Single Family, Condo Style

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Home ownership has become not just the American dream, but almost a birthright. Homeowners in the United States are on track to hit a record high of 70 percent of all households some time next year, up from only 64 percent a decade ago.

This trend is clearly being driven by historically low interest rates, plus the historically high number of lenders willing to write a mortgage, as long as they can resell it to Fannie Mae or Freddie Mac. The easy availability of cheap money has also made it possible for millions of Americans to own not only a first home, but a second home as well.

The rate of both first and second homeownership is likely to keep rising over the next five to 10 years for a couple of reasons. Home sales have become an extraordinarily important engine of economic growth: virtually every home sale creates income for one or more realtors, lenders, lawyers, insurance companies, contractors, and others. But the second reason is that the highest rate of homeownership--over 82 percent--is among householders ages 55 to 74, the age cohort where the highest rate of household growth is occurring.

All this homeownership, however, comes with a price: time. Most first-time homeowners are blissfully unaware of how much time it will require to maintain their home. To be sure, many men and women enjoy working in and around their house. That's partly why so many can be found in a Home Depot, Loews or a local garden store on any weekend.

But as a typical homeowner gets older, working around the house can get old too, particularly if they own more than one. At some point, many homeowners don't want to spend their time mowing the lawn, trimming the shrubs or touching up the peeling paint.

In the past, it was possible to get some neighborhood teenager to do yard chores. But there are not as many of them in suburban neighborhoods as in years past. And besides, most teenagers now have other opportunities to make money, such as working with their friends in a fast food restaurant, that are more fun and don't involve so much physical labor.

The answer to owning a home without the maintenance issues is, of course, to buy a condominium. And that is exactly what approximately a million homeowners did last year. According to Celia Chen, an economist with, the demand for condominiums is so high that it has driven the median U.S. condo price close to $200,000, above that of single-family homes. What's driving this demand is, of course, aging Baby Boomers.

During the decade of the 1990s the number of homeowners ages 55 to 74 grew very slowly, edging up 9 percent compared to an 18 percent increase for all homeowners. Out of an increase of 10.8 million owner-occupied dwellings in that decade, only 1.8 million of that increase could be attributed to owners 55 to 74 years old.

But in the past five years (2000 to 2005), assuming a constant rate of ownership, the number of homeowners ages 55 to 74 has risen by at least 3 million. That would be a 15 percent increase, just slightly above the estimated 13 percent increase for all homeowners. It's not just a coincidence that in 2001 the oldest Baby Boomer turned 55 years old.

The big jump, however, will be coming in the next 10 years. During that decade (2005 to 2015) we project that all owner occupied householders ages 55 to 74 will rise 36 percent, an increase of over 8 million older homeowners. That assumes no increase in the ownership rate, and does not take into account how many of them will buy two homes.

The ratio of conventional single-family sales to condominium sales is now about 7 to 1, and, according to the Census Bureau's annual housing survey, among owner-occupied housing units, there are about 15 conventional single-family dwellings for every condominium.

So over the next decade, it appears that a relatively small fraction of the householders wishing to cut back on or eliminate their house maintenance chores will be able to do so by moving to a condominium. In any case, after age 55, most people don't really want to move.

The coming big increase in aging homeowners is likely to provide an opportunity for a home builder, re-modeler or maintenance firm to enter into a contract with a homeowner that would essentially turn their conventional suburban single family home into a condominium.

Imagine a tired homeowner being offered this deal: we will take care of your lawn, keep your driveway clear, trim your trees & bushes, periodically repaint the siding or fix the roof where necessary and even look after your house when you are away. All for between $500 and $1,500 a month, depending on the size of the house and the services provided.

For the firm providing such a service, every 100 customers at an average price of, say, $850 a month would be a steady cash flow of over a million dollars a year. Such a business would obviously be more profitable when homes under contract were close together and were in relatively good shape.

Last fall in Stratham, New Hampshire, a home builder who previously built only conventional single family developments broke ground on a 75 unit development that, in appearance, looked like a typical cluster development. Except for a few attached units, most homes will stand alone, but be closer together than in the more usual large-lot developments. The major difference is that they will all be condominiums.

Despite the fear that because they were so "different" they would not sell, they are selling much faster than projections and at well above the pre-development forecasted price. There were no age restrictions, but among the first 20 units sold, nearly all were sold to older individuals or older families with no children.

New England has proportionally more householders 55 to 74 years old than the rest of the nation, so it is not too surprising that a development such as the one described above would be more attractive. But as an increasing number of homeowners nationwide get old and tired of house chores, the opportunity to "condo-ize" conventional homes is likely to grow as well.

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