A growing wave of older, wealthier households is poised to enter the rental pool, according to market research firm Property and Portfolio Research (PPR). And the types of housing choices they will make is likely to evolve, another new report indicates.
While those aged 35 to 54 are typically in their prime homeownership years, the decline in homeownership rates and household wealth for this age group, combined with mounting job losses and tighter underwriting standards, will likely push more of them into rentals.
“Homeownership is falling across the board for older homeowners, which should translate to a slightly older rental pool,” says Michael Cohen, PPR’s research strategist.
Overall, homeownership rates have declined from a high of 69.2 percent in the second quarter of 2004, to 67.3 percent in the first quarter of 2009, Cohen adds. But a look inside the numbers tells the tale. The homeownership rate of those aged 45 to 55 went from 77 percent to 74.6 percent in that timespan. And the homeownership rate of those aged 55 and older went from 82.4 percent to 79.8 percent in that same period.
This bump in demand should affect all classes of apartment properties. “If we have a cyclical or a secular decline in homeownership, which would translate into a slightly older and slightly wealthier rental pool, then that should translate into some demand for Class A product, as well as B and C,” Cohen says.
Such housing choices by those 55 and older—a segment that makes up about a quarter of the U.S. population—was also the subject of a recent study by the National Association of Home Builders and MetLife.
The study, Housing for the 55+ Market, found that most Baby Boomers moving into multifamily age-restricted communities do so to be closer to family or friends. But another important consideration is being closer to work. In 2001, only about 10 percent of 55-plus households worked from home, but that grew to 16.7 percent by 2007, the study found.
This jibes with what seniors housing developers and owners are seeing, according to Mark Stemen, a senior vice president of active adult communities for K. Hovnanian Homes. “One trend I’m seeing is this desire to live near employment centers and to keep working beyond what might typically be standard retirement years,” Stemen said. “As a trend, you’ll see more of these age-qualified communities being integrated into existing towns and cities, rather than ‘destination’ communities that are far away.”
Another trend uncovered by the study is a lowering of the age for folks moving into age-qualified communities. In the past, these communities attracted residents closer to the age of 65, but an increasing number of those under the age of 60 are going to age-restricted communities.
Stemen says that K. Hovnanian’s Four Seasons communities in the mid-Atlantic would typically see an average entry age of 63, but in the last few years, it is seeing the younger part of the 55-plus bracket. “This causes us to market our communities to focus on lifestyle, fitness, and wellness, with things like yoga and Pilates,” Stemen says. “So, it’s not your father’s Oldsmobile anymore; it’s a new concept that appeals to the slightly younger empty nesters.”
Households aged 55 and older who move to multifamily communities are much more likely to be singles rather than married couples, particularly single females, as compared to the single-family market. Only 14 percent of age-restricted rentals are two-person households vs. about two-thirds being two-person households in the single-family market, according to the study.