Home builders: Baby Boomer home sales disappoint

Builder confidence in the housing market for those 55 years of age and older is slipping, highlighting a recent trend showing that Baby Boomers are staying put rather than downsizing.

According to the latest Housing Market Index from the National Association of Home Builders, sales of single-family homes to those over age 55 declined seven points to 60 in the third quarter.

But builders aren’t completely down on the market as a reading above 50 indicates that the sentiment is good, whereas a score below 50 means confidence is poor.

All three measurements of the single-family market for the 55-plus set saw a decline. Present sales dropped seven points, while expected sales for the next six months also fell 12 points and traffic for prospective buyers decreased four points.

NAHB’s 55+ Housing Industry Council Chairman Chuck Ellison said part of the problem is that some builders are having trouble producing homes in the budget for prospective buyers in this age bracket.

“In some places it is becoming a challenge for builders to provide housing at prices their customers can afford,” Ellison said, although he added that there are many parts of the country where the market for the 55-plus set is still doing well.

NAHB Chief Economist Robert Dietz pointed to several factors that are eroding builder confidence in this age group.

“The decline in the single-family 55+ HMI is consistent with the recent weakness in new and existing home sales,” Dietz said. “The high readings seen in the previous three quarters are not sustainable with high construction costs and rising interest rates.”

NAHB’s latest index results hark back to a trend emerging among the Baby Boomer generation: Many just aren’t downsizing in their retirement years.

A study released by Trulia in September revealed that seniors are holding off on downsizing, with just 5.5% of those surveyed saying they had moved. Of those who did, the split between single-family and multifamily dwellings was pretty even.

A second study released earlier this month by First American revealed that the median tenure for homeownership has jumped to 10 years, up 10% from last year. First American Chief Economist Mark Fleming also pointed to rising rates as the culprit and suggested it will increase the incentive to use a home equity line of credit for renovations.

“As rates rise, many existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate,” Fleming said, adding homeowners who choose to stay put might look to access their equity in other ways.”

“I think that HELOC loan demand will increase,” Fleming said. “The higher mortgage rates go, the larger the financial penalty for moving, and the greater the incentive to renovate with a HELOC loan instead.”

Article source: https://www.housingwire.com/articles/47281-home-builders-baby-boomer-home-sales-disappoint

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