There’s no denying the breadth and future influence of young consumers, especially Millennials. But while much of the marketing industry’s recent focus has been on the growing prowess of Gen Y, Baby Boomers make up 40% of U.S. households and are among the most valuable from a consumer perspective.
Their contributions to the U.S. economy have been—and will continue to be—significant, particularly with respect to housing. In fact, Baby Boomers will spend one out of every four dollars spent on rent or home purchases over the next five years. In total, they’ll spend $1.9 trillion on home purchases and $500 billion on rent between now and the start of the next decade.
While there is a notable perception that Boomers plan to downsize when they retire, or move to Florida, the reality is much different. In fact, recent research from The Demand Institute highlights just how contrary to common perception Boomer behavior will continue to be when it comes to housing. Many plan to enjoy their Golden Years in their current homes, while many plan to move into larger homes that they will need to take out new mortgages to finance.
FINANCIAL MATTERS AND STAYING PUT
One of the most notable characteristics of the Boomer landscape pertains to this group’s financial wellbeing. Boomers had a very solid run leading up to the Great Recession, but the downturn significantly altered their momentum. In fact, had the recession not interfered, the typical Boomer household would be worth about 2.5 times what it is today. Moreover, Boomers carry much more mortgage debt than earlier generations did at this stage in their lives.
According to The Demand Institute’s research, 63% of Boomers plan to stay right where they are: many have decided to stay by choice (85%), but a small set is unable to move because of financial constraints or other circumstances. Overall, most Boomers prefer to age in place. In addition, they believe their homes are places they can stay in as they get older. And they express this sentiment even though many of these homes lack aging-friendly aspects like accessibility features, low maintenance and only one story.
Given that many Boomers say they plan to stay where they are rather than re-locate as they get older, the assumption would be that future home improvements would involve adding the aging-friendly features their current properties lack. While it’s true that many Boomers do plan to make major home improvements in the next three years, many of those projects will be focused on adding home value, enhancing efficiencies and updating the sense of style. In fact, the top reasons that Boomers plan to renovate align closely with those of younger generations.
Not everyone plans to stay put, however, as 37% say they plan to move from their current homes at some point. While a little more than half (54%) plan to downsize–either in terms of size or cost of home –other Boomers will look to “upsize” (46%) and will seek bigger or more expensive homes. And Boomers aren’t afraid of debt, as the median outstanding mortgage balance for 50- to 69-year-old households with a mortgage has jumped 142% since 1992 (from $49,000 to $118,000). When the time comes for many to purchase, more than half will seek out mortgage financing to do so. But more importantly, and in contrast to many younger consumers, most Boomers are confident in their ability to qualify for financing.
For more information, download the “Baby Boomers and Their Homes” report.