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Baby Boomers Drive Second-Home Market

About 25 percent of baby boomers own one or more types of real estate in addition to a primary residence, and boomers own 57 percent of all vacation and seasonal homes and 58 percent of rental property, according to a survey conducted by Harris Interactive for the National Association of Realtors trade group.

The baby boomers study, based on responses from about 2,000 U.S. baby boomers born from 1946-64, also found that home equity accounts for about half of the net worth for middle-income boomer homeowners, and about nine in 10 of boomers earning $100,000 or more each year are homeowners.

About 19 percent of survey respondents are renters, 37 percent say they have just enough to make ends meet, and 17 percent say they are having financial difficulty, the survey revealed.
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About 13 percent of respondents own land, 8 percent own rental property, 7 percent own a vacation home or seasonally occupied property, 2 percent own commercial real estate and 3 percent some other kind of real estate.

About 40 percent of respondents intend to convert their vacation home into a primary residence in retirement, the Realtor group announced. Analysis by NAR shows baby boomers are proportionately more active in the second home market, owning about 57 percent of all vacation and seasonal homes and 58 percent of rental property.

Ten percent of boomers said they plan to buy some form of real estate within the next year, which corresponds with U.S. Census Bureau data that shows 3.5 million boomer households moved during the past year, according to the announcement. Two-thirds are considering a primary residence, but the rest are thinking about land, second homes or commercial property, the survey found.

“Most of the 78 million baby boomers are far from retirement, with diverse plans and timelines resulting in different housing requirements and significant shifts from patterns established by earlier generations,” the Realtor group reported.

David Lereah, NAR’s chief economist, said in a statement, “The differences from past generations — and between baby boomers themselves — will have a significant impact on housing needs over the next 10 to 20 years that is very different from the World War II generation, and many boomers simply don’t know how they’ll retire.”

He added, “A significant portion of baby boomers married later in life and had children at a later age, which means many will continue to work beyond the traditional retirement age. Older boomers are thinking about retirement, but one-third expect to go back and forth between periods of work and periods of leisure and another 35 percent want to work at least part-time or start a business — all of this will have an impact on the kind of homes they buy as well as where they buy them.”

The median age at which baby boomers expect to stop working is 70, but 27 percent say they never intend to stop working, according to the survey.

“Because they will be in the workforce longer, boomers will postpone purchase of retirement property and won’t be making those moves as early as assumed,” Lereah said.

About 42 percent of survey respondents said they would like to retire in the South, 32 percent in the West, 15 percent in the Midwest and 12 percent in the Northeast.

Most boomers live in two-income households, with a median income in 2005 of $64,700, which is 31 percent higher than the median for all households. This generation makes up 37.5 percent of U.S. households, but receives nearly half of all aggregate household income.

Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said in a statement that the survey shows most boomers want professional services when they buy real estate. “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf,” Stevens said.

About 75 percent of respondents said they are not financially prepared for retirement, and many expressed anxiety about their ability to retire. Some boomers said they might withdraw retirement funds for housing or real estate expenses.

Peter Francese, an independent demographic trends analyst who served as a consultant for the survey results, said in a statement, “For the vast majority of baby boomers, retirement is somewhere off in the future,” he said. “Considering that boomers are healthier than their predecessors, and are more likely to work in an office setting, many of them may work five or 10 years beyond the traditional retirement age of 65.”

Half of the respondents who live in an urban area said they would like to retire in a small town or rural area. Their ideal retirement location characteristics include a lower cost of living, being near family, quality health care, better climate and being near a body of water, the survey revealed.

More than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities. Half of responding boomers said they would consider living in an age-restricted community.

Francese speculated that boomers may choose a larger home than earlier generations. “Boomers may want or need a somewhat larger dwelling that includes one or two home offices, and a low-maintenance home on a single level would have broad appeal to this group,” he stated.

About one in four boomer households have a high net worth of $500,000 or more, and this ratio is expected to increase in the future as the generation ages, the Realtor group reported. Virtually all high-net-worth households are homeowners (97 percent), and 47 percent are likely to also own other real estate in addition to their primary residence, according to the survey. More than a third expect to help children or grandchildren with a down payment on a home. Wealthier boomers said they want amenities where they retire, including cultural activities such as museums and art galleries. As a result, they are more likely to retire in an urban area or city.

Although most boomers are married couples and 27 percent have children under the age of 18, nearly two out of five baby-boom households are nontraditional households, most of which are headed by women, the survey revealed.

Twenty percent of boomer households are headed by women, but because women 60 to 69 account for a quarter of homeowners in that age group, the number of women boomer homeowners is likely to increase much faster than average as they age, the Realtor association reported.

Francese said there’s little doubt that the vast majority of baby boomers will delay retirement. “Some will put off retirement because they have to, but many because they want to,” he said. “Many will have a larger income stream to purchase possibly two homes, which they may use to move back and forth between their retirement life and their working life.”

He also noted, “Surveys of future intentions often include a dose of wishful thinking, and attitudes can be influenced by the media and other outside pressures. For example, many are probably not going to be able to, or even want to, retire in a small rural town far from their current home, even if they may dream about it currently.”

The “Baby Boomers and Real Estate: Today and Tomorrow” study was conducted online between March 31 and April 6, 2006, among a nationwide cross section of 1,969 U.S. adults born from 1946-64. Figures for age, sex, race, education, region and household income were weighted to bring them into line with actual proportions in the population, the Realtor association reported. With 95 percent certainty, overall results have a sampling error of plus or minus 2.2 percentage points, with a higher sampling error for various sub-sample results.