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:
- 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.
- 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:
- 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).
- 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.