Baby Boomers’ appetites in houses are expanding almost like their waistlines. A diet, though, may be in sight. Just as the 40- and 50-year-olds are loosening their belts a notch or two, they also are slipping into roomier houses.
The average new house in the United States is three rooms bigger than it was a decade ago. The average size was 1,785 square feet in 1985 and 2,126 square feet last year, according to the National Association of Home Builders.
It’s a trend, though, that may have peaked as Baby Boomers’ children buy their first houses and more people stay put. Last year, fewer people moved than during any other year since the Korean War. For those who skipped history class, that’s about 45 years.
The sunset of the bigger-is-better mentality is just one of several trends demographic experts see on the real estate horizon. Other millennium previews include more vacation houses, more gift-money down payments for first-time buyers and more buyers with diverse ethnic tastes. Whether it’s starter houses, the mid-size models or luxury homes, real estate watchers have some predictions.
Members of so-called Generation X, generally people in their 20s, are purchasing houses left behind by upwardly mobile Baby Boomers, said Wallace Epperson, a Richmond, Va., investment banker who studies national real estate demographic trends. He recently spoke to fabric and flooring retailers at a convention in Orlando.
In fact, he said, so many Baby Boomers have abandoned their starter-home roots that the nation is suffering from a glut of inexpensive houses. The number of starter households has declined almost every year since 1986, Epperson said.
“If you bought a starter house 10 or 20 years ago and want to sell it, you could have problems,” Epperson said. “There are not enough buyers for starter homes.”
Orlando’s landscape saw thousands of starter houses built seemingly overnight 25 years ago to make room for all the “twentysomethings” getting jobs at Walt Disney World when it opened.
“All of those twentysomethings are now fortysomethings with kids,” Lewis said.
The children of Central Florida’s 1970s boom era have started moving into their own houses. In addition, the inventory of low-cost housing is attractive to retirees who move to the area.
The luxury home market in Central Florida looks promising for now, said Jim Lewis, owner of Charles Wayne Consulting, a real estate research company in Maitland.
“Metropolitan Orlando has 1.4 million people and 700,000 jobs. It’s not just a bunch of hamburger flippers out there. It’s a diversified market,” Lewis said.
In fact, he said, the high-end market is growing at a faster rate than the rest of the market. Since 1991, the percentage of Central Florida houses priced at $300,000 or more has doubled, Lewis said.
“All these Boomers are getting older and buying different houses,” he said.
Walt Disney Co.’s year-old Celebration community in northwest Osceola County is driving up average prices in the market. On the other end of the spectrum, established custom communities in north Seminole County are doing better than they have in years, Lewis said.
But what will happen to all those big houses when the Boomers get ready to retire? Epperson predicted a glut of medium-size houses in the early 2000s.
Oversized custom houses don’t seem to fit most retirement plans. Lewis said he believes the next generation of retirees will want to play in the mountains and on the beach. The tendency seems to be for them to unload the big house and buy one or two smaller ones in great geographic locations, Lewis said.
“I think the Boomers are going to be very active retirees,” Lewis said. “They’re more into health and activities.”
Having dual addresses sounds expensive, but Epperson predicts the Baby Boom generation will be able to afford the luxury because they’re getting inheritances.
It used to be that children received inheritances in their 40s and used the money to pay for their children’s college educations, to pay off the mortgage and to supplement their retirement benefits, said Epperson, a partner with Mann, Armistead & Epperson in Richmond.
Today, he said, inheritances are coming a decade later in life. And because retirees have saved and have good health plans, they have more to pass along to heirs.
Americans will enjoy $16 trillion in inheritances between now and 2010. The money comes at a time when college tuitions have been paid and little is left on the mortgages.
So what do they do with the money? Buy second houses for vacations and eventual retirement.
“I think you will see a boom in second homes and vacation homes,” Epperson said. “It’s going to be huge in the first part of the next century.”
Just a few years ago, home builders were constructing 50,000 vacation homes. This year, they’re expected to build 75,000, said Gopal Ahluwalia, spokesman and director of research for the National Association of Home Builders.
If it’s any consolation for their children, Baby Boomer retirees won’t be frolicking guiltlessly, Epperson said.
The Boomer generation has been blessed with healthy economies and inheritances, and they have been cursed with feelings of guilt for working so hard and perhaps neglecting their children, he added.
“The kids of the Boomers will become the most affluent ever,” Epperson said. “This new generation will come out of the box better off than any other previous generation.”
Age isn’t the only changing factor among buyers.
In the next 40 years the white population is expected to grow from 191 million to just 202 million. Epperson called the growth anemic and “almost nongrowth.”
In contrast, the population of African-Americans is expected to double, the number of Hispanics will quadruple, and the Asian population will grow about five-fold in the next 40 years.
