Retirement Home Preferences Changing Mortgage Needs

The retirement home preferences of senior homebuyers have changed significantly in recent months and years. And these affects the type of mortgage loans they seek to finance their retirement homes.

A few years ago, new communities designed for seniors were primarily comprised of small condominium units with a swimming pool and clubhouse where residents could play pool or shuffleboard. And affordability was a key consideration in planning the development.

Today, that concept has virtually disappeared. Retirees now opt for single-family detached homes in well planned communities that include golf, fitness centers, jogging/hiking/biking trails and other amenities that provide ample opportunity for varied activities by increasingly active seniors.

That clubhouse can still provide for games like pool and shuffleboard, but they had better also include computer stations where residents can access the Internet if they don’t have that capability in their own unit. The development should have infrastructure that will allow rapid Internet access if it is to be competitive with other senior communities vying for the same customers.

Retirees also like to customize their new homes and floor plans through a design center. This has long been a common approach for conventional residential developments, but is a relatively new concept for the senior market.

“Decorating and model merchandizing reflects senior lifestyles,” said Michael Rubin, president of Avatar Retirement Communities. “For instance, many buyers want to turn their den into a computer room instead of using it as a hobby room. With the growing use of the Internet among seniors, high-capacity telecommunications wiring and other smart-home features are becoming basic features rather than upgrades.”

The nation’s changing demographic pattern is creating two distinctly different retirement groups with different housing needs, according to a report from the Urban Land Institute.

Many members of the World War II generation born in the 1930s have fueled growth in sunbelt areas, particularly in desirable California and Florida communities. Many of today’s retirees have the security of lifetime pensions or investments.

They use these financial resources, along with equity from a former home and a carefully selected mortgage plan, to acquire just the home and amenities they want in a warm climate area offering recreational opportunities that interest them. Affordability is not the key factor, as it was in the past.

The 77 million members of the postwar baby boom generation, born between 1945 and 1964, are moving through their 50s and early 60s. They’re now planning ahead for their retirement.

That’s why the U.S. Census Bureau projects the nation’s older population will reach 62 million by the year 2025, the peak period for seniors’ housing in general. The aging boomers already have tremendous financial capabilities, which will increase as they inherit their parents’ properties and investments.

Buyers over age 50 now have a median net worth that is twice that of the average U.S. population and control 43 percent of all spendable discretionary income, the ULI reported.

Most of today’s baby boomers have a healthy outlook on their future. They view retirement as a process, not as an abrupt end to employment. About 70 percent of them plan to continue working part-time in retirement.

Going back to school and volunteering for worthy organizations is also high on the list of “things to do” after moving to a retirement residence.

About 36 percent of baby boomers plan to move when they retire. But only half of that group (18 percent) will relocate to another state, according to a research report. There are three primary reasons that retirees move to a new intrastate or out-of-state location: lifestyle, relational issues, and cost of living.

A recent Gallup Poll of people age 50 and older indicated that 60 percent idealized small towns and rural areas as better places to live. However, not all retirees prefer a rural environment. Many prefer to settle in medium to large metro areas.

Most retirees tend to locate in an area they have visited in the past such as vacation spots, it was noted in the ULI report. Many pre-retirees, even those with significant incomes, buy smaller second homes to “test drive” a potential retirement community. Some then opt for larger homes in the same area when full-time retirement arrives. This usually involves at least two mortgages during the time a senior couples settles in a new retirement community.

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As many as 200,000 first-time homebuyers per year will be adversely affected if the FHA’s streamlined down payment calculation plan, passed by Congress two years ago, expires on September 30. Unless it’s extended, the down payment calculation for FHA loans reverts on October 1 to an old formula that lowers the amount of money that can be borrowed, and increases the down payment required.

That’s the warning being communicated by the folks at the Mortgage
Bankers Association.

“It’s now time for Congress to act to extend or make permanent the FHA streamlined down payment program so the agency can continue to provide affordable homeownership opportunities to hard-working American families,” said James Murphy, MBA vice president.

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Generally, our system of mortgage lending in the United States is the envy of most other countries. Groups from foreign countries periodically come to our shores to study our system.

One such recent group was a delegation from the Chinese Ministry of Construction. They met with mortgage industry leaders and top executives with the U.S. Department of Housing and Urban Development (HUD) to discuss the development of mortgage lending programs and institutions.

Among other topics, the delegates learned about the function of mortgage banking in housing-finance systems, the role of private conduits, mortgage underwriting and servicing, and the role of technology in mortgage originations and servicing.

“China’s mortgage market is in its infancy but will be a very important facilitator of housing and homeownership in the future,” said Michael Lea, president of Countrywide International Consulting Services USA. “China has a unique opportunity at this stage in its development to build a modern, efficient housing-finance system.”

Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends. It’s titled “Open House” in most newspapers, and carries his byline as James M. Woodard. He is also a professional storyteller with a Web site at:

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