Q: What impact will the projected retirement of “Baby Boomers” have on real estate?
A: There are so many questions right now about real estate and the right timing to buy, the right timing to sell, with of course all sellers wanting to maximize their sales price and all buyers wanting to get the best deal. As in life, the answers can be very specific to each individual situation, so it’s important to get specific advice that relates to your needs and future plans. However, in generalities, there are definitely some things that we all should be aware of when anticipating changes in the real estate market. The Baby Boomers have historically had great impact on the real estate market and their coming of retirement era is expected to again shift the housing landscape.
The so-called “baby boomer generation” are the results of an increase in births following the end of World War II. Born between 1946 and 1964, this group alone constitutes almost 30% of the U.S. population and makes up the largest single age group in California. Due to government programs and optimism in The American Dream, their parents began to build housing, move to the suburbs, and have babies- lots of babies. This powerfully large generation has consistently had a huge impact on the real estate market. They grew up, joined the work force, and all needed apartments to rent, causing a spike in rents in the 1980s, which subsequently spurred construction of more rental housing to catch up. Toward the end of that decade, many started looking to buy homes, causing a boom in home prices and belated overbuilding, culminating in a recession. By the late 1990s, home prices had become stable, just in time for baby boomers to accumulate enough savings to invest in the stock market. Again, en masse, this group simultaneously invested and over-invested in the stock market, driving up prices (especially of overvalued tech stocks) until crashing in the “dot-com bubble”, where many lost all of their savings. The 2008 financial and real estate crash also took a toll on this group, many of whom were homeowners encouraged to use their home as an ATM, and/or whose stock or pension plan values were lost.
Financial crisis has delayed retirement from many of this generation, but they are retiring. A great many, especially those living in areas with high costs of living such as the communities served by this newspaper, will sell their homes and downsize- some within the same communities, others to different cities, states, or even countries. By some projections, the first groundswell of retirements and accompanying home sales will occur in 2020-2021. This will be a welcome development to buyers facing a shortage of inventory due to the delays in retirement and home turnover. The first round of home sellers in this category will likely receive the most benefit in terms of pricing and time to sell as eager buyers come to the table, finally able to purchase homes that may not have been on the market in decades. However, when the turnover becomes an avalanche of homes on the market and excess inventory, we can expect homes to take longer to sell and prices to be lower since buyers will have so much more to choose from.
On the other hand, Baby Boomers are anticipated to compete with “Generation Y”- who are first time buyers, often with very similar criteria as retirees- urban, rather than suburban location; amenities; newer construction; smaller and more affordable homes or condos. Expect a surge in condominium development to follow the needs of the Baby Boomer (and Gen Y) generation as demand for those properties in urban areas increases. In a city like Los Angeles, the lack of relative affordability will continue to drive many to more retiree-friendly locations, such as Florida or Nevada. Some will simply move to another county within California which allows them to keep their existing property tax assessment on their new home.
In summary, buyers looking for more choice in available homes, relief is on the way. Buyers looking to buy their first condo, don’t wait, because you will soon have even more competition for those smaller units. If you are a baby boomer, think carefully about when you will be ready to make your move. Don’t wait until all of your friends and neighbors’ homes are already up for sale- beat them to it and you are likely to reap the highest rewards and the most profit to ride off into the sunset with!
Disclaimer: This article is intended to be primarily for entertainment purposes and is not to be considered legal advice.
ABOUT LISA PHILLIPS, ESQ./ CA Dept. of Real Estate Broker License #01189413
Lisa Phillips is an active Realtor in the Los Angeles area, with close to 25 years as a practicing real estate broker and attorney, and is a Broker-Associate with Lotus Estate Properties in Marina del Rey. Lisa is also a member of the National Association of Realtors “Green Resource Council” and achieved its “GREEN” Designation. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly to achieve the best results for her clients. For more information, please visit www.LisaPhillipsRealEstate.com.
