Sunday, October 25, 1998

Home builders rushing to get into active adult market

By MICHELLE RUSHLO

Associated Press

SUN CITY WEST, Ariz. -- For the past decade, Don and Harriet Doerr have been the envy of friends back home in Nebraska.

He golfs four times a week in the winter. She plays bridge and volunteers at church. Neither runs out of things to do in Sun City West, a suburban Phoenix community for residents 55 and older.

"I wouldn't have lived in any other community. It had to be a retirement community," said Don Doerr, 73.

Many of the nation's largest home builders are banking that baby boomers on the brink of retirement will feel the same way, and they're aggressively pursuing the "active adult" market Del Webb Corp. has turned into an empire.

"A whole new wave of active adult communities is coming through. It's busting out all over," said Myril Axelrod, a consultant for the National Association of Home Builders.

For nearly 40 years, Phoenix-based Del Webb has crisscrossed the Sun Belt with its mega-developments, most under the Sun City name. The Sun Cities generally offer nearby medical facilities, golf courses, community centers, swimming pools, classes and clubs -- all catered to active retirees.

"Our customers don't need a home. What we try to offer is a lifestyle that is more attractive," said Leroy Hanneman Jr., Del Webb's chief operating officer. "You have to build a better mousetrap."

Other companies, like Houston-based U S Homes Inc., are stepping up efforts to sell that dream lifestyle to a growing customer base. Builders Pulte Home Corp. and K. Hovnanian Enterprises, which dabbled in the market during the 1970s, are also joining the race to expand their active adult segments.

"There is tremendous pent-up demand," said J. Larry Sorsby, the chief financial officer of Red Bank, N.J.-based Hovnanian. "This is a trend still in its infancy. We're only going to see it grow."

Sorsby and other builders are betting on demographics.

The U.S. Census Bureau estimates 55.9 million Americans, or nearly 21 percent of the total population, were 55 and older in 1997. That number is expected to hit 74.7 million by 2010.

Many retiring Americans are drawn to 55-and-older communities for their lifestyle. They like being near people their own age; they like the recreational activities, Axelrod said.

"I call it summer camp for adults," she said.

Like Pulte and U S Homes, Hovnanian is developing smaller communities than the mammoth Sun Cities, which can have up to 9,500 houses, but they are offering some of the same features -- golf courses, tennis courts and community centers.

With a series of developments in New Jersey, Pennsylvania and other East Coast communities, Hovnanian hopes to push its retirement community segment to 30 percent of its total business, Sorsby said.

U S Homes, which has developed retirement communities in Florida and other spots nationwide for nearly 30 years, is aggressively trying to balloon that segment of its business to 30 percent total sales too, said Kelly Somoza, vice president of investor relations.

Not to be outdone, Pulte is moving into active adult market in conjunction with Blackstone Real Estate Group. But it, like the other Del Webb competitors, is sticking to developments with less than 1,000 units, avoiding direct head-to-head competition with the retirement community behemoth.

As part of a reorganization, Pulte put the headquarters for the active adult market in Phoenix, Del Webb's stomping ground. But Eric Snider, vice president of marketing for Pulte's active adult segment, said the home developer plans to build developments all over the United States.

Traditionally, active adult communities have been concentrated in Sun Belt states, particularly Arizona, Nevada, California and Florida. However, surveys show that most retirees do not want to move far from their families when they quit working, Axelrod said.

That is why retirement communities are cropping up all over the nation, including cold-weather states, she said. Even Del Webb is taking its first venture into snow; it just launched a community outside Chicago.

There is no sign any developers plan to slow down, Axelrod said.

"Almost every place that anybody can find a piece of land that is suitable, they are building these communities," she said. "There is such an unfulfilled demand."