Baby Boomers Say No to Downsizing

Colonial homeIt used to be turning 65 meant seriously considering moving to a warm climate, playing golf or just relaxing. The birthday meant definitely not working. Not so for baby boomers who continue to redefine their older years just as they have every passage along the way. In fact, they are steadfastly refusing to downsize or even move far from home.

According to a recent Nielsen report, the baby boomer generation continues to play a major role in the housing market, as well as the U.S. economy more generally. Forty percent of households in the U.S. are headed by someone between the ages of 50 and 69, and this group holds 54% of all household wealth.

Baby boomers still big home buyers

Older households are less likely to move and purchase homes, but the sheer size and relative wealth of the baby boomer generation means they will account for $1 out every $4 spent on new home purchases or rent in the next five years.

Baby boomers did take a major hit during the Great Recession. Boomer households rode the housing and stock bull markets to their peaks, with the median net worth of their houses reaching just over $200,000 by 2007. Then home prices and stock prices plummeted, and so did boomer net worth, which fell to $140,000—more or less where it stands today.

Had the Great Recession never happened, the median boomer net worth could be close to $370,000—roughly 2.5 times what it is today. Without a doubt, many boomer households have had to modify or delay their retirement and housing plans as a result.

The good news, though, is that the worst appears to be over, and Boomer financial situations have stabilized. Now, Boomers are revisiting housing plans they put on hold. Many are planning to retire as they reach their mid-sixties—five years from now more than half of all Boomer households will be headed by someone who is retired—and have plans for their housing needs as they approach retirement.

Downsizing, condo in a sunny place?

Not on the radar for boomers. According to a survey performed by The Demand Institute, a non-profit research organization of more than 4,000 baby boomers, nearly two-thirds of boomers have no plans to move at all. They will “age in place” in homes and communities where they have often lived for a decade or more.

Those who are moving are not going very far. Sixty-seven percent of movers will stay in-state and over half will move within 30 miles of their current home. Being close to their communities and families is very important to them as they age. “Wanting to be closer to family” is as common a reason for boomers to move as seeking a “change of climate.” Third, and perhaps most surprisingly, many baby boomers are still seeking their “dream home.”

Bigger is still better for boomers

Nearly half of those that will move (46%) plan to increase the size of their home or spend more for a home the same size as what they have now.

Perhaps this seems odd—why are they upsizing at this life stage? Many report they are living in smaller homes than they would like, and many who are renting, are now acting on the housing plans they had to delay as a result of the economic difficulties of the past few years.

Downsizers are particular

The other half (54%) of boomer movers will downsize, either by moving to a smaller home or spending less for a home of the same size. Members of this group have already achieved their dream home, and are now looking for a home that will be easier to maintain as they age.

But downsizers are not necessarily looking for lesser homes in all regards, and many will seek high-end finishes or more numerous community services and amenities. In fact, downsizers will spend more on their next home ($200,000) than upsizers ($180,000), on average, a reflection of their still-considerable nest eggs.

Much of the benefit will flow to the single-family home market: Baby boomer movers, upsizers and downsizers alike, generally prefer such homes over condos and apartments. Few are planning to move to senior communities.

Boomers recognize the importance of having easy-to-maintain homes as they age, but most (69%) still want a yard or a garden. They are in general not yet ready for “senior” lifestyles. Only in one regard do we see them thinking ahead with health in mind: boomers will overwhelmingly seek single-story homes when they move.

Home owners vs. renters

Most baby boomers plan to purchase when they move, and while some will go from owning to renting, just as many will do the opposite. The majority (56%) of these purchases will require mortgage financing, but boomers do not seem daunted by the prospect of carrying mortgage debt well into retirement.

More than three-quarters of boomers say they are confident they will be able to qualify for financing (in fact they are much more confident than Millennials). Indeed, this generation is already carrying far more mortgage debt than the previous generation—the median outstanding mortgage balance for 50-69 year olds has grown 142% since 1992.

Renovating to stay put

Finally, even those who do not move will contribute to the housing-driven economy, by way of spending on renovations. One way or another, the vast majority of the boomer generation will be helping to drive the housing economy.

For those who choose to age in place, many will need to make aging-related modifications, whether by renovations or by moving. What that means is that the boomer generation will drive spending on housing in at least two waves. Many will move in the next five years, and many will have to move later. Further, what happens to housing has economic knock-on effects that are very broad, which is why developments in housing are so important.

Burbs will cater to older residents

Increasingly, suburban communities that may have once catered to young families will comprise more and more senior citizens, many of whom will be living with mobility limitations or other special needs. As a result, there will be an increased need for public and private programs and services that help older Americans stay in their homes—home health care, transportation programs, nutrition assistance, community centers, and all the accompaniments of an aging community will be important for those who move now, and those who move later.

Boomers ready for a brand new beat

While boomers may not be dancing in the streets like the 60s group, Martha and the Vandellas sang , they are ready for a “brand new beat.”

That boomers may not be the major drivers of the housing economy that does not mean they will not be very important to that economy and to community life.

For more information on boomers’ housing plans, read the full Demand Institute report.

 

 

 

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