Baby boomers drive trends

Home buyers paying with cash is reaching record levels and this is being attributed to baby boomers retiring.

According to the Census Bureau, in 2012 there were 61.8 million Americans over the age of 60 as compared with 46.6 million in 2000. Many of these boomers prefer to purchase a home with cash, avoiding the challenging mortgage process and wanting to avoid having monthly mortgage payments.

In the first quarter of this year, 29% of non-investment home buyers used cash, the highest on record for this time period, according to Bloomberg News. The chief economist for the National Association of Realtors further explained by saying, “With the economy improving and stock market at record highs, boomers are the ones who are driving the (real estate) market.”

The Mortgage Bankers Association supports this trend by reporting lending for home mortgages decreased to $115 billion in the first quarter of this year, the lowest level in three years.

Those of the baby-boom generation have more home equity than their parents, because they owned a home during the largest “bull market” of all time. The median U.S. price of an existing home in April was triple the median home price in 1982 when many boomers were buying their first homes.  Approximately 16 million Americans over 60 years of age owned their homes outright in 2012, up from about 12 million in 2009, according to the Census Bureau.

It is anticipated baby boomers will be purchasing and selling homes into their 80s, because they are more active and health conscious than their parents. Also, many of this sector will not be retiring in the same way as their parents.  Boomers are purchasing vacation homes with plans to live in them full time upon retiring.

Greenwich Realtors are seeing baby boomers selling their large homes requiring a lot of maintenance and down-sizing. They are choosing smaller homes or condominiums (town houses and co-ops included). They have one requirement in common in their search for a new home. They prefer a home which is renovated with few stairs and just enough room to meet their needs.

First-time buyers are frequently competing with downsizing baby-boomers. The first-time buyers are often losing out on properties, because they typically are unable to pay cash like baby boomers. All-cash deals represented 80% of June home sales in Vermont, 58% in Nevada, 57% in Florida and 51% in New York. Cash sales represent a small percentage in Texas, Utah and New Mexico.

Understandably, the markets associated with the most all-cash sales also tend to have a lot of distressed properties (i.e. foreclosures) and “depressed” home prices. Such characteristics attract investors, private investors and equity firms, according to RealtyTrac.

Analysts believe that cash home sales helped the recovery of the real estate market. Without these cash transactions, current sales might be much lower and home prices would have decreased as well. Median prices for cash sales are up 24% from the previous year while prices of home sales have overall increased 15%.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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