Retirement community home prices are of interest when one is in the market for a home. If one is familiar with real estate property pricing in a regular home market, the process is the same, but there are differences.
When appraising homes, the appraiser compares like with like. They hunt down the most comparable properties they can find. Therefore, it is imperative that only homes within a retirement community be used for their comps. The unique nature of retirement communities requires that one compares only homes within retirement communities. There are exceptions if there are no comparables. Then the appraiser can use comps outside of the community but they make adjustments.
One finds that home prices are generally lower in 55+ communities than the regular home market. Here are some reasons why:
For new home developments, the developer firmly sets prices after having one or more appraisals. Appraisals are done frequently to remain competitive. Remember to include any special incentives of the community in your pricing analysis. These incentives are plentiful in a buyers market and not so much in a sellers market, which most areas are in now.
Some developers keep their prices down rather than be too high. It is easier to raise prices than to cut them. Cutting prices later might anger residents who have already bought. However, if the appraisal warrants, they will reduce prices in the community, if necessary. Currently, most areas are raising prices but I have seen some communities lower them or keep them the same.
There may also be small pricing increases.
2016 Update: Starting in 2013, developers began slightly increasing prices at retirement communities due to substantial buying activity. They generally continued small price increases in 2014, 2015, and 2016. There have been higher price increases due to a more stable real estate market. Again, this doesn't apply to all areas so please check your local market.
Incentives to buy are great marketing tools in a highly competitive or slowing market. In the 2015 buying season there was not as much need for this tool as in recent years and there aren't as many of them.
A buyer may not be aware of an advertised incentive. For this reason, one wants to ask about them. The most common one is when the community covers some closing costs.
Others include items like a free sunroom, free solar, outdoor barbecue, free upgrades (most commonly free granite countertops) and many more. The most common time of year for incentives is the Fall and Winter seasons when traffic drops, especially at the end of the year.
However, if the home market improves, incentives disappear.
At the start of the first of the baby boomers reaching age 55, home prices were extremely low due to less demand. Now that baby boomers have turned 65 (in 2011), and more retiring every day, we would expect prices to go up.
However, due to the real estate subprime crisis and economy, prices fell off 2007 to 2013. There was pent-up demand. More people were holding off on buying, could not get financing, could not get their home sold, lost assets, feared the future, and were afraid to buy, etc. Renting became more popular after a home was sold. Pricing depended on the local market. Some markets have done better than others.
Apartment Rents Increase
Senior apartments became extremely popular during these years but since 2013, buyers must consider if it is better to rent or buy because apartment rents have increased due to recent demand and interest rates for buying remain low.
Starting in the latter half of 2013 the real estate market improved substantially and became a "sellers market" from its previous very strong "buyers market." Pent-up homebuyers came out buying pushing prices of homes up in most markets. More price increases continued into 2014 and 2015.
Due to the lack of inventory and high demand for retirement homes, there was nationwide price increasing at our retirement communities--some areas more than others, of course. Prices increased the most in the West followed by Florida. Texas prices, previously below average, have also increased. (Check with local Realtors.)
2016 is showed a very strong buying market in Florida, moving prices upwards. California also showed a strong recovery with higher prices. Check with your local Realtors for the most accurate sales information.
Sold prices are more valuable than listed prices when deciding the value of a home. The listed prices can help one decide where to list the home, but the sold price tells something very different. It tells what the home is worth in the current market.
Knowing how fast homes are selling is another useful piece of information. If homes are selling fast, this indicates higher demand and may warrant higher prices. This is public information and easily obtained.
Use your Realtors services:
A good Realtor is a valuable resource for deciding the market value of your home and their service for this is free since this gives them a chance to introduce themselves to you in the event you want to sell. You can even hire a professional appraiser but this will cost you usually hundreds of dollars. For names of ones in your area, you can contact the American Society of Appraisers (ASA) or your local bank to see who they use.
Is your home appreciating or depreciating?
Some homes in some areas may be depreciating every month rather than appreciating. This depends on your local market as markets differ considerably. However, this was more common in prior years. Today you are more likely to find an appreciating market.
Prior to 2013 homes in Florida or California were in a depreciating market while homes in Texas or Tennessee remained stable.
Generally, most areas in 2016 were in appreciating markets but you one needed to check locally to be sure.
Rates of appreciating prices:
2016 Update: Was an appreciating market where prices slightly increased with time. Check with local Realtors for rates of appreciation or depreciation in your area. They should give you this information when they do a free market analysis for you. Homes in some areas of Florida, California, Texas, and other states as well, are showing high price appreciation and fast selling times. Even the slow Northeast areas picked up in 2016.
Most communities are built in the rural or suburban areas since land is scarce in the cities. (However, there is more effort in today's market to develop them near commute lines into cities.)
If developers are delaying construction, they are holding on to their land until times are better, or they are selling it to other builders.**See Update.
We certainly do not see the pace of building accelerating.
The market has changed again. Starting in 2013, there was substantial improvement in buyer activity. As inventory decreased in the builder's portfolios, they began to release new and larger tracts of land for development of new over 55 communities. We saw some great new and larger communities being built in 2016 and higher price increases.
Commuting to Work in Retirement
The demand within cities is higher than ever. Therefore, communities within cities are getting hard to find, and more expensive to purchase. Keep in mind that these sell fast. Check with your local Realtors. Boomers who want or need to continue working in cities may have a hard time. Builders are developing more attached homes and townhouses to save space in cities and suburban areas.
Update: Becoming more popular is the 2 or 3-story low-rise apartment-styled condo building in suburban areas. Whenever possible, developers place them near commute routes.
Builders are aware that the current economy has changed things again, and more people are working longer and needing homes near commuter routes. 70% of boomers now say they will work longer than age 65. Builders must once again adapt to these changes. Most communities say on average 50% of residents still work. Developers now want to build on land that is closer to commute lines and near transportation hubs into the cities and work areas.
By building near transportation systems in areas where land is cheaper than in cities, the builders can offer better pricing and more amenities, plus offer ways to get into cities where jobs are.
Some condominium communities have been over-built in some areas which has depressed prices even more than the single-family home market.
When more people are able to get a single-family home, the condo market becomes a little depressed. This may be a good time to look at the condo market (verify with Realtors for the current year). Please make your own decisions after consulting with your advisers and professionals.
Not too long ago one could only find large homes inside a community. Today there are more homes with smaller square footage plans. This is due to demand and a worse economy (see current updates). People want smaller homes with less energy bills and lower pricing. This remains true most years. Large homes are not as appealing as they once were for the price conscious buyer. Price ranges are lower in many communities because the builder has added a smaller home plan to their inventory. Update: As the market improves, large homes may become popular with builders again.
New: Builders are now becoming more interested in what buyer's want. Today's boomers, independent thinkers, want to be part of the design process. Many builders are including "design sessions" in their marketing before the community is built to make the community more appealing to potential buyers and to make the floor plans more modern and accommodate changing buyer needs. This process enables builders to get more pre-sales, therefore, it is advised that you sign up for these sessions if possible to get updates.
Communities often are built in suburbs or rural areas around major cities where there is available land. City planners have to consider the impact on the environment in these rural areas. Some developers are more environmentally aware than others. Environmental groups, developers and planners make great efforts to preserve and protect the land, our most precious asset.
The amount of available land in an area and demand affects prices. Demand is created by preserving the quality of the land.
Green building has nearly reached mainstream. Not until recently have buyers shown this much interest in saving energy. These additions cost builders more money to install. However, there can be great savings on energy bills for the consumer.
Look for more communities that are offering incentives with green building and are environmentally sensitive. Update 2016: This has now happened and many communities are offering an option for energy upgrades or including them in the price. See Shea Homes Xero energy homes.
The senior market is no longer a top priority for developers. Developers who specialize in age-restricted communities are the exception, but they are building fewer communities. With lower interest rates, the first-time homebuyer market is stronger. (Think millenials.) This could cause a lower inventory over time for over 55 homes.
Some developers are holding land and waiting for the economy to improve before building. Some have gone bankrupt, and many smaller ones may not be able to continue.
2016 Update: Large builders are now beginning to release large tracts of land for larger communities as the market continues to improve and there are more senior buyers. Smaller builders will have to be more creative to keep up with this competitive market.
If buyers believe home prices will fall instead of going up, they may want to hold off buying. They may decide to rent for awhile, and that is what many of today's seniors are doing. Surprisingly, they are doing this at a time when interest rates and home prices are the lowest in decades.
2016 Update: The rental market has shown rent increases due to high demand and this may tip the scale and push renters into buying. Check with your local Realtor to decide if it better to rent or buy now.
2018 Update: How things have changed. Very strong Sellers market. Many buyers have been priced out of the market and many are going to affordable options such as manufactured homes and RV parks in rural areas. Priced-out buyers are finding RV Park Models are now called "tiny homes" and offer a very affordable lifestyle with clubhouses, pools and social amenities. See Affordable Housing Options article on our site.
To make matters worse, apartment rents in some areas are sky high and still going up. There is a scarcity of housing for 55+ (but check your local market as this isn't the same everywhere).
See National Association of Realtors for monthly articles which update the status of the housing market and pricing.
The economy is improving according to some financial experts and this would hopefully bring higher salaries so people can afford the higher prices in the current market (verify all information with your financial advisors and Real Estate professionals.) Also helpful would be if more 55+ housing communities are built. As always, we will have to wait and see what the future brings. NAR is a good source for commentary on the state of the market.
This article is informational only and not advice or opinion. Verify all information. Please consult with your local Realtors, certified financial planners or other qualified professionals for making decisions about your money, market trends, pricing and retirement. Markets vary so check with your local Realtor on pricing and financial information.