Retirees are in the Driver's Seat

As America’s wealthiest generation revs up for retirement, it is well-equipped to navigate a housing market that is rife with hazards

by Robert Dagley

Nicknamed for the boom in births after WWII, baby boomers may be better known today for the incredible boom in wealth they represent. Able to capitalize on low interest rates, a stock market that has grown exponentially during their earning years, moderately priced homes that have skyrocketed in value, and the ability to sock away savings during non-inflationary times, boomers have amassed over 50% of the American wealth. For boomers, the American dream is still alive, and they are in the driver’s seat as they enter retirement. When it comes to finding their dream retirement home, there seems no better time to step on the gas.

How did we get here?

Earlier this year, The New York Times reported that skyrocketing home prices generated extraordinary wealth for homeowners during the pandemic-induced rush on housing. Six trillion dollars in equity in just the past two years! That’s good news for boomers, who were the generation that benefited most from the sharp climb in home values. Especially since no one sees the price of homes going down, despite rising interest rates and a housing market that is showing signs of slowing. Whatever equity boomers have built up in their homes is here to stay.

According to Norada Real Estate Investments, the U.S. housing market “remains as hot as ever for homebuyers, with new records set for home-selling speeds and price increases.” When supply and demand aren’t in tune with each other, finding the house of your dreams is becoming harder to do. The good news is that if you’ve got the money, your chances are better than most.

This is not 2008 all over again

The market experts, realtors, and developers we’ve spoken to all agree that we are not in a housing bubble — at least not like what we faced in 2008. The Federal Reserve Bank of Dallas reported that “based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 global financial crisis in terms of magnitude or macroeconomic gravity.

Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom.”

A June 2022 Realtor.com report said the housing market is already recovering from the wild swings it absorbed during the pandemic. Real estate listings are rising, though they have a long way to go to reach pre-pandemic levels. While median home prices hit another record high, the sheer number of new homes should give buyers some leverage they haven’t had recently.

Where experts think interest rates are headed

One thing most experts agree on is that 30-year fixed mortgage rates could steadily inch up to 7% by the end of 2022. “High inflation and rates above 5% are both headwinds for the housing market in the coming months,” said Joel Kan of the Mortgage Bankers in a Forbes report. Chief economist of the National Association of Realtors Lawrence Yun added, “Mortgage rates bouncing along near 6% is certain for the remainder of the year. They could go up even close to 7%, especially if oil and gas supply further lags behind.”

As for 2023, Melissa Cohn, regional vice president at William Revis Mortgage, told Money.com that rates could rise to 8% if the Federal Reserve doesn’t rein in inflation. If that happens, she said, “the economy will certainly cool off [and] rates will come back down to affordable levels.”

Does the cash buyer still reign supreme?

Cash is still king, according to a Redfin report that found all-cash buyers are four times more likely to win the bidding wars that have become commonplace. An ATTOM report found that all-cash sales accounted for over 34% of all single-family home sales in the first quarter of 2022. “Interest rates will have a minimal effect on retirees,” said Jerry Helms, president of Brunswick Forest Realty. Randy M. Griffin, director of development at Cobble Creek in Colorado, said, “The bulk of our buyers are cash buyers. Most haven’t had a ‘real’ loan.” And Michael Asnip, COO at Seabrook Island Real Estate, reported, “The cash buyer has been a huge factor the last two years, accounting for over 50% of our home sales.”

They’re still following the sun

The tens of millions of baby boomers (especially those in the Northeast) entering their retirement years are still overwhelmingly heading to the Sunbelt. As much as they’re moving toward warmer climates and amenity-filled communities, they’re escaping from high taxes, congestion, crime, and even political climates. “They don’t want to be the last person to leave,” said Pete Howlett of Orlando Realty Solutions, which is still seeing an influx of boomers from the Northeast into central Florida. The same holds true in the Carolinas and Tennessee.

At Cobble Creek in Colorado, they are getting a lot of interest from both the East and West Coasts as retirees search for lower-density communities and the opportunity to get better value for their money. California has particularly come into play as taxes, home values, and crime have soared in recent years. Those California boomers are also making their way across the country to Florida.

Boomers have been here before

Those who bought a home in the early 80s remember when interest rates rose over 16%. Boomers were there when the real estate bubble burst in 2008. And along the way, they’ve experienced the ups and downs of the stock market. A Boomer herself, Diana M. Peters, president of Woodside Development, said “We’ve seen rates that were significantly higher; we remember those days. Home prices weren’t lower. Boomers have a long memory, but they are somewhat insulated because their investments over the last 10 years have done well. With their experience over the last 30-40 years and where they are today, they’ll be largely insulated.”

It’s still a seller’s market in central Florida

The real estate market continues to be red hot in central Florida, but there may be some breathing room for buyers in the months ahead. Boomers, however, shouldn’t expect to find bargains. A mid-year report by the Orlando Regional Realtors Association shows the region is continuing to break records, with median home prices hitting record highs. But even as interest rates continue to rise, there are more properties on the market, said Howlett, whose company represents 22 communities in the central Florida market. “Sellers are having a sense of urgency to put their homes on the market as interest rates rise higher. Buyers are seeing more opportunity, and it’s making people come to a decision. That’s a good thing.”

In Kissimmee’s 55+ gated community, Solivita, there’s still a wide assortment of homes available, ranging from $275,000$699,000. This vibrant community will eventually hold 5,000 homes, but already has enough residents to support over 250