Across generations some things remain the same. Growing up, there are times when every kid can’t wait to get out of their parents’ house and live by their own rules. The first tastes of independence and adulthood – driving, going to college, renting an apartment – often culminate in those kids growing up to purchase a home of their own.
That is, until 2008 when the U.S. economy crashed and many of those ‘kids’ (now newly graduated millennials) decided that given their staggering student debt combined with a lack of employment opportunities available, moving back in with Mom and Dad seemed like the most sensible thing to do. Fast forward to 2018, with a healthier economy and a robust real estate market in many major U.S. cities, and millennials are (finally) ready to purchase real estate.
However, now empty nesters, Mom and Dad don’t need that five-bedroom two-story home anymore, thus providing the backdrop to a new clash of the titans – baby boomers and millennials actually want to live in the same places.
In some urban markets, for the first time ever, it’s a battle-royale between boomers and millennials.
Both groups want the same things from a home as they enter a newly found independent stage of life. Boomers, who watched their 401(k) and home equity accounts dip during the recession are now enjoying the robust economy they were promised at retirement. Selling their home and walking away with a substantial amount of money is allowing them to make some pretty fun life decisions.
At the same time, millennials are pulling blankets down from over their eyes after having lived for the past half-decade in a state of fear watching many of their older friends and parents live through some pretty difficult financial situations. But, because they lived at home during that time, and many of them did garner high income earning jobs, they are sitting on some cash and it’s burning a hole. So, “what should we invest in?” they ask. The common answer and eventual decision is real estate.
WHAT DO BOTH GROUPS WANT?
In short, fun and convenience.
Baby boomers are not looking to retire to sleepy, quiet communities. Instead, they’re heading downtown to be close to the amenities a city has to offer – restaurants, theater, museums, entertainment and more. The revitalized downtown living areas that were conceived for millennials are often equally appealing to boomers. As AARP points out, boomers are buying into an “urban retirement” and downsizing into the upscale, amenity- rich, full service apartments.
According to the National Association of REALTORS® 2018 Home Buyer and Seller Generational Trends study, millennials are now the largest share of homebuyers. However, they’re not interested in the larger, suburban homes baby boomers are now looking to unload. True to this generation’s style and swagger, convenience is key. (Thanks again, Uber!) This has led to an interesting real estate market in that both baby boomers and millennials are after the same things – smaller homes in more urban, walkable suburbs and cities, with coffee shops, bars, restaurants and other amenities just around the corner.
WHO IS COMING OUT ON TOP IN TODAY’S CHALLENGING, LOWINVENTORY MARKET?
The answer is not a simple one. While boomers may be sitting on a larger amount of cash and can appear to be financially stronger to a seller, millennials are exceptionally skilled when it comes to home-finding.
Patience is low, and instant gratification high for millennials, and with the tech at their fingertips, they are able to pounce on real estate opportunities they often find out about before the generational competition.
With the help of aggressive real estate agents and tech tools so synonymous with the younger generation’s lifestyle, the first one to make a strong offer can have the edge.
Christian Klempp, a condo expert and licensed REALTOR® with Engel & Völkers Minneapolis, has also observed the phenomenon. “The ability of many baby boomer buyers to use cash to purchase remains a huge competitive advantage,” notes Klempp. “Older, experienced buyers are also more comfortable forgoing inspection contingencies and streamlining the extensive disclosure requirements involved in a condo purchase.
He does, however, agree that this is a trend gaining momentum.
“Young professionals shopping for an urban primary residence are competing with their parents as downsizing empty nesters in search of the same urban living experience and turn key lifestyle.”
HOW DO WE AS PROFESSIONALS COUNSEL OUR CLIENTS?
Setting expectations is crucial. Spend some time with your clients in the urban areas they’re considering making their investment. Purchase them a gift card or two for some of the local establishments that make that area famous. Give them an immersive experience. Most of the time, specifically for the boomer generation coming from the suburbs, moving downtown is going to be a huge life adjustment. If they have a vision of what it’s going to be like living ‘in the city’ and reality ends up being quite different, it is because we, as real estate professionals, failed to educate or help set those expectations. While they might be listing the place again soon, it unfortunately will not be with you.
For the younger crowd, it’s all about making sure their finances are in order and they are ready to rock in a competitive situation. As Klempp suggested, the cash heavy boomers have a potential distinct advantage over their younger counterparts. Getting pre-approved, being swift to not only see a listing but offering on it, appearing financially solid and working with reputable lenders will be paramount to their success in winning the deal.
As a professional, it’s important to notice these trends. It makes for some very interesting conversations and needed knowledge in the area of inventory and demand. Preparation, as they say, leads to execution. Boomers, don’t let the kids have all the fun. Kids, be nice to Mom and Dad. You’re neighbors now. GEOFFREY BRAY