With all the ink spilled in the press about retiring baby boomers, plus all the cocktail party conversations about the best places to retire, one would think there is nothing left to discuss. Amazingly, Topretirements had some new thoughts about what the best retirement real estate strategy ought to be for the oldest cohort of boomers, those aged 55 – 62.
Death of the Suburbs:
- Two college professors, Christopher B. Leinberger (University of Michigan) and Arthur C. Nelson (Director of Virginia Tech’s Metropolitan Institute (www.mi.vt.edu) predict that traditional suburbia, long home to the American family dream, is in trouble. In fact the suburbs could become America’s new “outer city” slums, with attendant crime, decay, and poverty. (see the Atlantic Monthly article)
- Their dire predictions are based on demographics – baby boomers are going to tire of all the responsibility, upkeep, tax, isolation, and expense that comes along with owning a home in suburbia. Millions of these homes will sprout “For Sale” signs in the coming years, joining an already crowded market
- Millions and millions of baby boomers are going to move in the next 10 years. By far most will move to new homes in the towns and states they live in now. But as many as 10 -15 million others will move to warmer, less costly states.
Baby boomer are about to move to different kinds of communities than where they live now
- Suburbia will be out, new urban communities like Abacoa, Celebration or Seaside in Florida will be in. Also in great demand will be charming small towns with active downtowns (think Oxford OH or Mount Airy NC). Urban areas like New York or Seattle, and college towns like Ann Arbor or Gainesville will be prosper as well-heeled retirees move there.
- Many boomers will move to gated golf communities, active adult, or 55 and over communities. These communities feature a built in social structure, plenty of activities, and someone else to cut the grass and paint the house.
Some real estate markets will do a lot better than others
Just about everyone’s attention these days is focused, justifiably, on the current upheaval in the real estate markets. But consider this startling fact: Half of U.S. markets saw price increases in the 4th quarter vs. year ago quarter (Source: National Association of Realtors)
What does this mean? A lot of things, but chiefly that real estate is intensely local. Local economies vary in strength. Pricing bubbles and overbuilding affected some areas more than others. And, for a variety of reasons, some areas of the country are more desirable than others.
A New Real Estate Strategy for Baby Boomers
Topretirements took into account the trends discussed above to come up with a new, quite radical real estate strategy for the oldest group of baby boomers (age 55+) to consider:
- Put your existing suburban home on the market now
- Start shopping for the home you will live in retirement now
- Make sure your new home is in one of the markets that is likely to prosper from the new demographic trends
Here’s the rationale for this somewhat unorthodox approach. As far as selling your existing home, it’s true that with so much inventory out there it’s not good time to sell. But on the other hand if you price it fairly (in 2008 prices, not the hyped up prices of 2005) and do a good job of marketing it, you can sell it within a reasonable time. Although you probably won’t get what it was worth a few years ago, you will be gaining several advantages:
- By selling your home now you get to take your equity out now. And you get the money before the rest of your baby boomer cohort put their houses up for sale, further depressing the market.
- This is a great time to buy the home you will spend your retirement in. Particularly in active adult communities, inventories are high, prices are low, and mortgage rates are the most attractive they have been in years. You will be securing your real estate future when the market is distressed, safely ahead of the millions of your peers.
OK, now we’ve got out on a limb with our opinion (and remember what you paid for it!). What do you think? Please post your comments about the suburbs as the new slums and let us know if you agree, or simply think we’re nuts!