The downturn in the housing market is frustrating developers trying to capitalize on the New York area’s growing elderly population.
Although the residential real estate market in metro New York has fared better than markets in the rest of the country, it is not impervious to the slump, and that’s affected sales at developments catering to people 55 and older. They offer quiet and security, rather than specialized medical care, and are often the next step for empty nesters whose grown children have set up households of their own.
As the notion of retirement moves away from heading down to a Florida condominium, many suburbs are seen as ideal locations for “active adult developments.” Because they cater to a limited, though growing, customer base, sales may be impacted harder than the rest of the residential market, partly because prospective buyers usually come from the immediate surrounding communities.
Also, there’ no urgency to make this kind of move — it’s not driven by medical needs, and these are experienced sellers and buyers who are able to wait for the best offers.
“The downturn will continue to affect how fast senior housing facilities fill up,” said Michael Berne, a managing director and head of the senior housing and healthcare group at Cushman & Wakefield.
But he added that the senior housing market will stay relatively strong, fed by aging baby boomers.
Potential buyers are also slower to invest in age-restricted communities and other developments, because they are having difficulty selling their homes in the suburbs.
In response, some developers in New York suburban counties are enticing buyers by lowering prices and providing free upgrades and add-ons.
“The first phase of a response to a slowing market would be builder’s giveaways — granite kitchens, upgraded bathrooms, all sorts of goodies,” said Bart Cafarella, senior vice president at Prudential Douglas Elliman’s South Huntington office and an active adult development specialist.
Homebuilder WCI Communities provides incentives to sell units at two Long Island active adult communities, according to Gabriel Pasquale, vice president and chief marketing officer for WCI’s northeast region.
Marketing for WCI’s 240-villa gated community, Encore Atlantic Shores in Eastport, near Westhampton, began in January 2005. The project is 62 percent sold. The company projected a four-year sellout. Prices start in the mid-$500,000s.
For about the last year, the company has offered upgrades and options for the show homes. Since the spring, the company has been doing the same at Encore Lake Grove, a 55-and-over development in Lake Grove. The Encore Lake Grove homes were put on the market in November 2005.
Concessions at both developments amount to $5,000 to $10,000 discounts toward features such as fireplaces, Jacuzzi tubs and alarm systems, as well as upgraded carpeting, appliances and cabinetry.
“To keep pace, we had to offer the incentives,” Pasquale said. “If it were a year ago, we wouldn’t have had to do that.”
A look at the current health of the Long Island market illustrates the difficulty seniors are having selling their homes.
In Nassau and Suffolk counties, excluding the Hamptons and the North Fork, homes languished on the market in the second quarter of 2007, according to data prepared for Elliman by appraisal firm Miller Samuel.
Homes were on the market for 117 days in the quarter through June 30, compared to 88 days in the prior year’s quarter. Listing inventory rose year-over-year to 25,759 from 23,658. While the average sales price increased slightly to $519,650 from $517,583, the number of sales dropped to 5,596 from 6,604.
The pool of potential buyers for active adult communities is growing, although there are fewer purchasers than developers would like.
New York had 3.2 million people age 60 and over in 2005, about 17.3 percent of the state’s population, according to the most current data from American Community Survey.
The Beechwood Organization, which builds communities throughout New York State, has been handing out incentives like higher-end faucets in master bathrooms to sell the remaining units in the 720-unit Meadowbrook Pointe, a 55-plus community in Westbury, in Nassau County.
The company is also enticing buyers with an additional six-month leeway between contract signing and closing to allow buyers more time to sell their current homes, said Kathy Sheck, director of merchandising and design at Beechwood.
“Our sales have been very strong because we’re being flexible,” she added.
Beechwood’s founder and president, Michael Dubb, said, “The key to building in a bad market is to build a better mouse trap.”
Construction is almost completed at the North Shore Farmland Group’s 285-unit Plymouth Estates, an age-restricted development in Mount Sinai, in Suffolk County. Elliman’s Cafarella is actively marketing the project as well as two other active adult communities on Long Island.
The pace of sales at Plymouth Estates shifted when market conditions did. Sales were moving at a rapid clip until about 15 months ago, when the market turned, and have since been moving at a slower pace.
After a more noticeable drop in sales last month, in part caused by the traditionally slow summer season, the developer decided to add incentives.
The company extended its sales projection to three years from two and a half.
Cafarella said that during the summer he was seeing a 20 percent decrease in the absorption of active living projects.
The tough market is borne out by recent financial results from Pulte Homes, perhaps the nation’s largest builder of active adult communities for people 55 and older. The company saw a drop in revenue for the first six months of this year compared to the first two quarters of last year — to $3.9 billion from $6.3 billion.
Although active senior housing sales won’t soar this year, people are living longer, wealthier and healthier. And those are encouraging trends for these developers.