Developers hoping to find a lucrative market among the increasing numbers of elderly in the United States are now retrenching after learning that most elderly people would rather stay in their own homes than move to new quarters.

"We have found that our competition is not the retirement home down the street, but the single-family home the elderly person is living in at the time," said Gerald Glaser, vice president and development manager for Oxford Development Corp., a developer based in Maryland that builds about 20,000 housing units nationwide each year.

"The elderly want nice things in the home, like young professionals do, so we are working on building units for the elderly that are bigger and have more sex appeal," he said.

What has attracted builders to this market is the wealth locked up in the equity older people have in homes. Economists currently estimate there is $630 million of equity tied up in the houses of people older than 65 and that, by 1990, that figure will reach $750 million.

Developers have found, however, that the elderly are reluctant to move, and that, in many cases, families are unwilling to let their parents use up a large portion of the equity from a house sale on nonrefundable entrance fees charged by many of the retirement communities.

Several developers have encountered problems with retirement projects that have been difficult to sell. One Florida developer built 350 units but, after a year of marketing, he has sold only a dozen units.

As a result, consumers can expect to see new ways of going after customers for retirement projects, including chosing locations and services carefully.

Developers working in the field have found that locations are difficult to choose and may be the key to a project's success.

Despite the highly publicized migration of retired people to the Sun Belt in the 1970s, demographers say that most of the demand for quality retirement housing is in the established East Coast and Midwest communities where elderly people have friends and family.

"The opportunities are in the Rust Belt," said Joseph Howell, president of Howell Associates, a consulting firm based in Washington, who spoke last week at a conference on building for the retirement market. "Builders are better off looking to the areas where there are high concentrations of people. Because these areas have not been the focus for developers in the past, many of these cities need more retirement housing."

Although developers in the past have concentrated on providing housing for retired couples, Howell said there is more demand for retirement housing for older widows, those in the middle range of old age -- between 70 and 80 -- who may be frail but not in need of nursing care.

Howell said that developers who continue to market to the young elderly -- the 55-to-70 group -- may find their market dwindling. While the number of elderly is increasing, the group known as the young elderly represents the generation born during the Depression, when birth rates declined dramatically.

"If you think you should market your retirement project to couples, you are wrong," Howell told the developers. "Your market is women, widowed women. It's a mistake loading up all those units with lots of fancy services and expecting couples to move in. It's important to look very carefully at the market where you plan to build."

The National Corporation for Housing Partnerships, chartered by Congress in 1968 to encourage private investment in low- and moderate-income housing, built a six-story rental complex for the elderly in Gaithersburg, Village House, several years ago, but has had "quite a problem" marketing the units, said Kenneth H. Becker, vice president for development with NCHP.

"We originally looked for the primary retiree, the guy playing golf who would move in with his wife, but that didn't work," Becker said. At that point, NCHP decided to market the complex to an older group, and began offering nursing care.

What the company found, however, was that renting to the very old meant a high turnover rate at the complex, because residents died frequently.

In the end, NCHP began marketing to the middle old and increased the quality of services. Today, Becker said, the project is 80 percent leased.

While many developers still are focusing on rental projects for the elderly, several have built condominiums, which analysts say may be more attractive to many retirees.

In the past, most housing projects for the elderly have been either rentals or continuing-care projects that require nonrefundable entrance fees as high as $200,000. Elderly people have been wary, however, of spending their life savings on entrance fees, and condominiums offer an alternative.

The Carley Capital Group recently developed a condominium in Reston, Thoreau Place, and has sold 70 percent of the 134 units after a year-long marketing program. Units at the complex are priced from $55,000 for an efficiency to $128,000 for the most expensive two-bedroom, and the condominium offers a "wellness nursing program," dining and housekeeping on an a la carte basis.

Although the minimum age is 55 years, Agustin Costa, one of the architects of the project, said the average age of the residents is 72.

"It seemed to us there was a gap in the market," Costa said. "We saw we could successfully market to elderly people who wanted to move out of their houses without taking on a lot of expensive services. We also saw that there were few ownership options for the elderly. Most elderly would prefer to continue owning if they can."

Costa said that 20 percent of the purchasers had opted for a shared-equity program where ownership of the unit was shared with a child, and the parent became, in part, a tenant. Such an arrangement allows the tax advantages of owning to be passed on to the adult child, who has a higher income and can use the deductions.

On the negative side, condominium ownership for the elderly could prove disadvantageous if there are problems with management of the services.

"The problem with the condominium concept is that condos in general have problems taking care of their amenities, and if you add complex services such as dining halls and nursing care, it could become more difficult," said James Frush, a Florida retirement developer. "The other problem is that the elderly owner cannot control or anticipate increases in fees for managing services. It could create problems."

Companies that have specialized in continuing care, retirement projects that offer a wide range of services, including full nursing care if it is needed, are moving away from nonrefundable entrance fees.

One such company, Life Care Services Corp. of Des Moines, Iowa, is planning to build a 246-unit project outside of Annapolis, called Ginger Cove, and has financed the project so that 90 percent of the entrance fees -- which range from $100,000 to $200,000 -- will be refundable to the family after the elderly resident dies.

To fund such a project, however, Life Care Services will have to charge high monthly service fees, from $1,000 to $2,000.

Still, the company, which has built 40 such communities around the United States, believes the refundable entrance fee will help sell the project.

"The response so far has been amazing," said Linda Brown, retirement counselor for Life Care Services, who said the company already has 25 deposits after only a few months of marketing. "If you've worked all your life to leave something for your heirs, this is a way to do that and still enjoy your retirement."