Spoon-fed on instant gratification, Baby Boomers are not content to wait for their gold watches before sampling the fruits of retirement. Those who can swing it financially are buying second homes to vacation in today and retire in tomorrow.
“Baby Boomers aren’t ready for retirement yet. They feel younger at 50 than their parents did,” observes J. Richard McElyea, executive vice president of Economic Research Associates, a real estate consulting firm in San Francisco.
But Boomers are slowing down and smelling the roses, which, in real estate circles, translates into a growing demand for recreational property.
“They’ve bought everything else–cars, toys, gadgets. A second home is the next logical step,” says McElyea.
The desire to get away is strong. According to a study by Ragatz Associates, a market research firm in Eugene, Ore., 60.3 percent of Americans interviewed in 1995 believed they had some chance of purchasing recreational property by 2005. That was up from 26.1 percent in a 1990 survey and 43.8 percent in 1993.
But Shangri-la does not come cheaply.
The majority of Americans in the Ragatz study thought a realistic price for vacation property ranged from $25,000 to $100,000. Yet even starting-price tags on most recreational property is much higher.
“You need an annual income of at least $150,000 to afford a decent vacation home,” says Dick Ragatz, executive vice president of RCI Consulting (formerly Ragatz Associates).
Sticker shock has caused many vacation home buyers to embrace time-sharing or some form of fractional ownership, with one big exception.
“Although time-sharing has stolen much of the thunder from wholly owned vacation homes, second homes are still being bought as pre-retirement product,” observes Ragatz.
Boomers may balk at high prices for purely recreational property but they can rationalize the cost and maintenance headaches if they plan to put rocking chairs on those porches some day.
Pre-retirement property is not a brand-new concept, but Boomers are making it a hot topic among developers. Although most people retire without pulling up stakes, the number of relocation candidates swells significantly by the sheer force of the Boomer bulge.
“Within the next four to five years, you’re going to see that market go crazy. I think it’s going to happen across all price segments,” says Dick Larsen, vice president of marketing and sales for Arvida, a Ft. Lauderdale-based developer of master-planned communities.
Real estate agent Bill Bondurant has seen buyers in his neck of the woods shift from recreational shoppers to those with an eye on the future.
Selling property on Bald Head Island, off the North Carolina coast at Southport, Bondurant observes: “People are typically coming from the Northeast and the Midwest. A common theme is, `I’ve got 10 more years left (before retirement).’ They don’t want to be the last one in line when it comes to shopping for a retirement home.”
Indeed, pre-retirement purchases are spurred on by a fear of higher prices and lack of available product. Boomers already have driven up values on primary residences and are expected to bid up prices for second homes as well.
At Bald Head Island, where lots range from $55,000 to $775,000, prices have been rising 10 percent annually in the last few years.
“The money is there and the motivation is there,” says Bondurant.
And despite a perceived lack of job security and higher college costs for their children, Boomers have fared pretty well financially.
First-wave Boomers have earned more money and saved more than their parents did at the same age. A bull market has expanded their investment portfolios in recent years, and in the coming years they stand to inherit considerable wealth from their parents.
So while Boomers may not be ready to put away briefcases and business cards just yet, many are ready and able to indulge recreational whims.
In the past, pre-retirement communities have been a byproduct of destination resorts. But where today’s pre-retirees will cluster remains a mystery. Boomers have a long track record of breaking with tradition and the real estate community is hedging its bets.
“It’s not a given that all these Boomers are going to seek out the traditional resort locations,” says David Leininger, chief investment officer of Double Diamond Inc., a Dallas-based developer of second homes. “Hilton Head (developers) shouldn’t lick their chops and think they are going to experience a feast of opportunity.”
Leininger thinks Boomers may not stray too far from home. His firm is focused on developing property in “close-in” markets, located an hour or two from buyers’ primary residences.
“Destination places are not practical for the vast majority of people,” says Leininger.
With lots ranging from $20,000 to $75,000, Double Diamond’s developments are located near urban centers such as Eagle Rock in Hazelton, Pa. A two-hour drive from Manhattan, Eagle Rock represents a change of pace from the Big Apple without the hassle and expense of a plane commute. There may not be palm trees, but it does have the appeal of the Poconos.
Yet other developers expect destination communities to be strong. Expanded air travel makes it easier to visit remote spots while advanced communications technology allows people to stay in touch with offices and residences back home, enabling them to extend their stay.
Psychographics also plays a role.
“The late ’70s and the ’80s were decades of accumulation: glitz was better. Aging Boomers now realize the things they were striving for in their 30s and 40s have a bit of a hollow ring,” says James Chaffin, president of the Urban Land Institute, a real estate think tank based in Washington, D.C.
Chaffin cites a shift in the values of Boomers: moving from lifestyle to life experience, from being well off to well-being, and from being wealthy to being healthy.
With that in mind, today’s second-home shoppers are not looking for “trophy homes” that show off their wealth but places their children and grandchildren will want to visit–a trend Chaffin refers to as “legacy purchases.”
“Over the river and through the woods to Grandma’s house is no longer a two-hour drive upstate,” says Chaffin, who is also president of Spring Island Co., a private residential coastal island about 14 miles from Hilton Head, S.C..
Spring Island taps into a number of Boomer preferences, albeit at the upper end of the market, with 2- and 3-acre lots ranging from $250,000 to $900,000.
For the environmentally inclined, Spring Island offers more than a casual brush with Mother Nature. More than one-third of the island’s 3,000 acres have been set aside as a nature presure with a live oak forest, marshes, fields, rookeries and shrimp ponds.
The island is home to wood ducks, ibis, great blue herons, bald eagles, and a variety of song birds.
“Environmental education is very important,” says James Light, president of Snowmass Corp. in Colorado and a partner with Chaffin. “At Spring Island we hired our naturalist before we hired our golf pro.”
Indeed, catering to today’s pre-retirees means a different approach to programs. Golf still is an important amenity, but Boomers want a variety of activities and experiences.
Similarly, Boomers may seek serenity away from the hustle and bustle of urban life, but they still want access to creature comforts.
Sherry and Robert Murrie of Alpharetta, Ga., had vacationed frequently at Hilton Head, but nixed it for pre-retirement “because it was too commercialized.”
Instead, the Murries bought a four-bedroom home on Bald Head Island last year.
“My husband fell in love with the island first,” says Sherry Murrie. “The fact that there are no cars on the island gave him a real feeling of peace.”
Yet she likes the proximity to airports and restaurants: Wilmington, N.C., is 40 miles away and it’s an hour’s drive to Myrtle Beach.
Small towns are very attractive to Boomers, say recreational experts.
“I think it reflects a search for something authentic, something real. There’s a sense of wanting to be attached to a place that already has a sense of community,” says Diana B. Permar, president of Permar & Ravenel, a marketing analysis and research firm on Kiawah Island, S.C.
With “life-long learning” a Boomer buzzword, college towns are another magnet. In addition to teaching and learning opportunities, academic communities offer character and charm without compromising on culture.
Experts point to Charlottlesville, Va., Chapel Hill, N.C., Lawrence, Kan., and Stephen’s Point, Wis., among academic hotspots already attracting preretirement crowd.
Beyond geography, the other looming issue for developers is what type of housing Boomers will prefer as they ease into retirement.
Many experts predict that fewer cabins and cottages will be sold in favor of more fully equipped homes offering more storage and amenities. Their reasoning: The mindset of pre-retirement shoppers differs from those buying purely recreational shelter.
Developers observe that there’s a temporary attitude toward shelter used only for vacation jaunts. However, priorities change quickly when people plan to stick around.
Spatial arrangement and design are approached more like a primary residence. Whereas vacation homes are often very informal in design and decor, pre-retirees look for more traditional floor plans. That means closed-off spaces in lieu of the great rooms dominating many of today’s getaways.
“Pre-retirees may even look for space to accommodate special pieces of furniture they know they’re going to keep,” says Permar.
Although square footage will be similar to their primary residences, pre-retirement homes will be built with fewer stories. Buyers thinking ahead don’t want the challenge of climbing stairs.
Experts also look for a shift to higher density with safety and security being driving factors.
“As they get older, people would rather be closer to their neighbors than not,” says Ragatz.
Pre-retirement property involves a a certain amount of experimentation.
“The home you buy may not be the home you end up retiring in,” says McElyea. People may buy a less expensive home to test the area and then leverage their capital into another residence.
In many respects, fractional ownership (time-sharing done on a larger chunk of time) is a stepping stone to a wholly owned pre-retirement home.
“Time-sharing is really a substitute for a hotel room,” says McElyea. “Fractional ownership is a substitute for a second home.”
Still, both fractional and wholly owned vacation homes give buyers a better chance to sample an area.
And this sampling is one of the major benefits of pre-retirement property. Buying in advance reduces relocation shock.
“Learning the butcher, the baker, and the candlestick maker allows a family to become woven into the fabric of a community,” says Chaffin. There’s not a great sense of loss when they do retire, he adds: “They’re going from one home to another.”
