Cutting Edge: Sky diving is just one of the heart-pumping, non-traditional amenities age-targeted communities offer to attract today’s active adult buyers.
Credit: Steve Cole
These days, Tim McCarthy finds nothing relaxing about going out to lunch with prospective buyers of his age-targeted homes.
“They are going to sit there, they are going to grill me, and they are going to ask a lot of tough questions,” says McCarthy. “They are sophisticated. They’ll ask me questions about how we are financing our communities.”
But rather than reaching for a large bottle of Tums and telling his assistant to hold all his calls, the managing director of Pennsylvania-based Traditions of America encourages the lunch dates and welcomes the questions. It’s all part of a sales program that, start-to-finish, is designed to quell the considerable fear older buyers have had since the stock market’s dive in the fall of 2008.
“The significant reality is that they are traumatized by their financials in the past year,” says McCarthy. “Just a year ago, not only did they watch their stock values collapse and their home values collapse, they saw the runs on the banks. Many of them are still selling their stock and buying gold. They are afraid.”
And they are distrustful. “I think there is distrust for big banks, and I think there is distrust for big builders who just left town,” says McCarthy. “I think they want to be able to look the owner of the company in the eye and get real straight answers. They love the unvarnished truth.”
Hence, the numerous lunches and a number of other programs Traditions of America offers to calm worries, including refundable deposits, home staging, and help in pricing prospective buyers’ existing homes as well as helping them find the right listing agent. (See “Hand Holding and Tough Love,” right.)
It’s working. At the home building peak, Traditions was selling six to eight homes a month in each of its communities scattered across Pennsylvania. Now the company is closing four to five, an enviable pace even for non–age-based communities.
“It’s not about what we’re building, it’s about how we’re selling,” says McCarthy. “It’s about making the transaction risk free.”
It’s also about creating an age-targeted product that the buyers perceive to be different from the ones their parents might have favored—communities where wine tasting (and making) replace pot lucks, pickleball replaces bocce, and sky-diving replaces a round of golf.
The Big Thaw
Rapid Recreation: Del Webb’s Sun City Carolina Lakes built a kayaking center for residents.
While Traditions may have cracked the code of selling to older buyers in the current market, many other builders are still struggling and eagerly awaiting a spring thaw from the winter no one expected to occur in the 55-plus buyer market.
That market was expected to remain sunny for the next couple of decades. The theory was that the 78 million Baby Boomer “me generation” buyers’ relative wealth and free-spending ways would weather any storm in the general real estate market. Then the stock market crash came and plunged that market, too, into a deep freeze.
Before the crash, Shea Home’s active adult housing market was down 20 percent, but still performing better than its other markets, which were down 40 percent. Now they’re both equally challenged, says Rick Andreen, president of active adult communities for Shea.
“It used to be 55-plus buyers would overcome the psychological thing [of a depressed housing market] and take the risk and buy and rent out their old home,” says Andreen. “They were fine about taking risks before September of last year.”
Not now. So Shea is trying various sales tactics to overcome worries. “I think what we have to do is be better in the sales process about talking about these things,” says Andreen. “Our salespeople are so used to talking about the benefits of our housing products and lifestyle that they have a little harder time counseling someone who is 60 years old on finance. It’s difficult from a credibility perspective.”
Ultimately, Andreen sees time as the definitive cure for the over-55 market. But make no mistake, he believes there will once again be a huge market for new homes targeted for 55-plus buyers. And those builders who are able to get even a small slice of it will profit mightily.
Cha Cha Changing
Yet questions remain. Has the recent market crash fundamentally changed Baby Boomers, transforming them from carefree risk takers to cautious worriers? And, will this group of buyers, who famously fight any concessions to age, be receptive to products they perceive to be for “older” buyers?
Andreen thinks the answer is definitely yes for the latter. As evidence, he tells this story about his minivan. “When I was 27 and had been married for a year, I said I would be 6 feet under ground and horizontal before I bought a minivan,” he remembers. Four years and two kids later, Andreen not only owned a minivan, but was extolling the virtues of its comfortable roominess and many cup holders to others.
Just as his view of the world changed after having children, people’s perspectives change after retirement and when they become empty-nesters. Like their parents, it will happen to Baby Boomers, too.
“All of a sudden, the relationships that they have at work are gone after retirement, their social connections change, and their children are gone,” says Andreen.
“A big emotional thing happens, and they are going to seek a change in their lifestyle,” he says.
Empty-nester Boomers crave new connections and new experiences, he says. They become tired of taking care of the big house and begin to desire freedom, and sometimes that sends them looking for a neighborhood where the living is easier.
“That [desire for change] is something that I will argue is going to significantly offset the emotion of what’s happening to them financially,” Andreen asserts. Their smaller nest egg might lead them to choose to buy a 1,700-square-foot retirement home rather than a 2,300-square-foot one, he continues, “but they are still going to seek a change in lifestyle.”
Most Baby Boomers aren’t at that stage yet. “That psychological transition occurs when someone actually retires,” he says. And the first of the Baby Boomer generation won’t start turning 65, the traditional retirement age, until 2011. While, given the economy and their free-spending ways, many will continue working, some won’t. And, because their total numbers are so huge, even snagging a small share of the market will be significant, Andreen argues.
Becoming Their Parents, With Style
But just because Boomers will go through some of the same emotional events that their parents did that may trigger a desire for a life change doesn’t mean that they will choose the same type of retirement lifestyle. Rather, it is far more likely, say those who keep tabs on the active adult market and the Boomer psyche, that they will rework it to make it “cooler” than their parents’ retirement living, in the same way other products have been revised to appeal to the style-conscious group.
The typical male Baby Boomer will still want a comfortable recliner, but the La-Z-Boy recliners today have been made far more stylish than the one his father watched football from. Another example of how Boomers restyle things is that minivan, which was embraced by this group in their child-bearing years but eventually was replaced by muscular SUVs. “Boomers will just take these things and put them on steroids,” says Andreen. “I think it’s all going to be continuously revised and evolve.”
Multiple Personalities
“The reality is nobody really knows” what Boomer buyers are going to want in retirement, says Ron Robichaud, of Robichaud Financial Services, which advises home builders. “There’s the big question about whether they are going to want to go age-restricted. But they are caught betwixt and between in that they don’t want to be with old people, but they don’t want to be with kids either.”
Robichaud thinks the answer is that there will be no single answer to the question of what kind of housing Boomer buyers will want in the later part of their lives. After all, it’s a generation that prides itself on originality.
“There will be enormous fragmentation in the market,” he says. The good news is that with so many buyers in that age group there will be plenty of prospects for even niche interests.
Knowing that there is no one answer to what 55-plus buyers want, and that what the dynamic generation wants right now is likely to change over time, developers of age-targeted communities are building flexibility into their developments and amenities.
“Interests of Baby Boomers change,” says Andreen. For example, “we wouldn’t put in a bowling alley. That’s expensive, and it’s likely to be converted to something else later.”
Steve Bomberger, owner of Delaware-based Benchmark Builders, says he builds smallish clubhouses for his communities, because his buyers don’t want to be saddled with the costs of elaborate amenities. Instead, he designs the spaces to be flexible, so the residents can decide how to use them.
“I call it a stage,” Bomberger says. “We give them a stage, and they can produce whatever they want. We always seem to find one person within every community who is the social butterfly, who loves to put together the bridge club or whatever and suddenly the clubhouse has a calendar.”
Different Strokes
Wine Winner: Crushing grapes is a fall activity at Shea Home’s Trilogy at the Vineyards where grapevines replaced the golf course.
Pulte’s Del Webb brand has already begun evolving, from golf course–centric communities to communities where location dictates some of the amenities. While the brand continues to focus on offering over-the-top amenities that “trump everything,” and golf courses are still part of many of those, says Caryn Klebba, Pulte’s corporate communication director, there are now other choices.
For instance, Del Webb’s Sun City Carolina Lakes, which borders a river, offers a canoeing and kayak center and a kayak run where residents are picked up at the end and taken back to the center.
“The must-have [in every community] is being responsible to needs and not doing the cookie-cutter community,” Klebba says. “The bottom line where we are headed with the brand has been that we are being adaptable.”
Andreen would just as soon eliminate golf courses all together in many communities where there is another way to create open space. Most residents don’t regularly golf, but they like living on golf courses because of the attractive open space view. “We’ve never done just golf,” he says.
Shea’s Trilogy at the Vineyards in the East San Francisco Bay community of Brentwood has a vineyard planted on its rolling hills rather than a golf course. Residents recently got together there to crush grapes.
“People really like it,” says Andreen. “The clubhouse has a full spa. It’s a bit like going to Napa Valley. It creates a different ambiance that is unique to the Bay Area.”
But the same model wouldn’t work in other markets. “We don’t prescribe” one model for the company’s 55-plus product, Andreen explains. “What we do when we expand into Texas will be different from what we do in the East Bay, for instance.”
There’s No Place Like Home
While active adult communities have their roots in the huge developments in Sun Belt states, they’ve grown well beyond that region. Since traditionally only 20 percent of home buyers move very far away from home after retirement, many communities have begun to sprout up around large metropolitan areas for older buyers who want an age-targeted living experience closer to home.
That phenomenon has made it easier for small local builders to compete with large production builders in the 55-plus market because the developments tend to be smaller and less costly than the giant communities that started the active adult genre.
“Most of our customers are moving fewer than 10 miles,” says Traditions of America’s McCarthy. “They want to stay close to their family. They want to stay close to their grandchildren. They will still be going to the same church, same schools, same libraries, and many of them are still working.”
But they want to get away from their existing homes, which aren’t working for them anymore. They want to be done with home maintenance and yard work.
“They want one-floor living, but they buy second floors as space for grandchildren and visitors,” says McCarthy. “They want to get away from the old mechanical systems that are not energy efficient. And their neighborhoods have changed. Many of their old neighbors have moved, and young families with children have moved in.”
All of those desires make Baby Boomer buyers very interested in moving—it just takes more finesse to get them to commit these days. But it’s worth the extra effort because, in the end, they are better buyers than the rest of the market, builders say.
”Boomers still are very qualified buyers,” McCarthy says, “and still very affluent compared with the rest of the country.”
Hand Holding and Tough Love
On Target: Traditions of America’s sales centers continue to attract crowds despite the downturn.
Credit: Courtesy Traditions of America
Successful age-targeted home builders share sales tips that work.
Attracting potential buyers to Traditions of America’s sales offices is easy, says Tim McCarthy, managing director of the Pennsylvania-based builder of age-targeted homes.
“They are out looking,” he says. “We got 1,000 people through our sales offices last month.”
Getting them to buy is a much more difficult proposition in a market that has 55-plus buyers frightened and distrustful. Yet Traditions has devised a sales program that is working, successfully turning lookers into buyers. “We are selling four to five a month in each community,” McCarthy says. “It still produces very strong financial results for us. We are profitable at this rate.”
But, be aware, Traditions of America’s sales program is not for the lazy. Arduous, painstaking, long, and costly—all describe the system it uses to get older buyers off the fence and into one of its homes.
“The transaction has to be made risk free for them,” says McCarthy. “The first thing we tell them is, ‘Yeah, we know you are really worried about what’s happened to your home’s value, but if you can’t sell your home, you don’t have to buy ours. You get every penny back.’ You have to say that like 10 times to them.”
To help them through the process, Traditions set up a separate department that manages the listing and selling of customers’ existing homes. It also provides staging services to show the buyers’ homes in the best light.
“They are really not prepared to take over the sale of their home,” he says. So, a year and a half ago Traditions hired three full-time professionals who help buyers find the right agent to sell their existing home, oversee the valuation process, monitor brokers’ performance, and represent owners in sale negotiations, McCarthy says.
“They really need professional help,” he says. “And we are vested in selling their house and for selling at a high price.”
McCarthy says the three employees more than earn their wages. “I actually thought we would get a lot of cancellations, but we’ve had one,” he says. “We sell everyone’s home. As of this month our average price realized is 98.6 percent of list price, and we are getting buy-in from customers.” And the homes are selling in about 76 days, half the local market averages.
Traditions also lets buyers take their time between contract and closing. “We have real long settlement times, so we’re not rushing them,” he says. “And we guarantee them against any price cuts.”
The company builds confidence in buyers by assuring them of its stability. McCarthy, himself, lunches with buyers, easing their fears by answering their hard questions honestly, convincing them that the company is on sound financial footing.
“We cannot leave any doubt in the customers’ minds about our financial situation and our commitment to finish the project,” he says. “You can’t look like you are on a shoestring.”
McCarthy says that, in his market, it helps to be a smaller private rather than a big public builder because his customers have watched the large public builders leave town.
“They want to know that we are all in, that we’re from here and we’re always going to be here,” he says.
Lastly, McCarthy says Traditions offers products buyers want.
Lately, that’s a smaller, less-expensive house, he says. But smaller doesn’t mean bland and cookie-cutter.
“I think they need to be sold that the builder is sincere about building what they want,” he says. “They want very flexible floor plans with plenty of opportunity to customize.”
“When the economy got tough, the first reaction [for some builders] was to cut back on choices,” he says. “I think that’s exactly opposite of what you need to do.”
But, for Traditions, the homes themselves may be the least important element of the sales equation, says McCarthy.
“I think in our case it’s not about what we’re building,” he says. “It’s about how we’re selling. It’s about making the transaction risk free and giving the customer peace of mind. It’s not about building a better kitchen or a nicer bath.”
Traditions isn’t the only builder of age-targeted homes who is getting some selling traction through a variety of fear-calming techniques.
Steve Bomberger, owner of Delaware-based Benchmark Homes, also offers buyers no-risk contracts contingent on selling their existing homes as well as the services of home stagers.
“At least we are getting them to make that first step,” he says. “This is the first downturn in the housing market where I have seen [55-plus buyers] frozen in the headlights like a deer. They don’t know what to do.”
At first, Benchmark’s sales agents took the hand-holding approach with potential buyers as well. But lately two new slightly different tactics have been added to the sales arsenal as well—tough love and creating an addiction.
Benchmark works hard to sell its lifestyle, and it continues selling it even after the contract is signed during the 90-day contingency time frame. The goal is to hook its want-to-be residents on its communities’ lifestyles. For instance, they get invited to ice cream socials and other events where they meet their potential neighbors. That has the effect of helping them mentally begin making the transition to what their new life will be like.
In addition, there’s a lot of emphasis placed on the easier maintenance and lower energy costs of the new homes versus their current ones.
Next, when a buyer balks, perhaps because an offer on their existing home is less than they thought it should be, the sales agents tell them that they can’t help them until they get realistic about how much their home is worth and stress that they’re going to miss out on a buying opportunity. Then they send them home without any further rationalizing.
“It sends them back home with this dejected feeling,” says Bomberger. They’ve begun to see themselves in the new house, met their potential new neighbors, and gotten excited about the lifestyle change.
If it happens to be autumn and the leaves start falling and they face buying fuel oil for the winter, or maybe summer’s starting and the grass starts growing, the new low-maintenance home looks even better, he says.
“Invariably, the couple argues” with the wife on the side of moving, says Bomberger. “And then they come back and buy.”
Don't Tell, Don't Ask
Staying Put: Residents can easily age in place with roll-in showers and roomy kitchens in Traditions of America’s homes.
What not to talk about when selling to age-targeted home buyers.
There are a few dirty words and one obscene item practically guaranteed to turn off buyers of age-targeted homes.
Unmentionable phrases include: “age in place” and “Universal Design.” Item to ban from all models: visible grab bars in the bathrooms.
Yes, these are good and useful things, and most buyers will be grateful for them in time. And deep down, the buyers really want them included. But mentioning elements in homes that remind buyers who are active today that they soon might not be, can make them cringe like an adolescent boy being dragged through the bra aisle by his mother.
The sight of a grab bar that looks like it belongs in a nursing home can ruin the mood you’ve carefully crafted when showing off communities chock full of activities and amenities designed to get buyers excited about how socially and physically active their new lives will be now that the kids are gone.
That doesn’t mean that builders of age-targeted communities are neglecting to include Universal Design elements that will help buyers age in place in their homes and make the homes more accessible to all users in the meantime as well. The more responsible builders are, the less they talk about it unless asked, they say.
“They won’t ask about it,” says Tim McCarthy, managing director of home builder Traditions of America. “They don’t want to say it out loud. No one ever asks how wide the doorways are, but you can see them measuring them in their minds.”
Yet Traditions incorporates many Universal Design elements into its homes anyway. In addition to the wider doorways, lower switches, step-less entries, higher counter tops, and elevated appliances are standard.
But the builder doesn’t install grab bars in the bathrooms. That is the item that sellers say may be the biggest turn-off of all to buyers of a certain age. However, Traditions does put wooden blocking behind the tile to make it easy to install grab bars later without having to rip out the tile. “People don’t want them standard,” McCarthy says.
Steven Bomberger of Benchmark Homes employs similar tactics, offering grab bars as an option, by putting wood blocking behind the tile as a standard feature. Benchmark also puts in at least one threshold-less entry when possible.
“We don’t advertise Universal Design or say it in any of our literature,” Bomberger says. “We say ‘easy living,’ or ‘first-floor living,’ ” he says. “We tell them how their new home is going to be a lot easier for them, not only for their abilities, but because of low maintenance and energy efficiency. … They are tired of heating the big house, and they are tired of taking care of the yard.”
While most older buyers aren’t asking for Universal Design features in their homes, a recent study by the NAHB and the Met Life Mature Market Institute has uncovered some other items potential buyers do say they want in a home:
A master suite or at least one bedroom downstairs;
Technology, including wiring for high-speed Internet connections, home security systems, low-voltage wiring for electronic signals, and energy-management systems;
Low-maintenance homes that offer savings on energy costs;
Conveniences and services available in the community such as home repair, transportation, house cleaning, home-delivered meals, and personal care; and
Home office space, since many people are working longer these days.
One thing most buyers aren’t asking for is bigger homes chock-full of luxuries, something that’s changed with the falling stock market and home prices.
“They are looking for affordability, not just in the initial purchase but in maintenance and energy costs,” says Rick Andreen, president of Shea Homes’ active adult product division. “I think that is one shift that has occurred in the market that will be lasting,” he says.