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Daily Real Estate News | October 16, 2006
Boomers Pave Their Own Road to Retirement
The nation’s 78 million baby boomers have diverse plans and timelines for their retirement years, resulting in different housing requirements and significant shifts from patterns established by earlier generations, according to a study by the NATIONAL ASSOCIATION OF REALTORS®.
“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,” says David Lereah, NAR’s chief economist. “Many boomers simply don’t know how they’ll retire.”
The comprehensive study is based on a survey of nearly 2,000 American baby boomers born between 1946 and 1964 — the largest generation in U.S. history. The survey was conducted for NAR by Harris Interactive.
Many Don’t Plan to Leave Workforce
The study found that 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, Lereah says. The median age at which baby boomers expect to stop working is 70, but 27 percent say they never intend to stop working.
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,” Lereah says. “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.”
Given a longer tenure in the work force baby boomers may choose a larger home than earlier generations, speculates Peter Francese, an independent demographic trends analyst and founder of American Demographics magazine. “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,” he says.
More Key Findings
The survey also revealed a lot about where retiring baby boomers will move and how much money they’ll have available to spend on housing.
- Sunbelt is popular choice. Forty-two percent of survey respondents would like to retire in the South, 32 percent in the West, 15 percent in the Midwest and 12 percent in the Northeast. “This tells us that the Sunbelt will remain a traditional draw for retirees,” Lereah says.
- High median income. 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 home owners,” Lereah says.
- But not everyone is rich. For baby boomers earning $100,000 or more, the study shows that more than 9 in 10 are home owners. 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. Furthermore, most survey respondents were unsure of their financial future, with three-quarters saying they’re 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.
- Diverse real estate holdings. 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.
- Plans involve vacation homes. 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.
- Boomers see the value of using a practitioner. The survey shows most boomers want professional services when they buy real estate, says NAR President Thomas M. Stevens from Vienna, Va. “Baby boomers expect professional service and guidance from real estate agents, and they value those services,” he says. “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf.”
- Rural destinations lead the pack. 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.
- Will help kids buy a home. 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 home owners (97 percent), and 47 percent are likely to also own other real estate in addition to their primary residence. More than a third expects to help children or grandchildren with a down payment 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.
A Little Wishful Thinking?
As you digest all of the survey’s findings, Francese warns that some of the responses about retirement preferences are based on dreams. “Surveys of future intentions often include a dose of wishful thinking, and attitudes can be influenced by the media and other outside pressures,” he says. “For example, many are probably not going to be able to, or even want to, retire in a small rural town far from their current home, even if they may dream about it currently.”
Preliminary results of the study were released in May at NAR’s Midyear Legislative Meetings & Trade Expo, with a focus on the real estate and second-home appetite of boomers. This more extensive analysis is supplemented with context and data from the Census Bureau’s mid-2006 estimates of population characteristics; it offers an abundance of information helpful for planning to real estate practitioners, builders, mortgage lenders, and others connected to the housing industry.
For more findings, read the full press release at REALTOR.org. The survey, titled Baby Boomers and Real Estate: Today and Tomorrow, was conducted online between March 31 and April 6 among a cross section of 1,969 U.S. adults born between 1946 and 1964.
— REALTOR® Magazine Online