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| May 22, 2009 |
By: Polyana da Costa |
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eal estate agent Jeff Katz knows many colleagues who are struggling to sell homes in this down market. But for him, “business has never been better.”
Katz specializes in representing potential buyers in so-called “active adult” developments, those that cater to residents 55 or older and attributes his success to that niche, which includes about one-fifth of all buyers in the U.S.
This year, he has closed or put under contract nine homes in Palm Beach County. Last year, for the first time in his seven years in the business, he ranked among the top 100 ReMax agents — out of 4,000 — based on commissions.
“It was definitely because of my specialty,” he said. “If I specialized in something else, I would probably have been hurt just as much as the other agents [in the overall market].”
He focuses on properties varying from $300,000 to $600,000 and said about 90 percent of his clients are from the nation’s Northeast region.
Like Katz, local builders also say the active adult market is weathering the recession better than other residential sectors.
GL Homes is marketing houses for sale in two active adult developments — Valencia Pointe in Boynton Beach and the Valencia Reserve in Delray Beach. Between the two developments, GL has sold more than 100 homes this year, totaling about $36 million in sales, said Marcie DePlaza, GL Homes’ division president.
About 60 percent of the buyers are paying cash, she said. They include retirees moving from the Northeast, cost-conscious buyers relocating from country club communities where they have to pay thousands of dollars in annual membership fees, and others who were priced out of the market during the housing boom and are now finding bargains.
“Between those three groups, we have done very well,” she said.
About half the units that went under contract this year in those developments have yet to close, but DePlaza said she considers them done deals. The contract default rate in GL’s active adult communities over the past year has been less than 2 percent, she said.
“And unlike during the boom, nowadays people are buying with their eyes wide-open,” she said.
Adam Rosenblum, vice president of marketing and sales for Palace Management Group, which developed the Palace at Weston, another active adult community, said if buyers weren’t such reliable closers, his project would have been in the same trouble as so many others across South Florida.
“We are able to close about 90 percent of our contracts,” he said of the 382-unit project that was completed in 2007 and caters to 55 and older buyers.
Many developments that were completed in 2007 and 2008 failed since buyers refused to close because of the declining market. Many walked away from large deposits.
But for people like Rhonda Moses, walking away from a contract wouldn’t be an option — even if that meant loosing $100,000.
Moses, 57, and her 55-year-old husband closed on the $446,000 purchase of a house at GL Homes’ Valencia Pointe last month.
The New Jersey couple had signed the contract last year, right before the financial market collapsed in October.
“I knew the price of our house had gone down about $100,000 over night,” she said. “But we did not hesitate to close. If we were younger maybe I would be more concerned, but my husband was burnt out and I thought it was the right time to make the move. We are not wealthy people but over the course of time it is not going to make that much of a difference.”
Moses said she was able to get some free upgrades from the builder at closing.
READY TO BUY
As they age, many buyers aren’t willing to wait for the market to improve, Katz said. And with prices “bottoming out,” older buyers who were priced out of the market during the boom years are now coming back.
“There is a group of people who have been looking to buy a retirement home for about 10 years. They see the market is down and say, ‘Why not make a move now?’ ” Katz said.
Also, many retirees have saved enough to buy with cash in a market where it’s very difficult to get a mortgage, said Brad Hunter of Metrostudy, which tracks housing data in South Florida.
And because their careers are largely behind them, they don’t have the job securities concerns that keep younger people from shopping for a home.
“Both markets are depressed but the active adult market is doing much better than the family-oriented communities,” Hunter said.
Still, many older buyers have been hurt by a volatile stock market, which has pummeled their retirement accounts; and are trying to sell their current homes that have lot substantial value.
Betty Smith, a sales associate at the Villaggio, a subdivision developed by Ansca Homes for residents 55 and older in Lake Worth, agreed.
“It was a little slow with everything that was going on with the stock market, but it’s starting to get better again,” she said. “We are definitely selling better than the family market.”
Smith said the 538-home project is almost sold out, with 17 houses left for sale. Six homes have sold in the last two months.
Rosenblum of the Palace at Weston said the fact that the active adult sector is surviving the recession better than the rest of the market doesn’t mean sales in some communities have not been off by as much as 50 percent.
And at least one active adult development in Palm Beach County is in foreclosure. BankAtlantic in January filed suit to foreclose on 163 unsold units at Tivoli Isles, an active adult development by Home Devco in Delray Beach. The developer only sold 152 homes in the 315-house development.
“Sales at the Tivoli have been slow,” Katz said. “It’s a much smaller community with a smaller clubhouse. Larger communities seem to be doing better.”
A call to the developer was not returned.
But regardless of some of the failed adult developments, the long-term prospects for this niche market seem promising.
The number of Americans age 55 or older has increased from about 59.3 million in 2000 to about 70.6 million and is expected to reach 85.3 million by 2014, according to a report by the National Association of Home Builders that cites data from the U.S. Census Bureau.
According to the NAHB, the demand for active adult housing is expected to reach its peak from 2012 to 2015, when 2 million baby boomers per year will reach the 65 retirement age.
But for now, builders are being conservative. According to the NAHB, about 126,000 homes will be built this year nationwide for buyers 55 and older, compared to about 249,000 last year.
“We will wait and see what happens to the economy before we announce our next project,” said Smith of Ansca Homes.
Polyana da Costa can be reached at (561) 820-2065.
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