Q–We are considering building a $350,000 house on acreage, riverfront or lakeshore in a south Minneapolis suburb. What is the expected market value for this price range in the next 10 to 20 years? Is there any reason to think we would not get our money out of this property, plus the expected normal appreciation of what I perceive to be a highly desirable location?
A–In general, the market for housing may be divided into three categories by age of the buyer or buyers: Starter housing (age 25 through 34); move-up housing (age 35 through 49); empty nester housing (age 50 through 65).
The demand for any category of housing is a function of the number of people in a particular age group.
A $350,000 house is typically purchased by people in their peak earning years and aged 35 through 49. People of those ages were born from 1947 to 1965, and are often called “Baby Boomers.”
Nationally, the number of people in this age group is expected to decline substantially as the boomers grow older. Along with the decline in this population will be a declining demand for larger, more expensive housing.
So aside from inflation, the prospect of a price increase in $350,000 homes over the next 20 years is minimal. Because of the projected decline in demand, it’s possible that $350,000 homes may be difficult to sell in 2015.
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Have a question about real estate? You can write to George Karvel in care of the Chicago Tribune’s Your Place section, 435 N. Michigan Ave., Chicago, Ill. 60611.
