The baby boom generation, those born between 1946 and 1964, is defying common misconceptions about them and making a significant impact on the housing market. They are not simply downsizing or relocating to retirement communities as widely believed. Quite the contrary, they are actively influencing real estate trends and shaping preferences. Their dynamic presence in the market should not be underestimated.
In fact, baby boomers represent the largest group of homebuyers at 39%, according to the National Association of Realtors (NAR).
So they are downsizing, right?
Not necessarily.
“Some boomers are also not necessarily downsizing. Maybe they’re looking for a single-story home or a new build that makes it easy for them to customize the home’s accessibility functions, said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, via National Mortgage Professional.
Several factors influence the housing choices of baby boomers, including increased life expectancy, the desire for single-story or accessible homes, and the opportunity to be closer to friends and family during retirement.
And don’t forget, many baby boomers also have substantial housing equity due to rising home prices, allowing them to consider various housing options.
Lending concerns
However, a recent study suggests that older borrowers may encounter difficulties in obtaining mortgages, with age potentially playing a significant role in mortgage rejection. The study points out that lenders may be concerned about prepayment risk or foreclosure risk associated with older borrowers.
Why?
Per the aforementioned study, age increases the rejection rate because “having a borrower die can be costly to the lender, because it increases the likelihood of the loan being paid off early (prepayment risk) or entering foreclosure (default and recovery risk),” stated Lautz, via National Mortgage Professional.
Listen, then plan accordingly
To effectively serve seniors in the housing market, professionals, such as mortgage originators, are advised to take a holistic approach. This includes understanding the specific goals and needs of each senior borrower, which can vary widely. Some seniors may benefit from reverse mortgages, while others may opt for home equity lines of credit (HELOCs) or short-term loans. The key is to provide education and guidance tailored to each individual’s situation and financial goals.
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“(As an advisor) You need to learn about their situation before predetermining what they want. Listen and understand what that person is trying to accomplish, and from there it’ll be easy to find a product that will make the most sense for them whether it’s a HELOC [home equity line of credit] or reverse,” Adam Huebner, co-founder of Advantage Reverse Lending, told National Mortgage Professional.
“It’s my goal to help educate and help them understand what else is out there, and if for some reason my products don’t align with their goals, I can direct them in a different way.”
“Younger buyers like Gen Zers and millennials are accumulating wealth, but seniors have a different mindset where they’re in a wealth distribution phase and they’re trying to figure out how to best manage that wealth that they’ve spent the past 40 years accumulating.”
Adam Huebner, co-founder, Advantage Reverse Lending, via National Mortgage Professional
Furthermore, reaching seniors in the housing market requires connecting with financial planners, in-home care specialists, nursing professionals, and real estate agents who work with clients looking to downsize. Moreover, professionals should prioritize education and sensitivity when discussing financial options and addressing concerns about life and death.
In summary, baby boomers are actively participating in the housing market, and professionals should adopt a personalized and educational approach to serve seniors effectively in their housing and mortgage needs.
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