Retiring Baby Boomers – A New Real Estate Market Dynamic
More than a few stories have been written about the fact the first person of the baby boomer generation received social security on October 15, 2007. What many people are missing is the coming impact on the real estate market.
In many ways, baby boomers have been driving the real estate market. Yes, low interest rates were certainly a large factor, but the sneaky secret of the past red hot market was the fact that many of the real estate transactions happening were for second homes, not primary residences.
What was fueling this rush to by second homes? Baby boomers who are in the latter part of their primer earning years! They have put their kids through school and paid down much of their home debt, which means their expenses are down. At the same time, their income is at the highest it will ever be as they have risen to the high paying positions at or near the top of the corporate and business ladder.
So, what impact will the first baby boomer getting social security have? None for now. It does foreshadow a near future, however, with a dramatically altered real estate market. As the baby boomer generation continues to the age, they will be looking to offload those second homes. Many will also be downsizing to live off the cash in their homes. This portends two things amongst others.
First, the inventory of the real estate market is going to by higher than normal over the next 20 plus years. While this will sway the market towards buyers, it will be a gradual and smooth slope that will not shock the market.
The other big impact will be liquidation. Specifically, how will aging baby boomers turn their biggest retirement asset, their home equity, into a liquid form they can use to live on? More and more will start looking to the controversial reverse mortgages. We can expect to see conflict and controversy in this area as these very costly loans inevitably are used to take care of seniors.
For many years, people have been pointing to the potential impact of the population bulge known as the baby boomers. With the boomers now ready to access social security, the way we think of finances is going to have to change, but slowly so.
