Thursday, October 18, 2012

Where will the Baby Boomers live?

When I was teenager, my recently widowed maternal grandmother sold the home she’d shared with her husband for many years, and moved to the safety and security of Seal Beach Leisure World, one of the first age-restricted communities built by Ross Cortese in the early 1960s. 

However, this was a move my paternal grandmother didn’t quite understand at the time, as she much preferred aging in place and living out her own life in a classic neighborhood of more mixed demographics.  Since both grandmothers made the right decisions for their own circumstances, it made me wonder:  where will the Baby Boomers live, and in what numbers?

If you asked this question in the late 90s, as the stock market was rising and pensions were swelling, many Boomers envisioned a leisurely retirement filled with ocean cruises and vacation homes.  Fast forward to 2012, however, and given a combination of fewer pensions, a housing market in the beginning stages of a rebound, and individual investors who largely missed out on the latest stock rebound, for many Boomers the new plan is to work longer and either downsize to a smaller, more manageable home or simply age in place.  But that still means plenty of opportunity for both builders and remodelers.

Fortunately, Pulte Homes’ Del Webb subsidiary, which has long had its own army of market researchers, has been conducting its own Baby Boomer survey since 1996.  For these surveys, the company separates out younger Boomers (those turning 50 years of age in the next year) and older ones (about to turn 64), and separates them into four groups:  younger Boomers, older Boomers, boomers who were 50 in 1996 and were about to turn 65 in 2010, and current residents of Del Webb communities, most of whom were age 60 to 76.

Some of the differences between the surveys of 1996 and 2010 are striking. Compared to 50 year-olds in 1996, today’s younger Boomers plan to retire four years later (age 67 vs. 63) and are half as likely to be prepared for retirement (16% vs. 34%).  Over four in ten think they’ll never be financially prepared to retire, and nearly four in ten haven’t started to save for it.

Consequently, 72% of young Boomers plan to work, but that’s actually pretty close to the rates for older Boomers (74%) and Del Webb residents (70%). Still, the reasons for continuing to work aren’t just financial – they also include keeping busy and self-satisfaction. Nonetheless, just 40% of current retirees are actually working, but this rate may rise along with the growing acceptability of home offices.

The most consistent response to these surveys was whether or not to move:  over one-third of respondents in all four groups – or just over 26 million people -- plan to move during retirement (the rate is even higher at 42% for young boomers).  Of those planning to move, half think they’ll move to a new state.

Not surprisingly, when considering age-restricted communities, older Boomers prefer the option by 2-to-1, and existing Del Webb residents favor a similar community by a factor of 10-to-1.  For younger Boomers still wearing skinny jeans and going to rock concerts, however, less than 10% of them are interested in age-restricted options.

For both younger and older Boomers, cost of living and healthcare remain by far the most important considerations when choosing a retirement home (Del Webb residents added ‘amenities’ to that list).  Other important factors for all groups surveyed included a better climate, being close to children and grandchildren, and networking opportunities.

Interestingly, the idea that retiring Boomers would depart the suburbs in favor of the hustle and cultural options of cities has not yet been supported by census data.  Recently, Forbes magazine, with the help of demographer Wendell Cox, compared population numbers for Boomers ages 45-54 in 2000 and compared them with those ages 55-64 in 2010.  During that ten-year period, cities actually lost over 10% of these urban empty nesters, and the rate of decline was even higher (12%) for older retirees ages 65-75.

What this data suggests it that both of the choices selected by my grandmothers are expected to remain popular in the years ahead.  Although the Del Webb model will always have its fans, builders can also benefit from addressing those Boomers who choose to stay in place – if not in their existing home, at least in the same community. In turn, the apocalyptic future of suburban ghost towns in favor of city living will likely turn out to be just a fantasy.

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