With an affluent population, projected strong job growth, and a large aging population, the Baltimore and Washington, D.C. metropolitan statistical areas (MSA) provide an excellent opportunity for active adult builders and developers as the housing market improves. In the currently challenging housing market, many well-positioned active adult communities are outperforming traditional move-up projects.  

“The combined Baltimore/Washington metropolitan area is perhaps the strongest and most dynamic housing market in the country,” said Steve Eckert, president of Classic Communities Corporation and developer of the Preserve at Two Rivers in Crofton, Md. “And it is poised for major growth in the next decade.”

While the two markets are adjacent, and share many of the same demographic traits, the economies are significantly different. The Washington MSA, being home to the federal government and recipient of much of the federal stimulus dollars, has a strong employment base.  Although the region is losing jobs, the unemployment rate is 6.2%, one-third lower than the national unemployment rate. Another major advantage for Washington is a high number of federal employees entering retirement, with significant pensions, and high home equity, resulting from owning the same homes for decades. The greater Baltimore metro area also is faring better than the national economy with an unemployment rate of 7.6 percent, or just over two points below the national unemployment rate of 9.7%.

The combined market area, shown below, extends from the Chesapeake Bay to West Virginia, and from the Pennsylvania state line in the north, to Spotsylvania County as the southernmost county.  

An analysis of the demographics for the region show an affluent and populous area which is expected to grow significantly over the next five years, from 2009 to 2014. During this period, nearly 350,000 new households are expected to be added to this region, as Echo Boomers (children of Baby Boomers) grow in number, and the job market expands to support both domestic workers and foreign in-migration. 

Household incomes throughout the Washington MSA are $82,000, and Baltimore’s is nearly $64,000. 

Home values in the Baltimore MSA are 16% less than the Washington MSA and may offer a reasonable and lower cost of living when home shoppers are contemplating retirement locations. 

The gap in the median age of residents, 1.7 years in 2009, demonstrates the older population in the Baltimore area, when compared to the Washington MSA.    

Most important to the growth of the housing industry in the region is the aging of the population, which is represented in the following graph. This illustrates the change in the number of households from 2009 to 2014, by age group. These numbers reflect the aging of existing residents and the net migration of new households from other areas. Together, the 55-64 and 65-74 active-adult age cohorts will have more than 85,000 new households in the Washington metro area, and the Baltimore metro area will add nearly 39,000 households. The most growth will occur in the 65-74 age group, which will increase by more than 50,000 new households in Washington, and almost 24,000 new households in Baltimore. The decline in the number of move-up age households will result in price pressures on all types of housing and this must be factored into community proformas. 

Market Depth

Using a proprietary demand model, Fulton Research estimates the annual number of prospects for new active adult housing. Combining U.S. Census demographic data with a proprietary consumer survey data of home shoppers, and propensity to purchase estimates, the Fulton Research demand model suggests that there is a annual market of 7,514 age-and income-qualified prospects in Washington MSA, while there is approximately half of that in the Baltimore MSA. The value of the homes in demand has a weighted average value of $373,843 in Washington, and $302,694 in Baltimore.

In 2007, Fulton Research, and New Homes Guide of the Washington/Baltimore area, released the results of a survey of 1,017 home shoppers entitled “Today’s Home Shopper - Who They Are. What They Want.”  In the sub-segment of households, aged 55+, the attitudes towards age-qualified communities was interesting. Approximately one-third of the households preferred all-age communities, one-third preferred age-qualified communities, and the remaining third preferring communities with homes targeted to the mature market. Applying those findings, there is demand for approximately 2,460 age-qualified homes in Washington, and 1,222 age-qualified homes in Baltimore.  

View the estimated annual number of Active Adult prospects chart here.

Housing Market Conditions:

The over-supply of resale listing inventory has been steadily improving across the metropolitan area. The months supply of inventory varies greatly by county, as shown in the comparison between Prince William County, Va., with 3.6 months supply, and Prince George’s County, Md., with 13.5 months supply. Existing home inventory is low in the closer-in counties of Virginia and in Montgomery County, Md., and the District of Columbia. 

From the peak of the housing market, median sales prices for all resale listings dropped 18% in Harford County, Md., to 59% in Prince William County, Va. Prices are starting to stabilize as housing demand returns in some counties; however, the less desirable counties are still experiencing declining sales prices. 

According to statistics provided by Hanley Wood Market Intelligence, homebuilders in the Washington market are on track to deliver 11,607 new homes in 2009, a 2% increase from 2008, but still 36% lower than 2007 levels. Prices have declined significantly since 2007, when the median price per square foot price for a single-family home was $208. In 2009, single-family detached units are selling for $183 per square foot, a 12% decline in values. 

Notable active adult communities:

The following are active and planned senior communities to watch over the next few years.

• The Preserve at Two Rivers is an upscale, age-qualified community, by Classic Community Development Corporation. Its location in the desirable submarket of Crofton, Md., is perfectly positioned 10 miles outside of the Capital Beltway allowing Two Rivers enjoy a deep and affluent market in both the Baltimore and Washington metropolitan areas. Opening for sales in 2011, Two Rivers will include more than 2,000 single-family and villa-style homes. This is the ideal opportunity for buyers to live in an amenity-rich community that is convenient to shopping, dining, entertainment, and possibly near their children, and enjoy a maintenance-free lifestyle. 
  
• Four Seasons at St. Margaret, a gated community by K. Hovnanian Homes, opened in April 2006, and offers 166, two- and three-bedroom condominiums with elevators, of which 146 have been sold. Prices range from $250,000 to $450,000.

When asked why Four Seasons at St. Margaret has been successful even during the difficult housing market, Dee Minich, senior vice president of sales and marketing for K. Hovnanian responded: “We have an outstanding community design and view our location as our greatest amenity. Within a short drive, home owners can visit fun and interesting destinations, such as the Chesapeake Bay, Historic Annapolis and the U.S. Naval Academy.”

Home owners also live here to remain close to their family and friends.

Active Adult Rental

The Evergreens at Columbia Town Center, developed by RMJ Development Group, LLC of McLean, Va., is an award-winning 55-or-better apartment community in the affluent family-oriented submarket of Columbia, Md. Commanding rents that are typically 10% or more above comparable class-A communities, the 156 one- and two-bedroom units are fully leased. Upscale finishes satisfy the needs of an affluent market, while a variety of amenities create a special community. Amenities include an outdoor pool and whirlpool, club room, golf putting green, greenhouse, game room with billiards, guest suite and walking paths, all contributing to help make this community a success. However, the location puts this community over the top. It is well-located next to The Mall in Columbia and residents can walk to Nordstrom’s and a host of nearby restaurants.

Service-Enriched

The Washington MSA’s service-enriched market is deep. There are many CCRCs, stand-alone independent living buildings with assisted living units, stand-alone assisted living properties that include an Alzheimer’s care unit, and group homes. There also are several tax credit rental properties for the age 62 and older. All such properties are attracting the age 75 and older with most residents in their 80s. Continued demand for such properties remains strong, given the projected population growth in the MSA.

Blending service-enriched and active adult components is illustrated at the Fox Hill condominium development, which opened in late 2008 next door to the upscale Burning Tree Country Club in Bethesda, Md. Attracting the age 75 and older, this property has 240 condominium units with 83 assisted living units to include Alzheimer’s care. It is marketed as active adult, but has the service-enriched overlay as exemplified in its mandatory meal program. Like a private country club, individuals pay a specified amount monthly ($600 per person) that can be used for one of three meals daily and for guests in any of the property’s four café and dining rooms. Fox Hill’s lifestyle amenities such as an indoor pool, game room, artists’ studio, business center, wine cellar and putting green exemplify the amenities at most active adult developments. The unit sizes also exemplify an active adult development and are complete with washer and dryer. They range in size from 834 square feet for a one-bedroom, to 2,146 square feet for a three-bedroom den unit. Fox Hill’s 16-acre wooded Site has three craftsman-style, four-story buildings that are extremely attractive. Managed by Sunrise Senior Living, the property is architecturally appealing and open to the age 60 and older; the second occupant can be as young as age 55.    

Outlook:

As we reach the bottom in the housing market, empty nesters throughout the Washington and Baltimore market area are able to sell their current homes and find their new home which will appeal to their active adult lifestyle. Consumer purchasing power is high, since home prices have fallen 20% to 40% since the peak in 2005. Offsetting this decline in new home prices is a decline in existing home prices and equities used for new home purchases. Ideally, the two will balance out, allowing current prices to be in a position to satisfy the market.

When asked if he sees particularly good opportunities for a specific housing product, Bill Slenker, president of Slenker Communities and recipient of NAHB’s 2009 Icon of the Industry – Active Adult Builder Award, noted: “I see good potential for many attached and detached product types. Seniors often will move from larger homes to small, more maintenance-free housing as they age. As the active adult market grows older, the acceptance of condominium-style living increases. Many who opted not to move in their younger retirement years will find the maintenance of a single-family home too much and will opt for the convenience and simplicity of a condominium or age-restricted apartment community. Even those living in single-family or villas in active adult communities may find reasons to move to a condominium.”

Dan Fulton is president of Fulton Research, Inc., a real estate advisory firm based in Fairfax, VA.   For 28 years, Fulton Research has been at the forefront of real estate market research, providing strategic advice to builders, developers, investors and lenders around the country.  Fulton Research principals have expertise in all uses of real estate, including housing, retail, office, hospitality and mixed-use.You can reach Dan at dfulton@fultonresearch.com or by calling (703) 385-3115. [Return to top]