Baby boomers put their faith in real estate, survey finds

Nation's Housing

Real Estate

October 20, 2006|By Kenneth Harney | Kenneth Harney,Earthlink

Rename them the real estate boomer generation: A comprehensive new demographic study reveals that the 78 million Americans born between 1946 and 1964 have a passion for owning real estate unlike any in the nation's history.

Consider these findings:

Ninety-six percent of all boomers believe that owning a home is a very smart financial investment, and nearly 4 out of 5 now own homes, while 1 in 4 boomers owns other forms of real estate besides a primary home. These include one or more vacation or seasonal retreats, acreage or income-earning property.

The value of boomers' primary homes varies sharply by geographic region. Overall, the median market value of their homes nationwide is $181,700. But in the Midwest, the median is $143,400, in the South it's $147,800, the Northeast $215,000, and in the West $359,100. One of every 14 boomer households in the Western states owns a home worth $1 million or more.

Home equity plays a huge role in boomers' financial planning and well-being. Their median equity stake - the market value of their real property minus mortgage debt - is $100,000. The median household net worth of boomers - financial holdings plus real estate, minus all debt obligations - was $149,500 in early 2006. However, 23 percent of boomers age 50 to 60 control equity stakes of $250,000 to $1 million or more. Fifteen percent of boomers aged 42 to 49 already have accumulated home equities of $250,000 to $1 million.

Home equity represents a significant percentage of total household net worth for most boomers. Thirty-six percent of 50-year-old to 60-year old homeowners report that the equity in their primary residences is 51 percent to 100 percent of their household net worth. Thirty-eight percent of boomers between 42 and 49 report the same.

The new study, conducted by market researchers at Harris Interactive between March 31 and April 6, polled a statistically representative sample of 1,969 boomers. The project was sponsored by the National Association of Realtors and has a margin of error of plus or minus 2 percentage points.

Boomers not only believe strongly in accumulating real estate, they intend to keep doing so even as they head toward the traditional retirement years. An extraordinary 1 out of 4 boomers between the ages of 50 and 60 consider it very likely or somewhat likely that they will purchase some form of additional real estate within the next 12 months.

Among boomer households with incomes of $100,000 or more, that percentage rises to 37 percent; almost 2 out of 5 expect to acquire more real estate very soon.

And what do they anticipate purchasing - especially now that real estate has morphed into buyer's market mode in many areas? Two-thirds of those considered likely to buy will be looking at a new primary residence. But another 26 percent expect to buy land, and 19 percent plan to acquire a rental property. Clearly some boomers expect to buy multiple pieces of property.

Most boomers are not real estate barons or serial investors, of course, and many admit that they're relatively uncertain about the retirement years looming down the road.

Three-quarters of those surveyed said they do not feel financially prepared at the moment to retire. Even among boomers with annual incomes of $100,000 or more, 1 of every 2 feel they are not financially ready to retire.

To handle their affairs as they hit the traditional post-60 retirement age and beyond, many boomers say they have no intention of hanging up their boots - they expect to keep working, health permitting. Part of their reason for staying in the workplace, they say, is the unusually high numbers of boomer households who have "extended family" responsibilities and are still paying for kids' educational expenses.

Almost 30 percent of those who are now 50 to 60 years old have one or more adult children still living in the primary home. And 60 percent have aged parents who may require assistance.

Many boomers told researchers that they expect to start a new business as part of their phasing down into quasi-retirement in their late 50s and 60s. "This suggests strongly," according to the study, "that the housing needs of boomers as they age may be quite different from their predecessors. Boomers may want, or need ... a somewhat larger dwelling that includes one or two offices or workplaces."

Boomers may be record-breaking acquirers of real estate, but growing numbers of them think it is getting too expensive.

Sixty-seven percent of those 50 to 60 and 75 percent of those between 42 and 49 worry that housing costs could spiral out of hand in future years, making affordability in an extended retirement an increasingly tough problem. kenharney@earthlink.net

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