Should You Invest in a Home In an Active Adult Community?

By June Fletcher
From The Wall Street Journal Online

Question: My wife and I are considering a home in an active adult community in Houston that offers such amenities as indoor and outdoor pools, golf and fitness facilities. What is your opinion regarding home appreciation and resale within an age-restricted, active-adult community? 

Answer: This is an intriguing question, as is its obvious corollary: Will such communities gain value over the years as quickly as those that accept buyers of all ages? Unfortunately, there's no clear answer to either.

Some history is in order. Retirement communities with enormous clubhouses, golf courses and other fabulous amenities have been around since Arizona developer Del Webb started the first Sun City in Phoenix in the 1960s. But the idea of marketing communities specifically to younger, richer, still-working empty-nesters didn't take hold among builders until the late '80s. Folks in the 55-to-65-year-old bracket were a tempting group to developers and builders: These consumers weren't being served by their sprawling move-up homes -- they no longer wanted to listen to children's noisy games, were tired of taking care of their big yards, and best of all, were in their peak earning years.

However, with at least a decade to go before they turned in their spreadsheets and staplers, empty-nesters didn't identify with the "retirement" label and its over-the-hill connotations. So developers got rid of the mahjong games and the shuffleboard courts, added wine tastings and conference rooms, improved the level of finishes and features, and ditched the "retirement" label. Helped by the 1995 Housing for Older Persons Act, which allows a project to exclude school-age children if it demonstrates intent to house people age 55 or older, they began to market their projects as adults-only playgrounds. The active-adult community was born.

So active-adult communities are relatively new, without a long history of resales. Indeed, the U.S. Census Bureau didn't start tracking them until 2001. Nor have they become widespread. Only about 1 million, or 1.4%, of the 69 million owner-occupied houses in the country are in age-restricted communities -- though the National Association of Home Builders expects that figure to climb substantially in the next decade, as the population continues to age.

That makes it very difficult to make any generalizations about resale values, especially when compared to all-age housing. Even comparing the sales histories of two nearby three-bedroom houses, one in an active-adult community and one in an all-age neighborhood with similar amenities, wouldn't be useful, because in all likelihood, the houses would be too different. Usually, an active adult home is smaller and is built on a more compact lot than an all-age home; it also usually has a higher level of finishes and more expensive "universal design" features like wider doorways, grab bars and walk-in showers.

So the best thing you can do is to look at the relative supply of active adult communities in your city and try to gauge the demand. According to NewRetirementCommunities.com, there are 13 age-restricted communities in Houston. That's not a lot for a major city that had almost 6,000 sales last month. Indeed, according to Houston real-estate agent Tom Blakeman, active-adult resale homes are in high demand these days because there aren't that many of them around and they don't come on the market very often.

Of course, there are some caveats to consider.  Developers could overbuild active-adult communities in the future, driving up supply and dragging down the worth of your house. And buying in an age-restricted community permanently limits your buying pool; the average age of a Houston resident is only 31.

But these are only potential future risks.  For now, I'd say the signs for buying that active-adult home look pretty auspicious.

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

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