55+ Communities: Will You Recoup the Investment in a Sale?
Understanding the unique threats to home values inside housing developments for older adults
If you’re buying a house in a 55+ community for your senior years, you may be more focused on the fun the development offers than selling the property later. But since a house in an active adult community isn’t likely the last place you’ll live, resale value matters. And that value may be less than you think.
That doesn’t mean buyers are often dissatisfied with their purchases in active adult neighborhoods. On the contrary, in the U.S., these developments are more popular today than ever before. Nor does it mean that homes in active adult communities --inherently return less on investment than other properties.
Rather, demographic and competitive issues unique to these communities represent challenges to resale that many homebuyers fail to consider. To avoid resale disappointment and possible financial stress, you’ll want a solid understanding of how these quirks might affect the future price of the 55+ home you buy today.
Checking the price trends in your neighborhood is, of course, an important step for any homebuyer. Real estate brokers also note that developments may require sellers to screen potential buyers for qualifications beyond age, such as health and financial fitness. Marketing restrictions may apply, such as a ban on for-sale signs or limits to open houses. Below are a few other issues for sellers in active adult community that don’t apply in traditional home sales.
Demographics are against you. About one in eight U.S. homes will go up for sale in the next decade as baby boomers start to die in larger numbers, according to a recent report by The Wall Street Journal and Zillow. This is a problem on several fronts for sellers in 55+ restricted communities.
The generations following baby boomers — the would-be buyers of those 9 million homes — are neither as numerous nor as rich as the current set of 55-pluses. About two-thirds of the nation’s home equity is in the hands of that soon-to-be shrinking baby boom generation.
Put simply, there may not be enough buyers to go around. People who want to move into the developments will have a harder time closing the requisite sales of their existing homes. And sellers in active adult communities can market only to the subset of this reduced buyer pool that matches the required demographic.
The developer may take your buyer. There’s a lot of new construction nationwide in active adult communities, and it’s all competition for your own house. In fact, if your community is relatively new, your own developer may be actively building your competition right now.
Ask how many and what kinds of homes are planned for the community, but don’t expect legally binding answers. If sales are strong, the developer likely will look into annexing additional land for more expansion beyond the original cap.
Your house looks like hundreds of others. Home models within 55+ developments are often limited to a handful of floor plans, which often means hundreds of homes look alike.
Why do people buy in your community? Are they golf enthusiasts who want to be backed up to the course? Or does the lower price on a busy intersection make that house more attractive to them? Has your home’s interior been modified in ways that make it stand out? Small details can make the difference between hot properties and hard-to-sell houses within the same communities.
Unpopular rules may limit buyers. Perhaps you picked your community because it bans dogs or disallows residents under 60 years old. And yes, those will be perks to some other home shoppers too. But every restriction also eliminates people from your pool of potential buyers, like the age-appropriate couple that keeps their grandkids in the summer. Generally, more restrictions equate to harder sales.