Bucking Past Trend, Boomers Staying Put in Retirement

Instead of heading south to the warm sunny beaches of Florida to spend their Golden Years, Baby Boomers say they are staying put, according to a new study.  But, even though many Boomers plan to stay in their current homes, the Demand Institute estimates that this generation will purchase about $1.9 trillion in real estate over the next five years.

A survey by The Demand Institute, the non-profit think tank run by the Conference Board and Nielsen, finds that while living most of their lives defying conventions, Boomers are continuing that tradition in retirement as it applies to their housing plans. Out of 4,000 Baby Boomers surveyed, 63% plan to stay in their current home once they retire.

"Their choices will have a real impact on the housing sector in the next several years," said Jeremy Burbank, vice president at The Demand Institute and Nielsen.

Here are more of his insights from the survey:

Boomer:  Are all Boomers making the most prudent housing decisions as they approach retirement?

Burbank:  The short answer is, “Not necessarily.” Boomers are making a range of decisions as they approach retirement, but the norm is not to scale back, despite financial realities. Their wealth has dropped dramatically due to a host of factors—not the least of which is the Great Recession—but Boomers have not abandoned their retirement and housing plans altogether. The majority is looking to stay put, but just over one-third of Boomers do plan to move, and many of them are planning for larger or more expensive homes.

Most Boomers want to continue living independently, but they aren’t paying as much attention, as perhaps they should, to home modifications they may need as they age. Renovations are popular among Boomers, but their projects look a lot like those of younger adults and tend to focus on style and value, rather than adjustments to address the physical needs that can come with old age.

Boomer:  Why are Boomers taking out new mortgages and moving into larger homes?

Burbank:  Many Boomer homebuyers are fulfilling a delayed aspiration of home ownership—moving from renting to owning—or finally pursuing their “dream home.” Still, their financial reality does not allow them to do so without taking on debt. To offset that debt load, many Boomers are planning to continue working. Only one-third of 50- to 59-year-olds plan to be retired in five years, and nearly one-third of 60- to 69-year-olds are still working today. It’s this continued reliance on employment and debt that will enable these Boomers to pursue those dream homes.

Boomers are also carrying much more mortgage debt than earlier generations at this life stage.Today, 76% of Boomers own homes, and more than half of those have a mortgage. In fact, the median outstanding mortgage balance for a 50- to 69-year-old household has grown 142% over the past 20 years. Even so, more than half of Boomers who will purchase homes will use mortgage financing. Boomers don’t appear to be afraid of carrying debt.

Boomer:  What is meant by "age in place," and what % of Baby Boomers are doing it and why?

Burbank:  “Aging in place” means a Boomer has no plans to move and expects to grow old in their current home. Sixty-three percent of Boomers plan to age in place. For the vast majority of them (85%), this is a personal choice—they prefer to stay where they are—but some have to stay put, mostly due to financial constraints or health issues.

For Boomers who choose to age in place, their reasons vary. Staying close to friends and family and maintaining a connection with their communities is important to many. These are homes they have typically been living in for a decade or longer. These Boomers are also more likely to own their homes and have less mortgage debt than movers—and that probably provides some level of comfort as they approach retirement. Many of these Boomers live in multistory homes that require a lot of maintenance and upkeep and lack accessibility features, but they still feel these are places they can live as they get older. There is a real concern, though, that this will prove problematic for many as they age.

Boomer:  Are all Boomers still looking to downsize to a condo in Florida and spend their retirement years golfing?

Burbank:  Not even close. As mentioned earlier, most Boomers don’t plan to move. Even among those who do plan to pack up and move, they are staying close to home. Two-thirds of Boomer movers are staying in-state, and more than half are moving within 30 miles of their current home. Again, they prefer to stay close to friends and family.

As for the type of housing they’re looking for, most Boomer movers want to purchase detached single-family homes, similar to what they have now. Many will look to downsize, either by moving to a smaller or less-expensive home—just over half of movers. But the other half will actually upsize. We also see that only one in five Boomer movers wants to relocate to senior housing or an active adult community.

Boomer:  What effect, if any, did the housing crisis of 2008 have on Baby Boomers and their homes?

Burbank:  The impact was significant. There’s a lot of variation in the financial situations of Boomer households, but the typical household experienced tremendous gains in wealth throughout the 1990s and early 2000s, during the housing and stock bull markets. That’s what you would expect: you save and invest, and, with compounding interest, that leads to increasing wealth. Leading up to 2007, this is what happened—the typical Boomer household had a net worth of just over $200,000.

But then the Great Recession hit, and both the housing and stock markets declined sharply, just as Boomers were nearing retirement. The result is that Boomer nest eggs have shrunk dramatically. Not only did their wealth plummet, but it has ceased to grow since. The drop in home prices hit Boomers particularly hard, since roughly half of Boomer wealth is tied up in their homes. Today, the typical Boomer household has a net worth of about $140,000—that may not seem so bad when you compare it to the 2007 number, but had their wealth continued to grow at its pre-recession trajectory, they would have had a net worth closer to $370,000 today. That’s a big hit.

What’s interesting is that, while many have been forced to adapt their retirement and housing plans to these new financial realities, Boomers haven’t altered those plans entirely. For the most part, Boomers are still retiring in their mid-sixties, and while most will stay in their current homes, many will move and in some cases purchase homes that are larger or more expensive than what they have now.