Baby boomers have a higher rate of homeownership than the national average
and one out of four own more than one property, according to a new study of the
largest generation in U.S. history commissioned by the National Association of
Realtors(r). Initial results were released here today at NAR’s Midyear
Legislative Meetings & Trade Expo.
The comprehensive study of nearly 2,000 Americans born between 1946 and 1964,
conducted for NAR by Harris Interactive(r), also shows boomers are optimistic
about the future, but many are not adequately prepared for retirement.
David Lereah, NAR’s chief economist, said marketing to this generation has been
and can be a challenge. "As a group, boomers are in their peak earning years and
continue to wield great influence in the U.S. economy, but they are not
homogeneous — there are significant variances in needs, behavior, attitudes and
resources," he said. "On one hand is an almost insatiable desire for real estate,
with some owning multiple properties, and on the other, many have not adequately
planned for retirement. What should not be overlooked are the discretionary
spending interests of this generation, and their appreciation of housing as a
great investment."
Nearly eight in 10 boomers own their own homes and almost nine out of 10 have
owned at some point in their lives; 96 percent believe owning a home is a good
financial investment — evidenced by their actions. According to the U.S. Census
Bureau, the overall rate of home ownership is 69 percent.
For the portion of baby boomers who have never owned a home, 85 percent cited
financial reasons but 38 percent simply didn’t want the responsibility of
homeownership.
One-quarter of respondents own one or more other kinds of real estate in
addition to a primary residence: 13 percent own land, 8 percent own rental
property, 7 percent a vacation home or seasonally occupied property, 2 percent
commercial real estate and 3 percent some other kind of real estate.
In addition to a higher rate of homeownership, analysis by NAR shows baby
boomers are proportionately more active in the second home market, owning 57
percent of all vacation/seasonal homes and 58 percent of rental property.
For the segment of boomers who own rental investment property, 34 percent own
multiple properties: 14 percent own two rentals, 5 percent own three and a small
number own four properties; however, 14 percent own five or more rental units.
Of the portion that own vacation homes or seasonally occupied property, 13
percent said they own two or more vacation or seasonal homes.
Four out of 10 respondents who own a vacation home or seasonal property intend
to eventually make that property a primary residence. Historically, other NAR
survey data shows only one in five vacation-home buyers had such intentions when
they first purchased the property.
Lereah said this has emerged as an investment strategy. "Some boomers will take
advantage of generous capital gains exclusions from their taxes when they sell
their primary residence, and then place themselves in the position of being able
to convert a vacation home into their new primary residence which would later
become eligible for the same tax treatment," he said.
"Then, if their needs change in the future, they’ll be able to take the capital
gains tax break after they have lived in that home as their primary residence
for two out the five previous years. It becomes a great way to build and protect
a nest egg."
For the portion of respondents who own land, the median holding was five acres.
Half of those with commercial property had an ownership interest in only one
property and 29 percent have two holdings.
NAR President Thomas M. Stevens from Vienna, Va., said the survey shows
one-quarter of all boomers are not satisfied with their present homes. "That
means a good portion of baby boomers may be considering a move, so it’s
important for the industry to understand their preferences and needs," said
Stevens, senior vice president of NRT Inc.
Ten percent of all boomers said they are likely to buy additional real estate in
the next 12 months; two-thirds of those respondents said they were considering a
primary residence but 26 percent were interested in land, 19 percent rental
property, 15 percent a vacation or seasonal home and 14 commercial property.
Eight out of 10 boomers used a real estate agent the last time they sold a home.
The things they value most in a real estate agent when they buy a home are
representation of interests and coordinating with other parties in the process;
explaining all contracts, forms and agreements; and management of the closing
process from start to finish.
In selling a home, they also want agents to establish the right asking price,
show the home and negotiate all offers received on their behalf.
"This tells us the Internet is great for information, but baby boomers want real
estate agents to provide services, whether they’re buying or selling," Stevens
said.
Typical boomers have lived in their present home for a median of nine years, and
plan to stay there for another five years. Two-thirds think it’s important to
pay off a mortgage quickly, but at the same time 58 percent are comfortable in
purchasing with a small downpayment.
In deciding whether to buy a primary residence in the future, nearly half of the
respondents that were considering a purchase said having sufficient wealth or
favorable mortgage financing were factors.
In terms of their current financial condition, 43 percent say they are
financially comfortable but 37 percent say they have just enough to make ends
meet. Only 4 percent said they were well-off, and 17 percent said they are
having financial difficulty. "That clouds the retirement options for many baby
boomers," Stevens said.
Nearly two-thirds say it costs too much today to truly retire and never work
again, and four out of 10 expect they will pay for at least some college
expenses for children or grandchildren; 38 percent said current financial needs
mean they give little attention to financial planning for retirement.
"Many baby boomers are simply too busy to give much thought to planning for
retirement, but they really need to develop strategies now," Stevens said. "Many
just see themselves ‘going’ for as long as they can."
Only 14 percent expect to receive a sizeable inheritance that will be a critical
help during retirement. Half of all boomers believe it is important to diversify
savings for retirement into different types of investments.
In describing how they would like to retire, many boomers might be described as
"dreamers." One in 10 said they already are retired but only 26 percent said
they would never want to work for pay again. One-third see themselves as going
back and forth between periods of work and leisure, 17 percent would work part
time, 11 percent would start a business and 7 percent would work full time. Even
so, 59 percent said it was not likely that they’d work beyond the time they
become eligible for full Social Security benefits. The average respondent
expects to stop working at age 65.
Three out of five say their idea of the perfect location to retire is in a rural
area or small town, with only 12 percent saying an urban or city setting, and
nearly half would consider living in an age-restricted community; 38 percent
want to be close to family.
If money were no object, access to quality health care is important to more
boomers than being on a golf course (38 percent vs. 4 percent). Ideally, they
would like to live in a rural area with access to quality health care. "One
question is how many areas actually offer those kinds of amenities in that kind
of environment," Stevens said.
Half said they have a 401(k) or similar retirement plan, 39 percent a pension,
39 percent an IRA or Roth IRA, 11 percent a SEP (Simplified Employee Pension
Plan) and 6 percent have investments in a REIT (real estate investment trust).
Most, 83 percent, do not plan to withdraw funds from an eligible retirement
account starting at age 59 and one-half. For those who are very likely to
withdraw, 75 percent said they’d use the funds for personal living expenses, and
51 percent said they’d travel; 39 percent would consider investment in some form
of real estate.
The 2006 National Association of Realtors(r) study, "Baby Boomers and Real
Estate: Today and Tomorrow," was conducted online by Harris Interactive(r)
between March 31 and April 6, among a nationwide cross section of 1,969 U.S.
adults born between 1946 and 1964. Figures for age, sex, race, education, region
and household income were weighted where necessary to bring them into line with
their actual proportions in the population. Propensity score weighting was also
used to adjust for respondents’ inclination to be online. With 95 percent
certainty, overall results have a sampling error of plus or minus 2.2 percentage
points; the sampling error for various sub-sample results is higher and varies.
The study, expected to be ready for publication in late June, can be ordered in
advance by calling 800-874-6500. The cost is $50 for NAR members and $125 for
non-members.
Harris Interactive Inc. — http://www.harrisinteractive.com — based in
Rochester, N.Y., is the 13th largest and the fastest- growing market research
firm in the world, most widely known for The Harris Poll(r) and for its
pioneering leadership in the online market research industry.
The National Association of Realtors(r), "The Voice for Real Estate," is
America’s largest trade association, representing more than 1.2 million members
involved in all aspects of the residential and commercial real estate
industries.
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Information about NAR is available at http://www.realtor.org. This and other
news releases are posted in the News Media section. Statistical data, charts and
surveys also may be found by clicking on Research.
Realtor(r) is a registered collective membership mark which may be used only by
real estate professionals who are members of the National Association of
Realtors and subscribe to its strict Code of Ethics.
All of the above text is a press release provided by the quoted organization.
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