Retiring Boomers Impact in the Housing Market

About 3.5 million American “boomers” reach age 65 each year and they retire a few years before or after that age.    Most start making changes in their lifestyle when their children leave.   After exhaling and congratulating themselves that they “made it”, they start adjusting to the next phase of life.

They will sharpen their plans for retirement, and accelerate their saving for retirement.  They will use vacations as research trips, looking for the right attributes in their next community.  Communities that attract boomers best will have top quality health care, reasonable income and property taxes, temperate climate, good restaurants and a low violent crime rate.

While K-12 school quality is no longer a big issue, access to continuing education at a post-secondary school is a big plus.  For boomers who plan to work part time in retirement, meaningful employment opportunities are also a focus.

When boomers choose their next community, most will be ready to downsize the quantity and scale of their furnishings – that allows choosing a smaller home.  Many will move to a warm, summy climate such as Florida, Texas, or Arizona.  Some move from the child-safe suburbs to an uptown community that caters to adults with a nightlife or cultural bent.  Some will opt for almost permanent vacation by joining the 8.2 million RV owners, many of whom live in RV resorts.   Many will pursue their golfing, yachting, or beach obsession by purchasing a small home or condo in an adult-community.  Overall, a large percentage will leave the communities in which they raised children.

As boomers exit their long-time communities they leave behind houses that are somewhat larger than is attractive to other seniors.  This many depress prices for those McMansions.  Many families were held in place involuntarily because they are upside down on their mortgage or because they lost equity that they counted on for their retirement.   As home prices try to rebound, those homes will flood back into the market keeping real estate tax revenues flat.

The retirement of boomers and their exit from the community will erode the tax base for states heavily reliant on income taxes.   If the states try to compensate by increasing income tax rates, they will exacerbate the state’s unattractiveness to employers and inbound working families.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

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