There Will Be Fewer Buyers from the Boomer Generation

By
Real Estate Agent with Inactive

Many Baby Boomers will not be buying another home anytime soon according to the Center for Economic Policy and Research report “The Wealth of the Baby Boom Cohorts after the Collapse of the Housing Bubble” dated February 2009 and written by David Rosnick and Dean Baker.

For precision, the Boomer generation was divided into Late Boomers between the ages of 45 to 54 and Early Boomers between the ages of 55 and 64 (the findings of the report exclude any benefits from defined benefit pensions). The findings of the report indicated:

  1. Late Boomers Median household wealth fell by more than 45 percent between 2004 and 2009, from $172,400 in 2004 to just $94,200 in 2009 (all amounts are in 2009 dollars). After a life time of work and wealth accumulation the median late boomer household has only enough wealth left to pay for 55% of the price for a typical house and they have no other assets whatsoever. Sadly, they would still owe approximately 45 percent of the price of a typical house.

  2. Early Boomers Median household wealth fell by almost 50% from $315,400 in 2004 to $159,800 in 2009. This net worth would be sufficient to allow these households, who are at the peak ages for wealth accumulation, to cover approximately 90% of the cost of the typical house, if they had no other assets.

Consequently, as a result of the collapse in house prices, many boomers now have little or no equity in their home. Of those who own their primary residence:

  1. Nearly 30% of the late boomer households, if they were to sell their home, will need to bring money to their closing (to cover their mortgage and transactions costs).

  2. More than 15% of the early boomers will need to bring money to a closing if and when they sell their home.

In my opinion, Real Estate markets where boomers shopped for second homes and/or retirement homes will experience a sharp decline in sales and a slow recovery.

 

Posted by

George Bennett, Principal Broker, Affiliated, GRI in Port Orford, OR 97465

Affiliated with 'Neath The Wind Realty Inc.

Comments (22)

Khash Saghafi NMLS
Liberty Home Mortgage Corporation - Cleveland, OH
Mortgage Loan Officer, Cleveland OH NMLS 1114762

Hey George,

  First, this is an extremely informative post.  I have not analyzed the baby boomer generation at all and your information will definitely have me doing some research this weekend.  I believe that it hi-lites why people must step up to the age of technology and bring themselves current on sites such as ActiveRain and taking a deeper look at First Time Buyers and how to market to them.

Mar 20, 2009 10:56 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Which is why the government's "cure" for the financial disaster is so infuriating.  It is the American home owner who has been harmed by the perfidy of the investment bankers and Wall Street cabals.  Yet, the government decided to help the perps of these crimes against the American home owners by handing them our national wealth and leaving the American home owners, who lost all their wealth in the debacle, twisting in the wind and financing this pay-off to cronies with tax money for decades to come. 

There are millions of home owners who are now prisoners of their mortgages and left with negative equity and no family security.

 

Mar 20, 2009 11:05 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

George, those are staggering numbers for many boomers who are reaching retirement or who may already be retired. The drop in household wealth will mean a lot of boomers will have to continue working into their retirement years.

Mar 21, 2009 12:40 AM
Sasha Miletic - Windsor Real Estate
RE/MAX Preferred Realty Ltd. - Windsor, ON

Hi George, Good post. Thanks for sharing. Keep posting best.

Best - Sash

Mar 21, 2009 01:41 AM
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Kate - Interesting indeed. There are a lot of families in pain. I just hope they can hang in there until assistance arrives and/or a recovery begins.

Fernando - You are welcome. Thanks for visiting. You are welcome any time.

Kash - The facts aren't pretty but you can't understand the problem, its depth or breadth without them.

Lenn - You know how little confidence I have in Geithner and his Wall St. cronies in the administration, at the Fed, and on Wall St. The public gets a bandaid while Wall St gets the best care that present and future taxpayers can finance.

Michael - I agree with you. The retirement plans and dreams of many boomers have been wiped out. There will be no recovery for them only a much longer working career if they are lucky enough to find work.

Sasha - You are welcome. Stop by anytime. 

Mar 21, 2009 05:18 AM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Oh my,  I thought you said Late Bloomers and Early Bloomers.  It is interesting isn't it.  I do think most people buying are under 45!

Mar 21, 2009 09:58 AM
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Hi Joan - That is an interesting twist but the bloomers, late or early, under 45 are OK.

Mar 21, 2009 10:36 AM
League City, TX - Worrell Team, REALTORS, GRI, CNE
RE/MAX 1st Class - League City, TX

George, But if the early boomers or bloomers take out a 30 year mortgage, they don't even necessarily have to pay it all back!!!  In all seriousness, it is a sad state of affairs, but this could all rebound and come right back up.  Not immediately, but in time to make a difference for these age demographics.

Mar 21, 2009 03:53 PM
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Brian, There are housing solutions to their needs but it is all far short of what they had envisioned for their retirement years. And we will all do some belt tightening and sadly some will need to do a lot more than others. I believe the market will come back but I don't think in will come back to 2006 levels. It will probably over correct and then come back to 2002 levels. Then there will be slow growth after that until the next bubble grows the economy.

Mar 21, 2009 05:29 PM
Vanessa Calhoun
PalmerHouse Properties & Associates, LLC - Atlanta, GA
Your Greater Atlanta Marketing Guru!!

Great Post George!

I agree with Khash's post in that it is essential that we increase our internet marketing and place more emphasis on first time homebuyers!

Mar 22, 2009 02:05 AM
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Vanessa -  There will some opportunities with first time buyers. Good Luck and thanks for stopping by.

Mar 22, 2009 03:17 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

In our area house prices continue to drop which is what happens when no one can afford to buy.  If that trend continues less money will buy more house soon enough.  

Mar 22, 2009 05:40 PM
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Robert - Buyers from areas outside of Sacramento whose home values have not dropped as much as they have in your area will get more house for their dollar. Home owners in Sacramento and from areas where home prices have dropped as much as Sacramento will have fewer equity dollars and some will have no equity dollars at all with which to purchase their next home. 

Mar 23, 2009 05:00 AM
Anonymous
Darrin D. Davis

Thanks for the info!

 

 

Darrin D. Davis

www.AnacostiaRiverRealty.com

Mar 25, 2009 03:06 AM
#16
Anonymous
Just an Opinion

Please stop with the sky is falling. The Boomers are just fine if they planned accordingly and if they do not need to sell their home in this market.

It's a terrible thing that they are not going to be buying a second home or retirement properties. But who is it terrible for? Them? Us as Realtors? Having a second home is not a rite of passage. It's a luxury.

Who's to blame for the current economic crisis? We ALL are. How about borrowers who push the envelope and did not change their lifestyles once they became homeowners? How about the lenders who push the envelope and qualified people based on false hopes and flexible, guidelines? How about Realtors who focused on getting their client into the house, but did not prepare them for the realities of homeownership? How about the Speculators who got over their heads with house flipping and rental properties with little to no management skills? How about those politicians who let the situation go uncheck for 7 years?

In 2000, 2001, we ignored the warning signs. . .Truth is we are all to blame and the only thing that will correct this market is time; a lot of cutting back and hopefully a memory that will prevent us from repeating our mistakes again.

 

Apr 10, 2009 05:06 AM
#17
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Hi JOP - Your opinion is welcomed. But it appears that you missed the point of this blog. It was a market analysis focused on areas where boomers would likely shop for their next homes and the impact that this financial crisis has had on the plans boomer had for buying their next home. While there are plenty of individuals, public & private companies, govt. agencies, and elected officials to share the blame, I don't agree that we are all to blame for the current economic crisis. When it comes to wrong doers I don't believe that enough resources have been allocated to identifying and investigating criminal and civil violaitons, collecting evidence, and prosecuting wrong doers. Additionally, there has been very little effort put into substantially reforming national and internaition regulations to prevent further wrong doing.

Historically, in my opinion, this crisis has been building since the early 1970's. I have written many blogs on the subject and you are welcome to read them for further details to gain a greater understanding and greater insights into the problems that threaten our economic stability and undermine our pressing needs for relief and recovery. The sky is not falling and we will get through this but we can't afford to ignore the root causes, or let wrong doers go unpunished, or fail to take effective corrective actions and institute all necessary measures to prevent a future occurrence. 

Apr 10, 2009 05:38 AM
Anonymous
JOP

I understood the point of the blog. With less equity in their homes, boomers are not not unlikely to buy that second home or retirement property because they can't pull equity from their homes. Is that right?    

Apr 10, 2009 05:52 AM
#19
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

JOP - Huge losses in equity and in some cases complete loss of equity have seriously compromised the next home purchasing abilities of boomers whether they planned on selling their current homes to buy their next home or just planned on pulling out some of their equity to buy a second home.  

Apr 10, 2009 06:29 AM
Anonymous
JOP

Oops, I meant the boomers are not likely to buy second homes or a retirement property. But I see that you understood me. Interestingly enough, reverse mortgages are on the rise. My company was highly against them years ago. Now I see the broker slowly but surely introducing the product as an alternative. In fact, the dialogue went something like this: "Maybe perents want to help their children while they are alive to buy their first home & well, with a reverse mortgage it might help you get one or two more deals."

Where's the blog you were pointing me too? I am a reader and a pc geek. So, I will definitely check it out. I'm all for learning more about real estate.

Apr 10, 2009 07:06 AM
#21
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

JOP - Here is the link to my blog page -  http://activerain.com/blogs/georgebennett

Reverse Mortgages may be a solution to meeting some of the boomers other wants & needs depending on how much equity is left in their homes. Unfortunately, some are now without any equity at all. Your point is well taken, these are times when we really should examine our alternatives.

Apr 10, 2009 09:37 AM