Two studies out in the last week or so are taking at look at the impact on housing of - what else - the Baby Boomers.

Both the Research Institute for Housing (an affiliate of the Mortgage Bankers Association) and the National Association of Realtors released the result of studies they conducted on the real estate behavior of this huge demographic as they enter their golden years.

The Research Institute for Housing (RIF) study which was conducted in conjunction with the Radian Group is available on-line in PDF format while the NAR has released theirs, commissioned through Harris Interactive, in book format for the sum of $125.00 ($50 if you have already paid the hefty NAR membership fee.) We have read the RIF publication but are, for obvious reasons, relying on the NAR's press release about their conclusions.



The NAR/Harris Interactive study concludes that, while most of the 78 million Baby Boomers are far from retirement - with great hoopla and ceremony the first wave turned 60 this year - they will have a wide variety of housing needs in the future. These needs will depend on the plans they have or have not formulated for that retirement.

David Lereah, NAR's chief economist stated that Baby Boomers are very different from earlier generations, first because they are living longer and second because they are not necessarily following fixed paths in their lives or toward retirement. They married later in life and started their families at an older age which means that they will continue to work beyond what is thought of as the traditional retirement age. "...one third expects to go back and forth between periods of work and periods of leisure, and another 35 percent want to work at least part-time or start a business - all of this will have an impact on the kind of homes they buy as well as where they buy them." The median age at which this generation plans to stop working is 70 but over a quarter say they will never really retire.

Since most Boomers are currently in the workforce and many still have children living at home Lereah said that they are still a driving force in the housing market. He stated that slightly more than 25 percent of the Boomers are aged 55 to 60 but, unlike earlier generations, they are less likely to be planning to downsize and will probably postpone purchasing a retirement property.

Forty-two percent of survey respondents would prefer to retire in the South, 32 percent in the West, 15 percent in the Midwest, and 12 percent in the Northeast. "This tells us that the Sunbelt will remain a traditional draw for retirees," Lehreah said.

The RIF study is not truly a "Boomer" study. It used U.S. Census Bureau Projections and information from the 2004 Health and Retirement Study (HRS) to profile three aspects of ownership among homeowners 50 and older.

The first is the involvement of older homeowners in the second home market. Boomers have long been assumed to be driving this subset but the RIF study provides some contrarian information.

The second aspect of older homeowner impact is that of suburban-urban migration. Here the boomer influence is real but not enough to turn the tide of urban flight.

The third category that the study looked at is a more general view and discussion of some of the broader implications of population aging, specifically for the mortgage industry.

We will first look at the second home scenario and then, in a second installment, the other two subjects covered in the RIF study.

RIF's data indicate that 6.6 million of the 43 million households comprised of individuals aged 50 and older who own their own homes also own a second home. (Ed. Note: The NAR study refers to 78 million baby boomers, many of whom are not yet 50; the RIF study is talking about owner occupied households, many of which will contain two older residents and all ages over 50 were included. Some analysis was done on the 50-54 and 55-59 years of age cohorts.)

Since this study was commissioned by an affiliate of MBA, the focus is less on ownership than on the status of financing and the study found that most second-home owners either inherited their homes or purchased them with cash. Overall, 17.1 percent of older homeowners had a mortgage on their second home and the likelihood of having a mortgage consistently fell as age increased. About 25 percent of homeowners aged 50-54 had a mortgage while only about 12 percent of those over 75 did. The average mortgage among those having one was $101,272 and the aggregate value of outstanding mortgage debt on second homes owned by older owners is only $126 billion. Data was limited about the details of these mortgages such as the dates of origination, original amount, and so forth.

Second home ownership among older Americans varied widely by race, education, and marriage status. 15.8 percent of white homeowners owned second homes but only 10 percent of African-American homeowners did. 20 percent of married or partnered couples owned a second home as did nearly one quarter of homeowners with a college degree. Ownership of second homes was at its highest level - 18.6 percent - in the 60-64 age group - a cohort Boomers are only just now entering.

The market for second homes nationally is small but the demand for second homes in some regional and local markets is significant. The usual subjects such as the Outer Banks, Arizona, Florida, and other recreational areas are most popular. There are also strong patterns of regional demand where persons with a primary residence in a given region are likely to prefer a second home in that same region. The two Census divisions with the strongest of these "own region" demands are the South Atlantic and the West. New England, the Mid-Atlantic, and the East North Central regions had the lowest same region preference. Feel free to draw your own conclusions about this particular piece of information.

Slightly more than half of older second home owners spend two weeks or less in their second homes and two-thirds spend fewer than four weeks. This perhaps indicates that most of these second homes are held for investment rather than recreation. Only 12.9 percent plan to make their second home their main residence in the future. The HRS study is longitudinal so the authors were able to conclude that, of those second home owners identified in the study in 1998, 45 percent owned only one home by 2004 and to extrapolate that the typical second home belonging to older households is owned for 15 years before being sold. For the typical second home owner, equity in that home represented only 13 percent of the household wealth.

The study's most surprising conclusion about second home ownership among the Boomers included in the data is that they were no more likely to own such homes than those who preceded them by one or two generations.