segments of the housing market: single-family homes and multifamily condominiums. Each measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor. 

An index reading below 50 indicates that more builders view market conditions as poor rather than good. 

For the single-family 55+ HMI, all components posted increases from one year ago. Present sales jumped 13 points to 65; expected sales for the next six months climbed 10 points to 63; and traffic of prospective buyers rose three points to 46. 

The multifamily index posted increases across all of its components as well, albeit at a lower rate than its single-family counterpart.

In total, the 55+ multifamily condo HMI posted a four point gain to a reading of 41, which is also its highest third quarter reading since the inception of the index. Present sales rose five points to 42; expected sales for the next six months grew three points to 43; and traffic of prospective buyers increased there points to 38.

Furthermore, the indices tracking production and demand of 55+ multifamily rentals also posted positive results in the third quarter, with present production rising four points to 52 and expected future production increasing two points to 52.

Additionally, confidence regarding current demand for existing units climbed four points to 64, while sentiment for future demand increased five points to 65.

“Demand for 55+ housing has never been higher, and this quarter’s index clearly demonstrates that,” said Steve Bomberger, chairman of NAHB’s 55+ Housing Council and president of Benchmark Builders Inc. in Wilmington, Del. “Consumers in this market are looking for a home that caters toward their specific needs, and 55+ builders and developers are able to create homes and communities that address these needs.” 

Written by Jason Oliva

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