Boomers and millennials pose questions for housing market

Baby boomers are the second largest group of homebuyers (31 percent) after millennials (35 percent) and many economists and real estate professionals have varying opinions about where and when Baby Boomers will retire.

Lack of retirement funds

A recent Merrill Lynch article reports that as life expectancy rises, Americans will need to fund longer retirements, yet most are not saving enough to meet their goals. In addition, most Americans do not know how much money they will need for retirement, leaving many unsure of how to fund their lifestyle after retirement. With approximately 10,000 new retirees being added to the marketplace each day, the issue of retirement funding as well as sufficient housing inventory is a growing need among Baby Boomers. What will this generation do to fund their retirement if they were not able to save enough to maintain their current lifestyle?

Merrill Lynch studied recent retirees and found that in order

to help fund retirement, 67 percent would consider selling their current property to purchase a less expensive home. Nearly half of those polled would consider selling in order to rent a smaller apartment and another 40-plus percent would be willing to take out a home equity loan, refinance their current mortgage or consider a reverse mortgage. And in a growing trend, fueled by popular sites such as AirBnB, another 25 percent

of people ages 50 and older are considering renting out a room or a portion of their home as a short term vacation rental in order to obtain extra income.

Trade-down dilemma

With these types of statistics brewing, Baby Boomers have big decisions to make. The current real estate climate isn’t going to make it easy on those looking to downsize. The number of starter homes on the market has dropped a stunning 43 percent since 2012 (Source: Trulia), and the number of “trade-up” homes on the

market has also fallen by 40 percent.

Ralph McLaughlin, the chief economist for Trulia has found that the prices of premium homes have spread the price gap even further from midrange properties. Currently, premium homes average $542,805 versus $267,845 for trade-up residences. This pricing distance will greatly affect Baby Boomers. “The more that price gap increases, the more difficult it will be for an existing trade-up home owner to then move into a premium home,” said McLaughlin. “And if that can’t happen, then it

may be difficult for boomers to find buyers for their homes.”

Student loan debt & boomers

According to Lawrence Yun, NAR chief economist, student debt is likely impacting boomers as well as millennials in their ability to buy a home. “Whether it’s from financing their own education or borrowed for their children, it’s somewhat surprising to see a higher median amount of student debt among Gen X ($28,000) and younger boomer buyers ($29,100)

compared to millennials ($25,000),” adds Yun. “One of the many reasons housing supply has been subdued in recent years may be because a segment of homeowners have decided to delay trading up or moving down in order to pay down their debt, including from student loans.”

Boomers might be feeling the strain of the retirement decisions in front of them, but there is hope! While the numbers can be frustrating, your situation is unique and there are always options in order to obtain your retirement dreams. Work closely with

your broker and real estate agent who can help guide you in the right direction.