Millennials are clearly the future of real estate. Nevertheless, there’s a new trend afoot that might be your next hot opportunity — and America’s wealthiest generation will be driving it.
Everyone has struggled to understand why younger people have been reluctant or unable to enter the housing market. Student loan debt, stricter lending standards and a limited job market have made it harder for millennials to purchase homes.
There’s another factor that might be limiting millennials, one that virtually no one notes. The challenge is that boomers not only control the purse strings; they’re holding almost the entire purse.
According to the International Council of Shopping Centers and the Economic Policy Institute, “The 55+ agent group controls more than three-fourths of America’s wealth and has three times the net worth of younger generations. More importantly, boomers outspend other generations by $400 billion each year on consumer goods and services according the U.S. Government Consumer Spending Survey.”
The peak birth rate for the baby boomer generation occurred in 1960. These individuals turned 55 this year. For those who are still working, they are at the peak of their earning capacity.
For many boomers, continuing to work is a choice. After all, retirement is for senior citizens. This stems from the fact that most boomers believe they are 10 to 15 years younger than their parents and grandparents were at this stage of their lives.
Others have to work due to loss of retirement funds during the downturn — or because their identity is so strongly linked to what they do.
Lack of inventory — boomers aren’t selling
Because the boomers control the inventory, their choice and inability to sell has been an ongoing drag on the current market. We’re at a tipping point where this is about to change.
HPMKT predicts that “The majority of the 78 million boomers need to remodel their homes or will be moving due to being in transitional life stages. Transition, in this case, meaning downsizing from the family home, but not yet ready for retirement.”
The first boomer wave is happening now
My husband and I just decided to list our big dream house. We have decided to move into a lock-and-leave community, where we can still have a luxurious home without the exterior maintenance hassles.
What has been surprising to me is that most of our baby boomer friends are either going through the same process or considering it soon. As one of my husband’s college buddies observed, “You’re on the tip of the trend — let us know how it goes.”
The community where we plan to build advertises itself as “right-sized” luxury living. A move takes us from a property tax rate in Austin’s most popular school district of 2.63 percent on full valuation to approximately 1.88 percent.
Because the home we’re looking at is half the size and more energy efficient than our current property, our mortgage and utilities will be reduced by more than half. Also, the property is very much akin to a five-star resort or a luxury cruise.
It offers plenty of classes, full workout facilities, indoor and outdoor pools, concerts on-site, an activity director — plus a full array of concierge services just a phone call away.
The trade-offs are a 10-15 minute longer commute to downtown Austin, an extra 10 minutes to the airport, no view and making the hard decisions about what we need versus what must be left behind.
Psychologically, I wasn’t ready to make the move. Moreover, the longer commute was a deal-killer for me.
Then one of my neighbors got more than $100,000 what the comparable sales justified, and I saw the big jump in our property tax bill, so we reconsidered our decision.
The home we hope to build will have three bedrooms, two baths and an office. An important reason we have resisted moving was that we wanted a large house so we could have a place for family and friends when they come to visit.
When I used this justification with a former neighbor who had recently moved into a similar style community, she responded by saying: “I went kicking and screaming all the way, and it was the smartest decision we ever made.
“We have more money for travel, we no longer have to spend our time maintaining the property, and we have a wonderful community of friends who are our age.
“In our previous neighborhood, everything revolved around children. Besides, what do you need that big house for? You know how many hotel nights you could buy for your guests with the money you will save on your property taxes and mortgage?”
If you would like to tap into the next big boomer movement, keep an eye out for part 2 of this series to learn more.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/