WASHINGTON -- May
19, 2006 --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 REALTOR® (NAR). Initial results were
released
yesterday during 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, also shows boomers are optimistic about the future, but
many are not adequately prepared for retirement.
David Lereah, NAR’s
chief economist, says
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 says. “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 homeownership 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 who
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 says 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 says.
“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 5 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 says 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,” says 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 says.
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. A 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 59½. 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 REALTOR®
study, "Baby Boomers and Real Estate: Today and Tomorrow," was
conducted online by Harris Interactive® between March 31 and April
6, 2006, 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.
Source: NAR
©
2006 FLORIDA ASSOCIATION OF REALTOR®S
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