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The resurgence of baby boomers
Baby boomers, the generation born between 1946 and 1964, are once again making waves in the real estate and mortgage industries. According to the National Association of Realtors (NAR), baby boomers now constitute the largest share of home buyers at 39%, representing a significant increase from the previous year’s 29%. This article aims to explore the reasons behind this shift and shed light on the implications it has for the market.
In an unexpected turn of events, baby boomers have emerged as the most prominent group of home buyers in the current market. This demographic dominance becomes apparent when comparing them to Generation Z, who only account for a mere 4% of home buyers. The contrast is striking, especially considering that 30% of Generation Z buyers transition directly from their parents’ homes into home ownership.
Boomer equity
What sets baby boomers apart from younger generations is their unique relationship with technology and media consumption. While the world has embraced social media, online streaming, and digital platforms, a significant portion of baby boomers still prefer the traditional ways. Approximately 40% of home buyers from this generation remember a time without computers, displaying a disdain for social media and an inclination towards watching shows on designated dates with commercials. They may not fully comprehend the hype surrounding real housewives, video games, food delivery services like Uber Eats, online shopping from Amazon, or streaming platforms like Netflix. It is interesting to note that 40% of these buyers still use flip phones, seemingly disconnected from the digital age that dominates the market.
The key factor fueling the rise of baby boomers in the real estate market is their substantial equity, aptly termed “boomer equity.” As explained by the NAR’s chief economist, Larry, many baby boomers are repeat buyers who possess significant housing equity, allowing them to pursue their dream homes. Contrary to popular belief, baby boomers are far from being inactive in the housing market, with their eagerness to find their ideal homes making them a valuable target for marketers.
Buying power
The dominance of baby boomers, particularly in homes with no or low mortgages, has led to a significant shift in the real estate market. Currently, approximately 63% of all U.S. properties are financed by mortgages, a statistic predominantly influenced by younger generations. However, it is the boomers who hold the advantage in terms of equity, creating a power dynamic that favors their interests.
Additionally, there has been a decline in first-time buyers, with only 26% of all buyers falling into this category. This is the lowest percentage since the NAR began tracking this data, indicating that the current price and interest rate levels are deterring younger generations from entering the housing market.
While baby boomers may dominate the market, it is crucial for lenders and marketers to also focus on Generation X and older millennials. These demographics hold considerable buying power, with Generation X having the highest median household income at $114,300, followed by older millennials at $102,900. Targeting these demographics is crucial for lenders, especially considering the affordability challenges faced by younger generations.
Conclusion
The resurgence of baby boomers in the real estate and mortgage industries has significant implications for marketers, lenders, and the overall market dynamics. By understanding and leveraging the concept of boomer equity, professionals in the industry can tap into a profitable segment of buyers. Additionally, targeting Generation X and older millennials, who have the financial means to enter the market, can prove to be a fruitful strategy. As the real estate market continues to face challenges in terms of inventory and affordability, it is imperative to recognize the potential offered by the boomer generation.
