Senior citizens, specifically retirees, are one of first tuesday’s 27 Real Estate Market Factors. Citizens aged 65-75 are more likely to own property than any other age group, as displayed on the first of the above charts. The accumulated equity in their homes, combined with their savings from a lifetime’s employment allows them to exert a disproportionately strong influence upon the statewide housing market. When these citizens begin to change their spending and living habits in retirement, they create new opportunities for multiple listing service (MLS) brokers and agents who market single family residences (SFRs).The number of people in California aged 65 and older is displayed on the second of the above charts. This rapidly growing segment of the population is traditionally made up of the retired and soon-to-be retired.Over the past twenty years, retirees have exerted minimal influence in real estate transactions, as the age group of citizens over 65 was comparatively small. The generations born between 1915 and 1935 – during the Great Depression and World War II – did not have the numbers necessary to remold the housing market in their own image. That is about to change dramatically, as the above population chart demonstrates.The massive Baby Boomer generation is defined by the U.S. Census Bureau as the generation born between 1946 and 1964. As they begin to retire en masse (a process which has already started) every aspect of the state’s economy will change. The Boomers, the largest single age group in California, have spent the last 30 years accumulating their wealth (primarily in the form of stock – not cash) and generally living in large, suburban SFRs….
And, from the analysis:
History repeats itself for Boomer generation
The impending increase in suburban SFR home sales among senior citizens will keep housing prices in outlying bedroom communities depressed, limiting the gain Boomers take on a sale. This is a story of supply and demand economics that their generation knows all too well….
Historical trends in Boomer conduct will also prove true now as retirees sell their current homes, looking to find replacement properties and live freer lives. The first Boomers to retire, those on the cusp of the population boom, have somewhat higher average earnings and savings than those who will follow. Consequently, the retirees of 2008-2017 will have the most money to spend, and will often have a second or third home to live in or sell.
Those retiring after 2018 will (generally) have somewhat less money, and thus less purchasing power upon their retirement. Those who retire later will also have a greater disadvantage due to the competition from other retirees in their generation. The homes they sell will fetch lower prices, the urban condos and retirement-community dwellings will be full before they arrive and prices will be rising.
The price reduction of large suburban SFRs caused by Boomer home sales will be further aggravated by a corresponding rise in the values of the more desirable replacement homes in near urban centers. While we cannot predict with certainty which properties will be involved or just where they will be, historical and current trends give us some hints.
Relocation: where will they go?
Homeowners in California do not tend to rent upon retirement, as shown by the first chart above. In fact, homeownership for those aged 75 and older remains 16% higher than for any age group under 50. Moreover, the percentage of citizens owning homes over the age of 75 grew even through the recession,, and is currently near its highest level since 2002.
Homeownership is a well-entrenched habit among the Boomer generation; a fact not likely to change because of increased age. However, this does not mean retirees remain stationary.
Sooner or later they decide to move to a new location that has a better climate or is closer to other family members. With their collective savings and equity, most will have the resources to do so with ease.
Retirees have traditionally moved to smaller, more conveniently-located properties that are closer to urban centers. The U.S. Census Bureau reported in 2009 that approximately 11% of the population in California’s metropolitan areas is 65 or older….
If I’m reading it right, the analysis forecasts less-than-optimal (housing market) conditions in CA for those boomers retiring in 2018 and beyond, due to their “older brethren” having “first dibs” on everything :=0
The analysis also states that those CA boomers with smaller pensions will retire to states with lower-cost housing and Mexico.
One thing I disagree with here (maybe I don’t – but just have an issue with the wording) is the location of the vast majority of CA boomers’ current homes (SFR’s). I believe they are overwhelmingly located 20 miles or less from an urban core and therefore well-located. I don’t believe very many of them bought tract homes (for their personal residences) out in exurbia (mostly developed since 2000). The article is stating that Gen Y may not want the homes in the current “boomer shadow inventory” when they enter the housing market en masse after 2014 (on the premise they were located in exurbia?). I disagree and think that boomers’ SFR listings will add to the close-in inventory that so many current buyers (looking for family homes) are lamenting is extremely short on inventory. IOW, Gen Y is not going to want to raise kids in a high-rise condo NOR will very many of them want to commute over one-half hour each way to work, IMO.