The Empty Nester Townhome Market

June 18th, 2009
The Empty Nester Townhome Market

My 60 something empty nester neighbors, Jack and Sue, have been debating a
move from their big two story for about 10 years since their boys grew up
and moved out. Sue would love a smaller place thats easier to take care of.
Jack doesn't want to give up his lawn tractor.

But far more than marital indecision is affecting the empty nester townhome
market.

I recently completed an appraisal of a large multi-product type townhome
development in a second ring suburb that 's doing OK. In the traditional 2
story townhome product there were a lot of sales, especially at the under
$200,000 price point. But then the market for the $500,000+ rambler townhome
empty nester product was dead. In fact, I had to go to a neighboring city to
find any sales at all and those sales were around $350,000. Based on this
appraisal in this one community I came to these conclusions about the empty
nester buyer:

*During the earlier part of the decade both their home equity and stock
funds soared. So they could sell their big 2 story and make a lateral or
downward price move and upgrade on amenities like granite counters.

*With declining home and stock values, the empty nesters choosing to move
are no longer wanting to pay for the high amenity homes.

* $350,000 is the cut off point because that is where the jumbo mortgages
kicks in at higher rates.

*My hypothesis was that the $350,000+ townhome market would be a declining
market share relative to the $250,000-$350,000 townhome market.

Data proved me wrong on this one when I studied the whole region. While the
total number of sales of new construction in the $250,000+ townhome market
is shrinking, the percentage of the $350,000+ has stayed steady from 2006
till today at around 34%.

People move for a variety of reasons. Job change. Income change. Marriage.
Divorce. Having babies. Growing kids. Health changes. But empty nesters,
like my neighbors Jack and Sue, are typically the least motivated home
buyers.

To sell over the $350,000+ price point for the empty nester product you
either have to be in a high end community like Minnetonka, or be lake/golf
course community. Unless you have a premium location, today's empty nester
doesn't seem interested in paying the premium for the non-location high end
building amenities.