Budget Buyers See Opportunity in the Nation’s Oldest Active Adult Communities

January 7, 2014 — It is common wisdom that the longer an active community has been in existence, the older its population. It makes sense – new communities market to an audience which is just starting retirement, mostly folks in their late 50’s to early 70’s. The buyers move in and tend to stay until they either die, or are forced to move to assisted living or a nursing home. That whole cycle typically plays out over 30 or so years. And then what happens? Well that is the subject of today’s article.

The Oldest Active Communities
Sun City, Arizona, was launched January 1, 1960, with five home models, a shopping center, recreation center and golf course. Although not the first (nearby Youngtown gets that honor), it did launch the market for master-planned active adult communities. According to Wikipedia the opening weekend drew 100,000 people, ten times more than expected, and resulted in a Time magazine cover story. The rest is history, as Del Webb expanded into more communities in Arizona (Sun City West, Sun City Grand) and across the U.S. Del Webb is now part of Pulte.

As it became apparent that active adult communities (developments aimed at retiree age populations and usually featuring multiple types of recreation and social activities) were a trend that was going to work, competitors came in. Some of the first ones include Laguna Woods Village (California), The Villages (Florida), Century Village (several campuses in Florida), and Sun City Center (FL), and Seven Lakes Golf & Tennis Club (FL).

The Challenges
Older communities face some big and obvious challenges when competing against brand new or recently built communities:
– The facilities, buildings, and infrastructure are older, less up to date, and need more repairs
– The inside of the homes and apartments are often dated. Kitchens with avocado appliances, linoleum floors, and plastic laminate counters will drive away younger buyers in droves
– Recreational opportunities and amenities might be yesteryear’s flavor. Shuffleboard courts are a sure sign the community has an aging population. Golf is less popular now; running trails, fire pits, and pickleball courts are more in vogue
– Home layouts and materials do not compare as favorably
– Buyers in established communities have to be ready for extensive home renovations if they want the latest look and quality. In communities still being built buyers usually have the option to customize their homes during pre-construction
– Since the current owners in the community are generally older, younger prospects considering the property are often hesitant about purchasing and being among “old” people
– Some older communities have faced problems with foreclosures and owners defaulting on their homeowners dues and assessments. This can be crippling when it reaches a critical mass – too few owners are left to shoulder the bills – forcing painful decisions and budget cuts.

Some advantages though
More established active adult communities, however, do have several advantages over newer ones:
– The builder/developer has usually moved on, leaving the residents and their Home Owners Association (HOA) as the owners/managers of the recreational facilities and common property
– The management transition from developer to HOA has been worked out and the community generally has a wealth of experience in managing its own financial and community responsibilities (the struggles to get to that place should not be underestimated)
– Pricing. Older properties are generally less expensive than brand new ones. For the millions of retiring on tight budgets, going with an established community might be the route.

Can older communities compete?
USA Today recently published an interesting article, Boomers Reinvent Sun City Retirement Community, which outlines how baby boomers are taking over the original active community, Sun City. Homes are selling briskly now, even though most of the baby boomers buying into Sun City are young enough to have grandparents who lived here. The major reason is price – the average home in Sun City is selling for about $129,000 vs. $190,000 in (newer) Sun City West and $240,000 in Sun City Grand. At that differential buyers can afford to plunk down more money to renovate kitchens, upgrade the exterior, and open up the interiors for a more contemporary feel.

But to complete the transition to a community that can compete, its infrastructure also needs to be brought up to date. Amenities that are no longer popular need to be phased out and replaced with the ones boomers are interested in, like big fitness centers with lots of equipment. A project like that requires getting a lot of people to cooperate and execute a shared vision for the future – usually a big challenge.

We asked Topretirements member and frequent commenter, Old Nassua, for his thoughts on the transitions going on in older communities (he lives in Century Village, one of Florida’s oldest active communities). As always, he had some thoughtful insights, both about his community and active communities in general:

What’s happening in Century Village as initial residents age or die:
1. It is becoming far more diverse; going from mainly NYC Jewish to Hispanic, Black, Italian, Russian.
2. Many more two-story elevators being installed.
a. When CV opened, 50 years ago, upper floors were at a premium, for the view. Now, first floors are desired.
b. Three stories and up: Elevators required by code at construction.
3. Palm Beach County Fire and Rescue has built has built a direct and private entrance directly into CV, rather than entering through the often congested guardhouse entrances.
4. Perhaps the most important change in the community is financial: more units have stopped paying COA fees, are abandoned, going up for sale, or signed over to the local association.
5. As a result of #4, more associations are allowing rentals
6. CV is a what Old Nassau calls a sedentary 55+ community: no green areas, golf, basketball, running or bicycling trails. Some tennis, pickleball, No dining in the clubhouse.

Here are three other services active communities will be needing to supply if they want to compete:
1. Wi-Fi. Here in CV there is a big fight between the 55+ baby boomers who want community-wide Wi-Fi, for an additional four or five dollars COA fees, and the 70+ who do not. The President is behind it, and so is economics: local realtors say that prospective buyers want Wi-Fi throughout. We already have it at all the pools. The time has come.
2. If there’s a health club within the village, honor Silver Sneakers. I emailed the newly opened MVP Health Club in The Villages. It does not honor Silver Sneakers, even though many Medicare Advantage and Secondary Health plans do offer Silver Sneakers to their 65+ members.
3. Here’s another concept whose time is coming: Charging Stations for electric vehicles, especially in condo communities. An article today in the Palm Beach Post, “Condos, Electric Cars: You Can Buy It, But Can You Charge It” discusses the problem.

As far as COA payment defaults, as the economy improves, so will income for associations. He also thinks that state legislatures will enact laws making lien foreclosures and fee collection at/from sale far easier for H- and C- OA’s.

In addition, owners or inheritors, simply to get out from fees and dues, will lower asking prices.
Google http://www.trulia.com/FL/West_Palm_Beach,16067,Century_Village/
The first condo is 95 Stratford G West Palm Beach, FL $28,000 2 beds 2 baths 978 sq.ft. The next two are $19,000 and $18,000.

A Prediction – Another Tier of Communities
Old Nassau predicts another layer of retiree communities for 65+ or even 75+, as people work and live longer. These communities will emphasize internal transportation, walking, small but many pools, large card and billiard rooms, shuffleboard, pickleball, on-site medical facilities with a hospice, and entertainers from the same generation as the retirees – pretty much what CV is now. These places are where today’s baby boomers will move in 15 or twenty years.
He calls these communities “sedentary”, or “great-grandparent”, communities.

What is likely to happen in the future?
Old Nassau raised some interesting points that communities need to work on beyond fancier gyms, aerobic studios, community gardens, and more walking trails. Here are some more thoughts from Topretirements on what older communities need to do to be competitive:
– Study and emulate the successful new communities to match their amenities, facilities, and appearances
– Develop a long range plan and execute it. We recently noted with pleasure that Sun City Center (a very established community near Tampa) has such a master plan that provides its vision for the future.

What should you be on the lookout for?
If you are interested in the idea of moving to an older community make sure you do your due diligence to know what you are getting into. You need to be on the lookout for:
– High percentage of dues delinquencies, many foreclosures and for sale signs, or other signs of financial trouble ahead
– Community boards that are actively planning for a healthy future
– Community residents and leaders that will support and encourage younger residents to live there
– Prices low enough to leave you sufficient capital to make necessary improvements in your new home
– Is the momentum in the community going in a positive direction
– Basic infrastructure that is strong enough that won’t require massive infusions of capital to become competitive.

Comments: What do you think about moving into an older active community vs. a new one – would you be willing to take the risk of an older one if the price was right? Please share your thoughts in the Comments section below.