So Much for Home Downsizing?

A recent study by Bank of America Merrill Lynch found that nearly one-third of Baby Boomers and seniors are buying larger homes in retirement instead of downsizing.

The report seems to point to an interest in larger home specifically that have extra bedrooms. One-third of retirees surveyed say a top reason they wanted to upsize was to have a home large enough for family members to visit. When adult children, grandchildren, and other family members are scattered around the country, the homes of retirees tend to function as a meeting place for extended family functions.

Some retirees may be looking for something more than just a guest bedroom, however. The multigenerational household trend is evident in the study, with one in six (16 percent) retirees saying they have a “boomerang” adult child who has moved back in.

Only 51 percent of those surveyed actually did downsize, citing greater financial freedom (64 percent) and lowered maintenance duties (44 percent) among their top reasons for doing so. The remaining 19 percent moved to a similarly-sized home.

Source: “Retiree preferences are poised to drive the housing market, study says,” L.A. Times (Feb. 25, 2015) 

Home Owners Doing Record Number of Cash Deals

A record number of home owners are using the increased equity in their current homes to buy their next homes in cash and avoid the mortgage process altogether. About 29 percent of non-investment buyers used cash to fund their housing transactions in the first quarter of this year — the highest level on record, according to a new Bloomberg report.

Baby boomers make up a large bulk of these all-cash deals, says Lawrence Yun, chief economist for the National Association of REALTORS®.

“Cash purchases are on the rise because older home owners who have decades of home-equity accumulation don’t want the hassle of a mortgage,” Yun says. “With the economy improving and the stock market at record highs, boomers are the ones who are driving the market.”

“The whole investor class, the ones doing most of the cash purchasing until now, is stepping back,” Yun says. “Baby boomers are taking their place.”

Baby boomers have more equity than previous generations because they may have owned a home during a 30-year “housing bull market.” In April, the median price of an existing-home was $201,700 compared to $67,800 in 1982, when many boomers had purchased their first properties, Bloomberg reports.

Baby boomers are expected to remain a strong presence in the housing market much longer than previous generations, too.

Source: “Cash Property Deals Reach Record with U.S. Boomers Retiring,” Bloomberg Businessweek (June 2, 2014)

Generational Differences Drive Housing Preferences?

Younger home buyers tend to view their home as a strong investment, more so than older buyers who tend to view their homes as a match to their lifestyle, according to the 2014 NAR Home Buyer and Seller Generational Trends study, based on a survey of more than 8,700 responses from buyers and sellers.

The survey provided an look at generational differences of recent buyers and sellers.

The largest group of recent buyers is millennials, those under the age of 34, comprising 31 percent of recent home purchases, according to the survey. Generation X buyers, born between 1965 and 1979, accounted for 30 percent of recent purchases, and younger boomers, born between 1955 and 1964, accounted for 16 percent.

“Given that millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand,” says Lawrence Yun, NAR’s chief economist. “Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people. However, the challenges of tight credit, limited inventory, eroding affordability, and high debt loads have limited the capacity of young people to own.”

Other findings are at survey source:   National Association of REALTORS®

 

Generational “Home Buying Trends”

At 31 percent, Gen X comprises the largest group of recent home buyers, according to NAR’s Home Buyer and Seller Generational Trends report released today. Gen Xers were followed in numbers by Gen Y buyers (28 percent), and then younger Baby Boomers (18 percent), older Baby Boomers (14 percent), and the Silent Generation (10 percent). The Greatest Generation, also known as the G.I. Generation, represented less than 1 percent of recent buyers.

The report — a compilation of survey data from 8,501 recent home buyers — also shows that 80 percent of buyers who are aged 57 and younger bought a detached single-family home in 2012. Buyers over 57 are increasingly purchasing townhouses and condos.

The report also found that among all generations of home buyers, the first step in the home buying process is looking online for properties for sale.

Older buyers are less likely to finance their home purchase in comparison to younger buyers; when they do finance, the share of the home they financed is typically smaller.

Survey respondents cited benefits from working with a real estate professional. Among age groups, younger buyers are more likely to want their agent to help them understand the process as they are more likely to have never purchased a home before. Additionally, younger sellers are more likely to use the same real estate agent or broker for their future home purchases than older sellers.

When it comes to selling, Gen X is the largest group who are recent home sellers followed by both younger Baby Boomers and older Baby Boomers, the Silent Generation, and Gen Y. The G.I. Generation represented less than 1 percent of recent sellers.

Source: National Association of Realtors (NAR)

Gen Y to Lead ‘Massive Increase in Housing Demand’

Watch out for Generation Y: This large, diverse, well-educated generation will drive the housing market recovery over the next 10 years, according to economists with the University of Southern California Lusk Center for Real Estate.

Gen Y (15-32 year olds) boasts about 77.4 million members, which is about equal in size to the baby boomers (46-64 years old). Yet, Gen Y is much more diverse and educated (60 percent of Gen Y goes to college), according to the center, which recently presented its findings at the USC Lusk Center Orange County Executive Briefing.

Stan Ross, Lusk Center Chairman of the Board, says that “baby boomers and Gen Y comprise 50 percent of the population and will soon be part of the largest U.S. wealth transfer ever.”

As more of this age group joins the work force, “they will produce a massive increase in housing demand,” forecasts the USC’s Lusk Center.

However, Ross points out “these kids are concerned. They have watched the stock market, financial markets, and economy wipe out their parents’ retirement plans. As a result, they will choose lower-risk investment strategies.”

Source: “USC Lusk Center Says More Educated, Diverse Generation to Drive Real Estate Recovery,” The Hoyt Organization (July 19, 2011) [No Link]

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