Tag Archives: baby boomers

Home Buyer and Seller Generational Trends

18 Mar

From the National Association of Realtors:

Characteristics of Home Buyers

 Gen Y comprises the largest share of home buyers at 32 percent, which is larger than all Baby
Boomers combined. Younger Boomers comprise 16 percent and Older Boomers comprise 15
percent of recent home buyers. Generation X made up 27 percent of recent buyers and the
Silent Generation has the smallest share of home buyers at 10 percent.

 While the demographics of recent buyers fall mostly in the expected range, income peaks for
ages 35 to 59, and the prevalence of children in the home peaks for buyers 35 to 49.

 Gen Y has the largest share of first-time buyers at 68 percent. The share of first-time buyers
declines as age increases. Among the Silent Generation only three percent of buyers are firsttime
buyers.

 Thirteen percent of all buyers purchased a multi-generational home, one in which the home
consists of adult children over the age of 18, and/or grandparents residing in the home. This is
most prevalent among Younger Boomers aged 50 to 59, at 21 percent. The most common
reason for this living arrangement among Younger Boomers was children over 18 moving back
into the house (37 percent), followed by health/caretaking of aging parents (21 percent).

 The prior living arrangement varies greatly for recent home buyers. Among those who are 33
and younger, 59 percent rented an apartment, while among those who are older than 50 years
of age and older more than half owned their previous residence.

 Thirty-nine percent of Gen Y buyers primarily purchased a home just for the desire to own a
home of their own. Gen X placed a high importance on owning a home of their own, but many
needed to move for a change in a family situation or a job-related relocation. Older Boomers
are more likely to move for retirement, the desire to be closer to friends, family, and relatives,
and the desire for a smaller home, while Younger Boomers are likely to move for a job-related
relocation and to downsize.

 As age increases among recent home buyers, the rate of owning more than one home also
increases.

Financing the Home Purchase

 Overall 88 percent of recent buyers financed their home purchase. Nearly all (97 percent) of
Gen Y buyers financed compared to just 61 percent of Silent Generation buyers.

 When financing the home purchase, younger buyers also financed larger shares—the typical
Gen Y downpayment is seven percent and Gen X is 10 percent compared to 22 percent among
the Silent Generation.

 Buyers have a variety of sources for a downpayment on a home. The source is predominately
savings for younger buyers, while older buyers are more likely than younger buyers to use
proceeds from a sale of a primary residence. Younger buyers are also more likely to use a gift or
loan from a relative or friend.

 Twelve percent of buyers overall cited saving for a downpayment was difficult. Among these
buyers, 50 percent reported credit card debt, 46 percent of buyers reported student loans, and
38 percent car loans was the debt that held them back from saving. This was most common
among Gen Y and Gen X buyers who are most likely to use savings as a downpayment source—
22 percent of Gen Y and 15 percent of Gen X had a difficult time saving. Among this 22 percent
of Gen Y, 54 percent reported student loans held them back from saving. Among the 15 percent
of Gen X, 41 percent found credit card debt held them back from saving.

 Despite record housing affordability, many buyers are still making financial sacrifices. About half
of Gen Y and Gen X buyers made sacrifices. Common sacrifices were cutting spending on luxury
or non-essential items, cutting spending on entertainment, or cutting spending on clothes.

 Younger buyers were considerably more optimistic that their home purchase was a good
financial investment in comparison to older buyers. Eighty-four percent of buyers under 34
considered their purchase a good financial investment compared to 72 percent of buyers 69
years of age and older.

Home Sellers and Their Selling Experience

 Among the generations, Gen X (27 percent) is the largest group who are recent home sellers
followed by both Older Boomers (23 percent) and Younger Boomers (20 percent).

 Gen Y is the largest share of married couples among sellers. The Baby Boomers had the lowest
share of married couples among sellers. Older Boomers have the highest share of single female
sellers.

 Seventy-five percent of Gen Y sellers are first-time sellers compared to just eight percent of sellers
in the Older Boomer segment and 11 percent of Silent Generation sellers.

 Older buyers tend to move further distances, and are more likely than younger buyers to buy in
other regions and less likely than younger buyers to buy in the same state as the home sold.

 There is a clear trend of moving to larger, higher priced homes for Gen Y and Gen X, moving into
a similar home for Younger Boomers, and downsizing in both square footage and price for Older
Boomers and the Silent Generation.

 The reasons for selling a home vary, however, for younger buyers many want to upgrade to a
larger home or to accommodate job relocation. In comparison, for older buyers many want to
be closer to friends and family and buy a smaller home due to retirement.

 Sixteen percent of sellers wanted to sell their home earlier than they were able to but waited or
stalled because their home was worth less than their mortgage. This is most common among
Gen X (23 percent) sellers. Among Gen Y and Younger Boomer sellers this occurred among 17
percent of sellers.

 Typically, the older the home seller, the longer the tenure in their home has been—this is a factor
in fewer sellers who had to stall the sale of their home. Gen Y typically owned their home for five
years while Older Boomers and the Silent Generation owned their homes for 13 years before
selling.

 

Read the full 2015 survey here:

http://www.realtor.org/sites/default/files/reports/2015/2015-home-buyer-and-seller-generational-trends-2015-03-11.pdf

 

Advertisements

Cash Deals for Homes Reach Record With Boomers Retiring

3 Jun

By Kathleen M. Howley, Bloomberg.com– Jun 2, 2014

Mike Trafton bought a house in a suburb of Boise, Idaho, where he plans to retire. He made the deal without signing a stack of mortgage papers.

Trafton, 55, and his wife Cindy, 54, paid $400,000 in cash for the 3,200-square-foot house in Eagle after selling their 4,400-square-foot home in a Portland, Oregon, suburb for $680,000. Like a growing number of baby boomers, born between 1946 and 1964, the Traftons had no desire to get a mortgage.

“I feel better about owning my home outright,” said Trafton, who’s moving to a region with an average of 200 sunny days a year and skiing in the winter. “At this stage in our lives, we can afford it, and it’s better than having a monthly mortgage payment hanging over us.”

U.S. home-price gains have restored $3.8 trillion of value to owners since the beginning of the real estate recovery in 2012, according to Federal Reserve data. A record number of Americans are using that equity to pay cash for properties, avoiding a mortgage process that has become even more onerous in the wake of the 2007 housing collapse. In the first quarter, 29 percent of non-investment homebuyers used cash, the highest on record for the period, according to data compiled by Bloomberg.

Cash Deals

The majority of people making all-cash deals are baby boomers mostly because America’s largest-ever generation is beginning to retire, said Lawrence Yun, chief economist of the National Association of Realtors. In 2012, there were a record 61.8 million Americans over the age of 60, according to the Census. That compares with 46.6 million in 2000.

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

Lending Falls

Lending for mortgages to purchase homes fell to $115 billion in the first quarter, the lowest in three years, according to the Mortgage Bankers Association. In the first three months of 2014, buyers plunked down $105.1 billion of their own money for properties, compared with $84.7 billion a year earlier, according to Bloomberg data. The share of purchases made by investors, who typically pay cash, dropped to the lowest first-quarter level since 2010.

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

About 10,000 Americans turn 65 every day, according to the Pew Research Center in Washington. Between 2010 and 2020, the group of Americans age 65 to 74 will jump 51 percent, according to Census projections. Combined U.S. home equity, the value of real estate unencumbered with mortgages, rose to a six-year high in the fourth quarter, according to the Fed.

Home Equity

Members of the baby-boom generation have more home equity than their parents because they owned homes during the biggest 30-year housing bull market in history. The median U.S. price of an existing home in April was $201,700, triple the $67,800 median price in 1982 when many were buying their first properties.

Just as they transformed societal norms and politics as college students in the 1960s and 1970s, the generation will change the housing market as they age, said William Frey, a senior fellow at the Brookings Institution in Washington who specializes in demographics. About 16.3 million Americans older than 60 owned their homes free and clear in 2012, according to Census data. In 2009, that number was 12.1 million.

“As boomers go through the stages of life, they change everything they touch,” Frey said. “Whatever housing decisions they make as they near retirement will have an impact on the market. If they have the ability to be free of a mortgage when their income diminishes, they’ll do that.”

Living Longer

This generation will likely stay in the housing market longer than the prior one, said John McIlwain, a senior fellow at the Urban Land Institute in Washington.

They “will be buying and selling well into their 80s because they are going to be active and healthier for a lot longer than their parents,” McIlwain said. “They are a rebellious generation, and they’re not going to go along with the idea of traditional retirement.”

Almost 60 percent of boomers said they plan to move out of their present home, according to a March survey by Better Homes and Gardens Real Estate LLC, a brokerage franchise based in Parsippany, New Jersey. Some, like Linda Snetselaar of Iowa City, Iowa, are buying a retirement home now and using it for vacations until they stop working.

Last month Snetselaar purchased a one-bedroom home for $450,000 in Heritage Sands, a community under construction on the south shore of Massachusetts’ Cape Cod designed to look like a collection of cottages from the 1940s. Snetselaar, 64, said she’ll continue working as a professor at College of Public Health at the University of Iowa for another five years or so, and then retire to the house in Dennis Port.

Rock Climbing

Snetselaar said when she sells the five-bedroom Iowa City home where she raised her children, she probably will use the proceeds to pay off the mortgage she needed to finance the Cape Cod house. She bought her first home in 1974, when the median U.S. price was about $36,800.

“I’ve been paying mortgages for four decades,” Snetselaar said. “Not having to make that monthly payment is something I’m looking forward to.”

About 39 percent of boomers want to retire to a rural community — either a farm or a small town, according to the Better Homes poll. About 27 percent plan to move to an adult community where activities such as rock climbing and yoga are available. And 26 percent said they want to retire to a city.

“They’ve gotten through the recession, and now they want to have fun,” said Sherry Chris, president of Better Homes and Gardens Real Estate. “The ones who can manage to pay cash will do it because they won’t be as dependent on the mortgage-interest tax deduction in retirement.”

Peace of Mind

Going without a mortgage bestows “peace of mind,” said Trafton, who watched families in his Oregon neighborhood lose homes during the real estate bust.

“There’s nothing like the feeling of owning your own home free and clear of a mortgage,” said Trafton, who had paid off the mortgage on his Portland home before selling it. “I’ve spent most of my life making mortgage payments, and now I’m done with it.”

New York Regional NRMLA Conference Offers Useful Information – Part FOUR – NRMLA Research Forum

25 Mar

The very last session at last week’s Regional Conference was an overview of recent research.

Michael Eriksen of the University of Georgia presented “Aging in Place, Access to Affordable Housing and the Health and Living Arrangements of Older Americans.”   With 75 million baby boomers on the verge of retirement, this is an important topic.  There is a clear desire to age in place.  In fact, 80% of older households were found to be owner-occupied. While homeownership rates dropped off in the mid-2000’s for other age groups, 65 and older homeownership continued and continues to rise.

Findings from this study also show that 1/3 of older homeowners have experienced a serious fall, fall rates are on the rise, but only 16% live in handicapped-modified homes.  Modifications are needed, but can be costly, leading to the conclusion that home equity may be the best way to pay for them.

Cindy Hounsell of the Women’s Institute for a Secure Retirement spoke about the need to inform women, especially, about financial options available in retirement.  At age 65 and over, there ate 6 million more women than men in the United States, and 68% of the 85 and older population are women.  Women’s issues to be considered are that they earn less therefore have less in savings and pensions, but live longer and often live alone.  Women need to realize that their biggest risk is outliving their retirement savings.  More women than men have consistently taken out reverse mortgages.

Ohio State University’s Stephanie Moulton presented research on “Aging in Place: Analyzing the Use of Reverse Mortgages to Preserve Independent Living.”  The underlying assumption is that reverse mortgages provide greater financial security which, combined with the ability to stay in one’s own home, may lead to independence and overall well-being.

Like other speakers in the conference, she pointed out that the pool of potential eligible HECM borrowers is growing.   Additionally, the age of the average HECM borrower is getting younger and more HECM borrowers have more mortgage debt.

Clients counseled for reverse mortgages reported that they used reverse mortgage funds mainly to increase monthly income and pay off existing mortgage debt.