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How Will the Retirement Surge Change the Housing Market?

Posted by lynnoconnellrealestate_ntlepx on June 16, 2016
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As baby boomers are aging with many retiring in droves, how will this affect the real estate market landscape once the surge has run its course?

The National Association of Realtors had reported in an article last year that the country will be experiencing a demographic shift that could count as one of the most significant issues that face the real estate industry. The piece read as “Demographic shifts from retiring Baby Boomers and the increase of Millennials buying homes will have the most profound impact on the real estate industry in coming years.”

Retirees and Inventory Effects
The life cycle includes Millennials moving out as renters and then becoming first time buyers purchasing properties typically on the lower end of the market. Meanwhile, retirees are having an effect on the market where their buying and moving tendencies are different as well as the type of property that they leave behind.

As of 2013 one in three Americans was 50 or older. By 2030, one in five will be 65 or older according to Transgenerational Design Matters.

There are a couple of reasons why this influx of retirees is significant. First, many of these older home owners will be in search of smaller homes as they downsize. Second, as they move they will be leaving behind a glut of larger homes for the market to absorb.

During the period of 1990 and 2010, Baby Boomers had reached their maximum earning power where they had invested in real estate according to NuWire Investor Company. Typically larger single families were being purchased in the suburbs with ⅓ of them being larger than 2,500 square feet and 40% built on lots that were bigger than a half acre.

However, as this older generation makes their next move, they are no longer interested in owning this type of property. In NAR’s 2015 report on the generational trends of home buyers and sellers, it stated: “Older Boomers are more likely to move for retirement, the desire to be closer to friends, family, and relatives, and the desire for a smaller home.”

The issue that this poses is that younger generations are also searching for homes that are smaller which may leave larger, suburban homes being less desirable.

Smaller Homes for the Future
The average homeowner under 35 is looking to increase their home size by an additional 590 to 2,270 square feet while those 35 to 40 are looking for 450 to 2,400 additional square feet of space. However, these reports are based on last years numbers and experts in new construction are stating that homes of the future will be smaller.

Gunnar Branson, CEO of the National Association of REal Estate Investment Managers states “People in their 20s are buying more than (older generations) did,” Gunnar said, “but they’re also buying less.” In a nutshell larger homes are going to be less desired as we see many come on the market in upcoming years as it transforms the housing market.