Boomers’ Renting Desires Don’t Bode Well for Reverse Mortgages

Baby Boomers will reshape the U.S. housing market as this massive demographic as they approach their retirement years with substantial amounts of home equity. But when it comes to their aging in place preferences, millions of Boomers would rather rent than own a home in their later years, according to a new survey from Freddie Mac.

An estimated 6 million homeowners and nearly as many rents aged 55 and older prefer to move again at some point in their lives, based on findings from the first Freddie Mac 55+ Survey of housing plans and perceptions of people born before 1961.

Of those who expect to relocate, over 5 million indicate they are likely to rent by 2020. Among those age 55-plus renters who plan to move again, 71% plan to rent their next home rather than buy.

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“When a population this large expects to move into less expensive rental housing, we have to expect it will create significant new pressure on both the supply and cost of existing affordable rental housing,” said David Brickman, executive vice president at Freddie Mac Multifamily, in a written statement.Screen Shot 2016-06-29 at 1.21.29 PM

The survey findings underscore the need for additional affordable rental housing in the U.S., especially considering 47% of renters aged 55 and older say they struggle from paycheck-to-paycheck, while 13% admitted they sometimes cannot afford basic living expenses until their next payday.

Affordability is a “very important” factor influencing Boomers’ next move, with 60% of survey respondents saying so. Meanwhile, just under half (47%) of Boomers say their biggest deciding factor for relocating depends on amenities needed for retirement; while 44% want to live in a community where they are no longer responsible for caring for the property.

For a majority of Boomers, relocating doesn’t necessarily mean moving across the country.

Among those who plan to move again, 31% of  renters would prefer to relocate to a different neighborhood in the same city, whereas 23% prefer to move into a different property within the same neighborhood and 18% plan to move to a different city within the same state. Only 24% of respondents indicated they would rather move out of state.

Although the majority of Boomers say they would rather become renters than homeowners in their later years, a sizable share of this population actually does plan to age in place within their current residence.

The survey also found significant differences between the housing expectations of older adults who haven’t retired and the housing choices retirees have actually made.

For instance, 34% of renters predict they will live in their current home for the rest of their lives, however, only 7% of retired renters say they currently live in the same home. Additionally, 46% of Boomer renters predict they will move closer to family in retirement, but only 31% of those who have already retired have done so.

As for other renters who predict they will age in place, 22% say they plan to move closer to children or grandchildren, while 12% plan to move in with their adult children.

Contrast to popular “snowbird” perceptions, just 18% of Boomer renters say they plan to move to a warmer climate for their aging in place needs.

Conducted by GfK on behalf of Freddie Mac, the Freddie Mac 55+ Survey is based on responses from nearly 6,000 homeowners and renters.

View the full survey.

Written by Jason Oliva

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  • This is no big surprise. The greatest generation are the ones who had ties to their homes and communities and wanted to age in place. Many baby boomers used their homes as ATM machines and are mortgaged to the hilt so a RM would not even be possible!
    Bottom line is supply and demand. Rents will be so high the smart ones will decide to own.

  • One thing to take into consideration is that we have so many more baby boomers turning 62 years of age than ever before.

    I guess I would say that sure, the survey would show more wanting to rent more today than compared to past years. It would be only logical because of the vast amount of people becoming of age.

    However, this survey is NOT bad news for our industry. If you took the percentage of people wanting to remain in their present home, move into a retirement community or move to a warmer climate, according to this survey, this is a huge number of possible senior potentials needing or wanting a reverse mortgage!

    Remember, we have almost 8,000 baby boomers daily turning 62 years of age, this is anticipated to remain at this level for the 15 to 18 years. Do we all have a bright future ahead of ourselves, I say yes, providing we approach the industry with the changing times!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      Why you see 10,000 per day being used for Baby Boomers turning 62 is because Baby Boomer total 74.9 million per Google, and the time over which they will be turning 62 began on 1/1/2008 and will end on 12/31/2026, a little over 10 years from now. A high proportion of these Baby Boomers were born in 1946 and 1947. (The average number of Baby Boomers turning 62 is actually about 10,800.)

      Our problem is that over 33.5 million Baby Boomers are now older than 62 and yet they have had little impact on endorsements. For years before 2008, there was a lot of chatting up the importance of this group to our future once they began turning 62. That has proved to be less than questionable.

      So we have less than 11 years before all Baby Boomers are 62 since the years for this generation are defined as 1946 to 1964. It is time that we see that this generation is not the ideal generation we were told they would be. It is now believed that we will not see many endorsements from this generation until at least two years of this generation (those born in 1946 and 1947) are over 72 years old.

      Gen Xers will start turning 62 on 1/1/2027. This generation is defined as those born after 12/31/1964 but before 1/1/1981. It is expected at their peak there will be 65.9 million Generation Xers per an April 25, 2016 Pew Research Center Report in the US. That should mean an average of a little less than 11,300 Generation Xers will turn 62 per day beginning on 1/1/2027.

      The average number of Millennials turning 62 daily will even be higher. So to be update, we need to raise up our averages. You are not alone but according to the best information available, you are underestimating what is actually occurring.

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