Marketing to Baby Boomers One More Time

Baby boomers are defined as people born between 1946 and 1964, which includes about 77 million Americans. The name “boomers” comes from the fact that generationally the group is significantly larger than the silent generation preceding them, and Generation X that followed. Baby boomers are significant for many reasons, including that they comprise 25% of U.S. population, control 70% of financial assets, have 50% of consumer discretionary spending power, and account for 32% of all home sales. It should come as no surprise that they remain among the best customers of builders and community developers. The youngest boomers are in their mid-50s, and the oldest are in their early 70s. Unlike millennials, they’ve had time to accumulate substantial equity to invest in a new home. Their incomes are typically higher, and on average so are their credit scores. For these and other reasons, the housing market’s recovery from the Great Recession has been largely focused on the move-up market, and active adult communities (AACs) are doing well. There are 45 million baby boomer households today, resulting in vastly more retirees than when Del Webb was creating the first Sun City AACs almost 60 years ago, which targeted an earlier generation of retirees. All boomers will have reached age 65 by 2030; the Census Bureau forecasts that by then one in five U.S. residents will be of traditional retirement age.

Boomers are a large and diverse group, and not all boomers are ready for retirement. An estimated 45% of boomers have little to no retirement savings (particularly among younger boomers). Many boomers will stay in the workforce longer for financial need or other reasons; about a third of boomers don’t plan to retire before age 70 or older. Boomers born in 1960 or later won’t get full Social Security benefits before age 67, and monthly payments are higher for those waiting to start collecting until reaching age 70. The home builder and community development industry is focused on the healthiest and most affluent quarter of the boomer population that are most actively seeking new housing. Some are value-seeking retirees, while others are continuing to work full-time or are launching encore careers as consultants or something else that they always wanted to do but couldn’t while focused primarily on their kids.

RCLCO recently surveyed 55+ households^[1] that were seeking to move in the next two years to understand why they want to move, where they want to live in terms of community setting and/or concept, and what type of community concept and housing product they are seeking, answers to which suggest how boomers want to live. The why is typically driven by a change in life stage that in turn informs where they want to live, which often means finding a new-home community that better suits their stage of life and the lifestyle they’d like to pursue. Some are ditching the suburbs and moving in-town where the action is, though more are still focused on suburban locations, especially areas with a convenient mix of homes, shopping, and services. As they transition to a new life stage, they’re also thinking about what type of house will best suit their needs, which often means downsizing to a smaller single-family home, townhouse, condo, or apartment. Responses to the where and what provide insightful clues regarding how Boomers would like to live their best life.

Why

When asked about the life stage events that put them back in the housing market, those 55+ were most likely to respond “preparing for retirement,” “retired,” or “last child moved out (empty nest).” Boomer responses to NAHB’s 2016 survey indicated their motivations for moving include “greater piece of mind,” “a fuller life,” “more me time,” and “more money to spend on leisure/travel,” suggesting they intend to keep some of the equity from a sale rather than roll it into their next purchase. In addition, 55+ households in RCLCO’s survey cited their desire to “move closer to family” or “move closer to recreational amenities” as reasons to move, underscoring how they want to spend their time as they retire or consider/approach retirement.

Where

When asked about the type of setting they desire in their next home, nearly a third of 55+ respondents to RCLCO’s survey indicated that they prefer a “suburban area with a mix of homes, shops, and businesses,” while roughly equal shares of respondents desire a primarily residential suburban neighborhood, the city, or a small town/rural environment.

Retirement Preferences of 55+
Close to 80% Prefer Suburbs or Outside a City

Source: RCLCO

Regarding the most important community considerations for their next home purchase, most respondents to RCLCO’s survey, regardless of age, said they’d like a high-quality home in a peaceful and relaxing setting. Those 55+ were most likely to rank “facilitates living a healthy lifestyle by having walking trails, fitness center, etc.” among their top three considerations. In terms of amenities, fitness centers, yoga studios, trainers, and fitness classes top their lists. Households of all ages ranked art and culture high on their lists of desirable amenities, but 55+ households ranked them the highest, suggesting concerts, food, wine and art events, and educational trips are all important activities to them. This is consistent with Shea Homes’ recent survey of their Trilogy AAC consumers, which shows an uptick in interest in food and beverage programming such as cooking classes, food and wine pairings, etc. They report that 70% of their 55+ home shoppers say they’d like a chef-driven food and beverage program in their community. Ken Colen, developer of the successful On Top of the World (OTOTW) community near Ocala, Florida, which has experienced 30% sales growth year-over-year since 2014, says “we find that a wide range of ongoing social engagements are a big factor in creating and maintaining community desirability, particularly with opportunities for continuing education and lifelong learning.”

Top Community Amenities
Art and Culture Grow in Importance for Older Market; Trails and Fitness are Constants

Source: RCLCO

RCLCO’s consumer survey indicates that a little over 30% of retiring boomers are considering relocating out of state, while others plan to move to a new neighborhood in their current city (about 24%).

Preference for Moving in Retirement Among 55+ Households

Source: RCLCO

Key purchase considerations for retiring boomers include affordability, home features, weather, taxes, and community features. Relative to affordability, a majority of boomers seeking new homes indicate concerns about the impact on their finances as one of their biggest potential obstacles. Compared with other home buyers, boomers are willing to consider a smaller home, or smaller lot, to make their new home more affordable.

Market Comprised of Multiple Segments

Source: RCLCO

What

When asked what type of housing product they’re looking to purchase, most 55+ respondents to RCLCO’s consumer survey said they wanted a smaller, lower-maintenance, but higher-quality home than their current residence. The quality of construction, availability of financing, design of the home, and design and appearance of the community are all important factors for boomers considering a new-home purchase. While most 55+ respondents to RCLCO’s survey expressed a preference for a single-family detached home, over 21% said they would consider a single-family attached home—much higher than the 12% that currently reside in such a product. In terms of number of floors, overall about 90% said they would consider a one-story residence, though over one-third indicated they would consider two-story product. Most buyers in RCLCO’s survey (87%) say they prefer the master bedroom on the main floor. This is consistent with other recent surveys suggesting that boomer homebuyers prefer single-story homes.^[2]

The chart below shows responses to RCLCO’s recent survey relative to desired home size by age of respondent.

Desired Home Size Depends On Age As Well
More Older Households Want Smaller-to-Medium Sized Homes, Fewer Want Larger Homes

Source: RCLCO

As indicated by a desire to be closer to family, many boomers are not only still focused on their kids, but they’re also actively involved with their grandchildren. Not all are seeking out childless environments in their next home. Younger boomers are particularly interested in living in a community without age restrictions or purchasing in an age-qualified neighborhood within an all-ages community.

Among 55+ households seeking to purchase a home in the next two years, there is significant variation by price band in propensity to choose age-restricted living. Although over a third of 55+ households seeking homes below $250,000 would prefer to live in an age-restricted community, the share of homebuyers interested in an AAC drops off at higher price points, with fewer than 20% of households looking for homes $600,000 and over interested in age-qualified living.

The preference to live in an age-targeted versus age-restricted community varies by age as well. Propensities for age-restricted communities increase with age, as households seek opportunities to live a more social lifestyle with birds of a feather in new-home communities that facilitate meaningful connections. Younger buyers tend not to be as price sensitive and are likely to prefer larger, more expensive homes. Age-targeted communities are primarily designed for early empty nesters with likely support from late empty nesters/retirees.

Age-Restricted or Age-Qualified Preference

Source: RCLCO

The AAC market has increasingly become much more specialized and segmented to appeal to specific targeted buyer profiles that have varied preferences and market depth. In response, successful communities vary in terms of concept (destination AAC, age-restricted enclave within an all-ages MPC, etc.), location (urban, suburban, resort), product (value, luxury, attached, detached), type and scale of amenities, total number of homes being offered, and affluence level of the consumers they’re targeting. Some examples include:

Age-Qualified Development Types

Source: RCLCO

RCLCO is actively engaged with our builder and developer clients, helping to define specific development programs for new communities as well as assisting with repositioning or introducing new elements to existing communities. RCLCO helps identify specific opportunities in the 55+ space so our clients can create the optimal development, amenities, and housing programs for successful projects in locations throughout the U.S.

Article and research prepared by Gregg Logan, Managing Director, and Todd LaRue, Managing Director.

References

^[1] RCLCO surveyed over 23,500 persons across the U.S., which resulted in 3,430 qualified survey participants who are age 18 or over, have incomes of $50,000 or over, and have intentions to purchase a home in the next 12 to 24 months. About 36% of those surveyed were over age 55 at the time of the survey, and their responses are summarized in this Advisory.

^[2] NAHB’s 2016 survey reported a 75% preference for single-story homes among baby boomers.

Disclaimer: Reasonable efforts have been made to ensure that the data contained in this Advisory reflect accurate and timely information, and the data is believed to be reliable and comprehensive. The Advisory is based on estimates, assumptions, and other information developed by RCLCO from its independent research effort and general knowledge of the industry. This Advisory contains opinions that represent our view of reasonable expectations at this particular time, but our opinions are not offered as predictions or assurances that particular events will occur.