NAR RELEASES BABY BOOMER STUDY

Baby boomers are like the vaudevillian who doesn't know when to leave the crowd laughing. They have dominated the economy, housing, product development and just about every other trend since they arrived on the scene in 1946. But the party's over in about 12 years, when they will no longer be the largest population segment in history, nor the largest body of consumers. But until then, they remain the most powerful demographic force in the U.S., particularly when it comes to housing.

According to a new study by the National Association of Realtors® conducted by Harris Interactive, the generation born between 1946 and 1964 is living longer but has no set path for retirement, a finding that may have developers, builders and Realtors in a tizzy.

"The differences from past generations -- and between baby boomers themselves -- will have a significant impact on housing needs over the next 10 to 20 years that is very different from the World War II generation, and many boomers simply don't know how they'll retire," observes David Lereah, chief economist for the NAR. "A significant portion of baby boomers married later in life and had children at a later age, which means many will continue to work beyond the traditional retirement age. Older boomers are thinking about retirement, but one-third expect to go back and forth between periods of work and periods of leisure, and another 35 percent want to work at least part-time or start a business -- all of this will have an impact on the kind of homes they buy as well as where they buy them."

The median age at which baby boomers expect to stop working is 70, but 27 percent say they never intend to stop working. Just over one-quarter are ages 55 to 60.

He said most baby boomers are still in the workforce, and many have children living at home, which makes them a continuing force in the housing market.

"Because they will be in the workforce longer, boomers will postpone purchase of retirement property and won't be making those moves as early as assumed," Lereah said.

Peter Francese, an independent demographic trends analyst and founder of American Demographics magazine, consulted on the findings. "For the vast majority of baby boomers, retirement is somewhere off in the future," he said. "Considering that boomers are healthier than their predecessors, and are more likely to work in an office setting, many of them may work five or 10 years beyond the traditional retirement age of 65," he said.

Given a longer tenure in the work force baby boomers may choose a larger home than earlier generations, speculates Francese. "Boomers may want or need a somewhat larger dwelling that includes one or two home offices, and a low-maintenance home on a single level would have broad appeal to this group," Francese said.

Not surprisingly, most boomers live in two-income households, with a median income in 2005 of $64,700, which is 31 percent higher than the median for all households. This generation makes up 37.5 percent of U.S. households, but receives nearly half of all aggregate household income. "This translates into a lot of purchasing power, and helps to explain why 8 out of 10 boomers are homeowners," Lereah said.

For baby boomers earning $100,000 or more, the study shows that more than 9 in 10 are homeowners. Among middle-income boomer homeowners, home equity accounts for fully half of their net worth. Even so, 19 percent of respondents are renters, 37 percent say they have just enough to make ends meet and 17 percent say they are having financial difficulty.

A quarter of baby boomers own one or more other kinds of real estate in addition to a primary residence: 13 percent own land, 8 percent own rental property, 7 percent a vacation home or seasonally occupied property, 2 percent commercial real estate and 3 percent some other kind of real estate. Four out of 10 respondents intend to convert their vacation home into a primary residence in retirement. Analysis by NAR shows baby boomers are proportionately more active in the second home market, owning 57 percent of all vacation/seasonal homes and 58 percent of rental property.

Ten percent of boomers indicate they plan to buy some form of real estate within the next year, which corresponds with Census data that shows 3.5 million boomer households moved during the last year. Two-thirds are considering a primary residence, but the rest are thinking about land, second homes or commercial property.

Most survey respondents were unsure of their financial future, says NAR, with three-quarters saying they are not financially prepared for retirement and many expressing anxiety about their ability to retire. Some boomers said they might withdraw retirement funds for housing or real estate expenses.

Where boomers will retire is uncertain. Half of boomers who live in an urban area would like to retire in a small town or rural area. Their ideal retirement location characteristics include a lower cost of living, being near family, quality health care, better climate and being near a body of water.

More than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities. Half of boomers said they would consider living in an age-restricted community.

Almost one in four boomer households have a high net worth of $500,000 or more, and this ratio is expected to increase in the future as the generation ages. Virtually all high-net-worth households are homeowners (97 percent), and 47 percent are likely to also own other real estate in addition to their primary residence. More than a third expect to help children or grandchildren with a downpayment on a home. Wealthier boomers want amenities where they retire, including cultural activities such as museums and art galleries. As a result, they are more likely to retire in an urban area or city.

Although most boomers are married couples and 27 percent have children under the age of 18, nearly two out of five baby boom households are nontraditional households, most of which are headed by women.

This changing demographic raises interesting ideas. Nontraditional households may have different needs and desires about where they want to live. Twenty percent of boomer households are headed by women, but because women aged 60 to 69 account for a quarter of homeowners in that age group, the number of women boomer homeowners is likely to increase much faster than average as they age.

For boomers with children, neighborhood schools are of obvious concern, but for those without children or grown children (3 out of 4), security may be a bigger issue.

In a similar study by the Mortgage Bankers Association, it was found that 43 million households headed by someone age 50 or older were owned as a main residence, and 6.6 million age 50 or older own a second home. The rate of second home ownership among boomers was flat between the years of 1992 and 2004, and only 12 percent of respondents said they intended to sell their main home and use their second home as a primary address. Even so, the MBA predicts that baby boomers will add 2 million second homes to their portfolios.

The good news for the real estate industry is that one out of four baby boomers between the ages of 50 and 60 intend to buy some form of real estate within the next 12 months; and the percentage jumps to 37 percent among the same age group with incomes at $100,000 or above.

But don't necessarily look for boomers to buy the most expensive homes. As they eye retirement, they are also considering affordability. Already 67 percent of those age 50 to 60 worry that housing costs could spiral beyond their reach.

Editor's note: The study can be ordered by calling 800/874-6500, or online. The cost is $50 for NAR members and $125 for nonmembers.

Published: October 30, 2006

by Blanche Evans

Realty Times