Earlier this year, I received my Senior Real Estate Specialist® designation, and it was such a special honor as I’ve been working with senior homeowners for more than three decades. The SRES® designation was a special reminder of all the wonderful clients I’ve consulted with and guided for more than thirty years – and all the clients I look forward to helping in the future.
Some of the topics we covered in the SRES® designation course were related to the home-buying process as it relates to this demographic – their preferred methods of communication and how they like to complete the home purchase, which is more often than not by paying in cash.
A new study by GOBankingRates confirms this trend. In the survey of more than 1,000 adults, researchers found 20 percent of Baby Boomers (ages 65 and up) paid the full amount for their home in cash – the highest percentage of any age group by far. When you add in the statistic that about 30% of the oldest Americans don’t own a home, (according to Yahoo! Finance) the 20% figure means that even more than one in five Boomers are paying for their houses in cash.
If you’re reading that statistic and thinking: Why?
Let me explain.
There are several factors at play here. Many Baby Boomers have been trading up homes for years or have owned one or two homes with substantial equity. In fact, according to the National Association of REALTORS®, there is approximately $44 trillion in home equity for homes in the U.S. and 38% of all homeowners own their home outright. But back to the Boomers … Many of those sellers/buyers are also cashing in on equity and moving up or down, depending on personal circumstances. Basically, Baby Boomers are paying cash for their new home, which almost always involves “equity trading” from another home to make this happen, whether it is a cash or financed purchase. For these same reasons, the Baby Boomers tend to put more cash down to make payments more manageable when not paying cash.
In addition, many of these Baby Boomers are getting to an age and time in their lives when they may be combining inherited wealth with home equity to purchase their next home. They might be moving to other areas out of state where prices are lower, allowing cash or high down payment purchases. The bottom line is that a buyer in the Baby Boomer demographic is more likely than buyers in other age demographics to combine acquired equity with potential inherited wealth to secure their next home, keeping payments and expenses in check.
Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California Properties • DRE: 00941825 • 818-380-2147 • firstname.lastname@example.org