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Baby Boomers Home Equity Retirement

As this generation heads into retirement, the picture of the American homestead is going to drastically change its face. The keywords here are change and adapt to the new economic trends the boomers will set, just as they have in the past 50 years. This shifting of generations is already creating major economic events in our housing outlook and retirement planning. The current slump in our housing market is not temporary and doesn’t necessarily have all to do with interest rates or the employment rate. The change of generational habits, wants and needs is now taking place and we must adapt as home values and equity slide downward.

The baby boomer generation has been steering the prices of real estate for over 40 years and they broke the traditional mold of what they want as home buyers. The boomers massive buying power usually drives the way American companies market their products to sell to them. The building industry listened to the call and produced homes to fit the boomers wants and they must listen again to the changing buyers needs in their senior years. In the past this generation has created the demand for bigger houses and set the pace for the average family to own 2 - 3 houses during their lifetime, compared to most of our parents having only 1 home in their life span. It is hard to predict if the boomers are really ready to downsize to new smaller homes or retirement centers, but you can bet whatever trend they choose will become popular by many. There is not much we can do to stop what is coming our way as the boomers plan retirement. Some will stay in their existing homes, but the majority will downsize or require assisted living residences.

For those of us looking to stay in our existing houses, we need to be prepared for the price of our properties to trickle downward. The fact is it will be a buyers market for years to come. Some professionals are estimating there will be 3 homes for sale for every buyer, this translates to lower prices and a surplus of larger houses in the real estate market. The generations behind us are struggling to save and buy townhomes or starter homes and can’t qualify for jumbo mortgages as we did in the past. I think there is another trend going on in many households, it is the return of their children after college and some returning married with kids of their own. The baby boomers may have no choice other than to take in their children or possibly their parents, living with them under one roof because of the high cost of living in the metropolitan suburbs.

Retirement  Income. Our parents, different than we, did not count on the equity value of a house to be part of their retirement income, they saved that asset in case of emergency and most of the time for their children’s inheritance. A majority of baby boomers on the other hand, have planned to use this equity for a large portion of their retirement fund and this is where boomers are going to fall short as home values decrease and equity lessens. The cost of maintaining a large home, taxes and healthcare will be higher than retirees income and maybe the boomers will need the financial help of their live in children and families to survive. So maybe your kids moving back home won’t be so bad after all, they will probably be paying part of your living expenses and will inherit the house in the long run. That’s better than selling the house to put you into assisted living somewhere else.

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