Friday, April 10, 2009
Developers endure a senior slump as over-55 market hits wall
Boston Business Journal - by Michelle Hillman
Ocean Meadow developer Stephen Gillis is offering prospective buyers $15,000 toward the purchase of a unit.
The adult-community development bubble has burst.
Earlier this decade, developers pursued aging boomers with gusto, building hundreds of “active adult” communities across the state. They banked on the assumption that empty-nesters would want to live out their golden years in maintenance-free homes, often complete with clubhouses and golf courses.
Now the 55-plus market is glutted with inventory. Some developments are in foreclosure, others are stalled and prices on some units reflect deep discounts, as the expected rush to adult communities has not materialized. An estimated 15,000 units are permitted or sitting on the market in Massachusetts.
The glut can be attributed to the housing slump and market crash. Boomers struggle to sell their homes and their ravaged retirement accounts make the care-free lifestyle that 55-plus communities promise more elusive. Since 2000, developers have built 311 active adult communities and 19,458 units, according to PrimeTime Communities LLC, which researched the market for its 2009-Prime 50 Plus Report. The report found that sales of units in 25 adult communities slowed from between three and six units per month at the peak of the market in 2006 to 0.5 a month, or one every other month, in 2008.
“The key factor is a decline in pricing, really, for the single-family homes,” said Thomas Skahen, a partner at PrimeTime. “People saw their housing values dip 10 to 20 percent and their stocks went down 40 percent.”
Stephen Gillis, president of Gillis Homes Inc., is offering prospective buyers a $15,000 “stimulus check” toward a unit at Ocean Meadow at West Newbury. The idea for the check came about after Gillis sold just one unit at in January. The 55-plus project was built in the spring of 2007 “when things were wonderful,” said Gillis.
“The big issue is people being able to sell their house,” said Gillis.
Developers with parcels permitted for 55-plus development are standing still, said Lynne Sweet, a principal at Needham-based market research firm LDS Consulting Group LLC. Those with land are unable to get financing and those with 55-plus projects permitted are trying to get the age restrictions lifted.
“On top of the fact that these things were incredibly over-permitted and not well thought out,” she said.
The developer of Yentile Place in Wilmington can’t get the project out of the ground until he can get a loan from a bank, said Bill Wolfe of Wilson Wolfe Real Estate. Wolfe said the bank won’t budge without 12 purchase-and-sale agreements in hand. Wolfe has only been able to line up seven at his 76-unit project.
A call to the developer was not returned.
“The longer it sits, the more concerns people have,” said Wolfe, adding that the developer has only managed to pour the foundation.
For those who moved ahead with active adult communities, it’s a fire sale.
Even with all the bells and whistles retirement living has to offer, the units are selling slowly, if at all. In Stoughton, the owners of the Village at Ames Pond reduced asking prices by $100,000 to about $340,000 last October to spur the sale of the last 11 units at the 40-unit development. The property was finished in 2006 and was expected to sell out in a 12-to-18-month period.
“We pretty much came on the market at the worst time we could’ve come on,” said Christa Griffin of Griffin Realty LLC.
Some developers haven’t been able to finish building 55-plus projects because of a lack of sales and financing.
The active adult community in Sharon, Hunter’s Ridge, has been quiet for a long time, said Tammy DeWolfe of Coldwell Banker Residential Brokerage. DeWolfe said the property went into foreclosure and the owners, the Charles Mirrione Trust, stopped building when units weren’t selling.
However, Charles “Nick” Mirrione, president of Mirrione Realty Corp. of South Easton, said he’s found a buyer for the project and expects the sale to close May 11.
“We weren’t able to keep up with the project,” said Mirrione, who added he’ll lose more than $6 million on Hunter’s Ridge. “There was no way I was ever going to make any money on it under these conditions.”
“For now I think people are just sitting on their hands and it would be very difficult for anyone to get financing in the future because there’s so much product sitting out there that’s failed,” Sweet said.