Monday, December 05, 2005

For Active Adults Only

by Osman Parvez


Here's a real estate trend that is only beginning to gather steam.

This past summer, the leading edge of the Baby Boomers began qualifying for tax free distributions from their 401K's. Without much fanfare, a critical milestone was reached.

As a demographic, the Boomers represent the most important segment of home buyers and sellers. They are the wealthiest (and largest) generation in American history. It's no secret that markets of all kinds have long focused on grabbing the eye of the Boomers and real estate is no exception. As they age, the changing needs of the Boomers will once again shift certain segments of the industry.

Goodbye Nursing Home. Hello Active Adult Community.

For some time, cities in Colorado have been recognized as top retirement home destinations. This past summer, Money magazine/CNN ranked Louisville, CO as one the best places to live. The May/June 2003 issue of AARP magazine ranked Ft. Collins/Loveland as the #1 best place to "reinvent your life."

Many of these retiring boomers are choosing to buy into Active Adult Communities. These facilities offer luxury living designed for buyers 55+ who are looking for an array of activities and amenities for their active lifestyles. Amenities typically include golf courses, clubhouses, greenbelt trails, hobby centers, computer labs, and a country club setting.

To point, here's a recent press release from Pulte Homes (PHM) that just opened a new Active Adult Community 20 miles north of Dallas. The development will feature a 28,500 square foot activity center, home to a fitness center, indoor track, indoor swimming pool, library, demo kitchen, and meeting rooms for social and special interest clubs. It's one of three new communities that Pulte is opening in 2006 in Texas alone. Under its Del Webb brand, PHM claims to be the nation's largest builder of active adult communities for people age 55 and better. Take a look at the 5 year stock chart below which plots PHM relative to the S&P and DOW. PHM has outperformed the broad market averages by +300%.

Of course, I'm not advocating the purchase of PHM or issuing an analyst opinion on its worth as an investment. Past returns do not guarantee future success, and you should always invest based on your specific situation. However, if you were thinking of investing in this segment, PHM may indeed represent a solid buy. Make sure you give the smaller (and perhaps faster growing) players in this industry a glance as well. (By the way, the other areas of real estate strongly impacted by aging/wealthy boomers are destination resort markets like Aspen and Vail).




















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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 


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