The requests for smaller homes have become more numerous and frequent.

While a majority of homebuyers 55 and over are seeking homes approximately the same size as their present home, builders catering to the age group can no longer afford to ignore the cash-strapped population demanding a smaller alternative to the 2,400-square-foot new home.

"We had a recent request for a new home half that size," said Brian Gentry of Landed Gentry Homes and Communities and a member of the National Association of Home Builders senior housing council. "The 1,200-square-foot home used to be built only on an odd lot where we could build little else. Now, it could be more of a mainstream product."

Gentry joined a handful of other "over-50"-focused builders from different regions around the country on a recent panel discussing "no risk" strategies for 2010 and beyond. They all are also grasping for ways to help potential customers sell their present homes and finance the new ones. Empathy has taken center stage because if a sale does not take place, few potential customers can afford to buy a new home.

Several builders are emphasizing the fact that new energy-efficient measures allow them to compete with the costs of resale homes and foreclosures. Others are stressing upfront benefits of lifestyle and location: creative, attached "jewel boxes" that appear to be separate and independent from the street, with fewer included amenities like upscale cabinets and soaking tubs, allowing for bargain-basement pricing.

Many are trying to reduce land costs by working with lenders who have taken back property from other sources. Developers say if they can minimize their acquisition costs, the savings could make their finished-product price point more appealing.

One builder is offering new buyers a price guarantee, promising that any home purchased in one of his communities will retain its value until the community is sold out. That guaranteed time frame is estimated to be about two years.

Another builder is presenting a plan to help shoulder any loss on the sale of the present home, volunteering to pay half the difference between an appraised price and its eventual selling price. …CONTINUED

For example, Chuck Covell of Covell Communities sends out a company representative to provide a market analysis of a specific home. If the company believes the home would sell for $250,000 but eventually sells for $230,000, Covell gives the buyers $10,000 if they buy a new home in one of the company’s communities.

The move to create consistent home values resonates with many housing analysts who say consumers need to feel confident that their purchase will not decline in value. The concept is not new in resale housing but has rarely been used on the new side.

One famous method was used by the Farm Credit Bank in St. Paul, Minn. In the 1980s, the Farm Credit Bank was facing the same issues on rural land that housing faces today. No one was willing to buy because they believed that values would decline further. So, the bank then made an offer that appealed to many buyers: sell foreclosed parcels with a 10 percent downpayment financed by a 30-year, fixed-rate loan.

As long as the owner took care of the property and paid the mortgage, insurance and tax payments, the bank offered to return the downpayment to the owners after five years if the property was not worth the original purchase price.

If the downpayment was returned, nominal rent was to be paid. In the end, the bank did not get any of the properties back — proving that housing was a good long-term investment.

Another example of a creative rebound can be traced to Houston, Texas, when the oil crisis crippled the housing market throughout the area. One developer offered buyers a four-year guarantee on three-bedroom, two-bathroom condominiums with a similar nominal rent due if values took a dive. The developer did not take back any condos.

Gentry said his company is having some success in luring new buyers by assisting with attractive bridge-loan financing, working with a longtime lender partner to provide acceptable solutions for clients.

"People were very skittish to do anything in 2009," Gentry said. "Older people were not buying any green bananas. I think things will loosen up a bit in 2010 because reality has set in. This is where we are and they have begun to deal with it. I think we’ll see people who really need to move actually doing something about it."

Tom Kelly’s book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on and on


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