Last week the National Association of Home Builders (NAHB) released a new segment of its Housing Market Index (HMI) that tracks the confidence levels of builders that serve buyers of homes that are 55 years or older. The HMI has been used for over 20 years to gauge builder perceptions in the single-family home market and has been slightly modified to track the aging population demographic for the United States. For the fourth quarter of 2008, the 55+ HMI debuted at 18 whereas a rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses. The new index was designed to provide insight into the home buying activities of the baby boomer generation, which is expected to exceed 85 million people by 2014. Builders were slightly more optimistic about the 55+ market segment over the next six month showing a higher rating for this segment versus the broader housing market.
“In December, NAHB’s HMI for the overall single-family home market was at an all-time low of 9, so the 55+ market is holding up slightly better than the market in general, but that is little consolation,” said NAHB Chief Economist David Crowe. “Consumers across the country are suffering, and every sector of the housing industry is being impacted by the current economic and financial crisis.”
“Over the past two decades, ‘active adult’ and service-enriched communities have become an important segment of the housing market, and this new index will help us gauge the health of that market,” said Pat Kelley, chairman of NAHB’s 50+ Housing Council and a builder from St. Louis. Kelley noted that such data is especially important right now, when not only builders, but policymakers are making important decisions based on market conditions.
To develop the panel of 800 builders, the NAHB started with a mailing of short questionnaires to about 2,000 builders building for 50+ households defined as those building age-restricted communities and communities whose residents are, for the most part, more mature buyers. The profile of the 55+ HMI builder would consist of the following:
- Over half of the survey respondents (51 percent) built homes in 2008 that were not age-restricted but in communities where most buyers are 55+, 35 percent built active adult/lifestyle communities, and 28 percent built age-restricted homes. In 2009, 55 percent, 39 percent, and 31 percent, respectively, plan to build in these 55+ housing segments.
- Nearly half of the respondents (48 percent) have built 55+ housing for 10 years or longer, 23 percent have built for this market for 5 to 10 years, and 29 percent have done it for less than 5 years.
- The average number of 55+ housing projects started by the respondents is six for 2007 and four for 2008. A third of the builders built no 55+ projects in 2007, compared with 42 percent in 2008.
- When asked about the type of 55+ housing built in 2008, 67 percent reported building single-family detached homes, 29 percent built single-family attached/townhouses, 20 percent built multifamily units for sale, and 6 percent built multifamily units for rent
For the full press release and information on the 55+ HMI, click here.