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Though the sizzling stock market burned
out with the dot-com bust of the late 90's, low interest rates coupled
with amended tax laws fueled the housing boom of the early 2000's. With
children exiting college and retirement on the horizon, Boomers
redirected their investing in real estate.
New research indicates that the number of
second homes purchased between 2000 - 2004 has nearly doubled.
The value of homes doubled as well, with the average home rising 55%
during these 4 years. Keunwon Chung, a statistical economist at the
National Association of Realtors, says the Baby Boomers, especially
those with above average incomes, are primarily motivating the second
home market.
Chung cites one reason these Boomers
are snapping up homes is to diversify their financial portfolio.
Another reason is to position themselves for their golden years. Tax
friendly retirement states such as Florida, Arizona, and Nevada already
have witnessed an explosive growth in both home construction and
appreciation. Florida experienced a 25% increase in home prices last
year, with one in five of those homes being purchased as a second home
or investment property. Nevada's home prices increased 17%, with a
comparable rate being purchased as an investment property. The U.S.
Census Bureau expects this rate to steadily continue and predicts second
home purchases from Baby Boomers will reach 6.4 million units by 2010.
Most Baby Boomers are seeking luxury in their second home
purchases. According to a Coldwell Banker survey, the Boomer generation
"...wants luxurious homes and wants to remain active." Neil Howe, author
and expert on generational theory, confirms this by stating, "Boomers
want to live somewhere where they can remain active. They want to be
near cultural and spiritual hubs that keep them connected with community
and culture." And this generation can afford their desires. From the
accumulation of wealth through the stock market, home equity, and
inheritance, along with the earning power of working during retirement
years, Boomers have more money than any previous retiree generation.
Studies from Harvard, NAR, and NAHB all agree that Boomers will most
likely use their cash resources and home equity to purchase multiple
residences that focus on prime location and amenities. While condos
traditionally filled this requirement, a growing number of Boomers are
now turning to condo hotels, condotels, and other various resort style
residential options.
Condo hotels
appeal to Boomers
because it markets luxury and location,
the two main ideals these Boomers are looking for to sustain their
dynamic lifestyle. "Why buy a condo in town that sits empty for 3/4 of a
year when they can own a condo hotel, have to five star amenities
available to them, be centrally located in a top vacation destination,
and receive rental income?" says Steven Roszell, owner of
CondoHotels.com and HotelsForSale.com. The rental of the condos,
provided by the hotel management company when the condo is unoccupied,
is another main attraction of condo hotels for Boomers. Bob Waun, of
vacation-finance.com, says that although Boomers desire resort style
living and luxurious amenities, not all Boomers may afford it. Says Waun,
"Fewer than 20 million (26.5%) of US Boomers will be wealthy enough to
afford a whole-ownership second home without rental income." But because
of the rent potential, condo hotels offer "subsidized luxury that will
be a growing choice among savvy Boomers." Waun also believes sheer
Boomer demand will motivate the condo hotel market. He cites, "if only
1% of this generation demands condo hotel as a second home option, 1.45
million units will be needed. That's 96,000 condo [hotel units] per
year, every year…." for the next fifteen years that Boomers will be
retiring. Considering that currently the US has only a handful of
markets for condo hotel resorts, it is probable that that demand will
supersede supply.
78 million US Baby Boomers retiring over the span of the next 15 years
will undoubtedly make an impact on the real estate market. With the
oldest of the Boomers turning 60 this year, realtors are getting reading
to accommodate their demand. "We will see large market cycles in the
condo hotel market," says Roszell," and CondoHotels.com is ready for
it."
Though
explosive appreciation and development is not anticipated, analysts do
agree that the Boomers will help
sustain a buoyant real estate market.
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