The 55+ Demographic
They’re better known as Baby Boomers (born between 1946 and 1964), and there are a whole lot of them: about 76 million, to be more precise. While they’re now outnumbered by Millennials* (also known as “Generation Y”), who number 83.1 million, some important facts about Baby Boomers** point toward a seismic shift in the residential real estate market over the next decade
- Baby Boomers control nearly 66% of the estimated $8 trillion in home equity.
- While the majority of baby boomers would prefer to “age in place” if they have total control, one-third of baby boomers expect to move again at least once.
- That’s 25 million baby boomers who now own homes who expect they will move again at least once.
- Of the 25 million baby boomers who expect to move again, 71% they plan to rent their next home.
- That means about 18 million homes currently owned by baby boomers will hit the market (with about 3.25 million expected to hit the market within the next four years).
The Time is Right to Sell
As they near retirement age. Baby Boomers who are thinking about selling their homes and buying a smaller home or a renting a condo or apartment might want to accelerate the process of listing their homes and finding a new place to live. Why? Because as Baby Boomers start to sell their homes and move into rental apartments and condos, the number of properties on the market will climb and the law of supply-and-demand will kick in, negatively affecting home prices.
People might be tempted to think that Millennials will soak up the supply of houses that Baby Boomers are leaving, because there are so many of them, helping to prop up prices. But that’s not what’s expected to happen, at least not anytime soon – and especially not with larger, higher-priced homes. That’s primarily because Millennials are not ready to buy: either they’re single and uninterested in owning a home, they have student loan debt, or they are not making enough money to qualify for mortgages.
The Good News for Baby Boomers Who Want to Downsize
The real estate market is white hot in mid-2017. The supply of homes in many markets is at all-time lows, which has driven prices to near all-time highs. Because interest rates are still modest (and expected to remain so) and because members of Generation Y are still buying homes for their growing families, it’s the perfect time to downsize for those interested in making the change.
Another bit of good news for baby boomers considering downsizing and moving into an apartment or condo at the beach is that the supply of units in “lock and leave” properties is still healthy. These attached-living arrangements (typically condominiums, townhomes or apartment buildings) provide a greater sense of security more amenities than single-family homes, and typically cost less to purchase or rent and maintain. But as more people downsize and relocate to desirable communities, the supply of these desirable homes in these communities is expected to tighten, at least in the near term.
So with a tight supply of homes on the market and plenty of places to move, it’s the perfect time for downsizing baby boomers to sell and move to a worry-free environment.
“I’ve seen more and more Baby Boomers moving because they’re just fed up with taking care of their places,” says estate sale specialist Brette Bates, of Bethesda Downsizing. “A lot of the estate sales we’ve held in the past two years have been people who are downsizing because they want to move somewhere else and be free of the hassles of living in a big house, or because they want to move closer to their kids and grandkids. It used to be that we had estate sales only when people moved into assisted living or passed away. That’s not the case so much anymore,” she added.
Realtor Chris Weathers of The Reef Team/TTR Sotheby’s International Realty says he’s seen a growing number of listings from people who want to move out of the homes where they raised their children. “They just don’t need all the space. Their kids are gone and they want to travel while they still can. One client told me, “If we don’t do it now while we’re in our early 60s, I’m afraid we won’t do it at all – and I really don’t want to be stuck here doing all these chores. I’m tired.”
Art and Sara Foss moved from a lakeside home on Lake Okanchee to a nearby single-family home on a small lot in Pewaukee, Wisconsin. “The lake house was fabulous and we enjoyed it for about 20 years. It wasn't that big, but the upkeep was ridiculous. We sold it to a cute young couple who wanted to renovate it, and we moved to an apartment for a year to decide where we wanted to end up,” according to Art. They found a 2,000-square-foot house that’s big enough to host the kids and grandkids, but small enough to take care of. “It’s close to restaurants, we’ve got some great neighbors, and it has a nice little patio out back for my planters and the barbecue grill. The master is on the main floor and the upstairs is for company. We’re so happy we did it,” added Sara.
* Washington Post, August 22, 2016.
** Freddie Mac, “Freddie Mac 55+ Survey,” conducted by GfK.