Study: Biggest Opportunities in Boomer Market
Daily Real Estate News | Wednesday, July 01, 2015
Though the real estate industry has made it a mission to bring Millennials into home ownership in recent years, a new study by research firm HouseCanary suggests we not ignore an inconvenient truth: Baby boomers have the buying power.
The study raises questions about how wise it is to focus on Millennial buyers, given their economic limitations. If interest rates – which are expected to keep ticking up this year – were to increase to 6 percent, more than one in three Millennials would no longer be able to afford a home at their current prices, HouseCanary found. Millennials are carrying high debt with limited savings, and their career growth has been slow.
But baby boomers have fueled the housing market for decades as the biggest drivers of growth in the entry-level market in the 1970s and ’80s, as well as the move-up market in the ’90s and 2000s. Boomers aren’t slowing down: They’re expected to continue to drive household growth over the next 20 years “due to significant wealth and high home ownership rates,” according to HouseCanary. Over the past year alone, baby boomers accounted for 244 percent of household growth annually.
“The vast imbalances in wealth and home ownership among baby boomers and Millennials are resulting in wide disparities in the demand for homebuying versus renting,” says HouseCanary President JP Ackerman. “Our analysis indicates that rising interest rates and home prices will exacerbate the situation, as the Millennials’ ability to purchase homes will be severely jeopardized as monthly payments get further out of reach.”
HouseCanary CEO Jeremy Sicklick says his company’s research indicates greater opportunity for developers to target the aging population with for-sale inventory while targeting the younger generation with for-rent inventory.
Source: House Canary<http://www.housecanary.com/infographic-demographic_shift.html>