We say rent! “Downsizing baby boomers face a key decision: Is it better to rent or to buy?”
A recent Washington Post article, Downsizing baby boomers face a key decision: Is it better to rent or to buy?, explores the decision to downsize and the current options available for both renters and buyers.
As a multifamily brokerage firm, KIG CRE believes baby boomers should rent and are renting — especially in the Chicagoland area.
Why Should We Care About the Downsizing Baby Boomer?
On a national level, between 2009 and 2015, the biggest changes in the renting population came from those aged 55 and older (up by 28 percent), compared with only a 3 percent increase in renters 34 or younger. And according to a survey by Freddie Mac, more than 5 million baby boomers are expected to rent their next home by 2020.
Between stagnate home appreciation in certain markets, the benefits of liquidity and the amenities in today’s multifamily building, renting is the better choice for baby boomers.
It’s obvious that renters have a greater liquidity than homeowners, a financial flexibility that cannot be understated in today’s economy. This is important to note because homes are not appreciating like they used to.
By analyzing data from the Joint Center for Housing Studies of Harvard University, we found that between January 2000 and December 2016, median home prices increased by only 1.1 percent in the Chicago metropolitan area. The Chicago market is an extreme, as other markets have fared much better. However, homes are not the safe bet on which people have always relied. If people are interested in seeing large investment returns, then they’re better off putting their money elsewhere.
Passing on Suburban Benefits
Some of the greatest benefits of owning a suburban home were the dividends it paid towards raising children. From being near the best schools to large yards for kids to play in to a strong community of nearby parents, these assets provide positives that are of little use to a retiree. Many may see these homes as valuable assets to their children, who will soon (if not already) be raising children of their own.
Renting: Single Family Home Vs. Apartment
We agree that a downsizing baby boomer is looking for a lifestyle change and is wanting to get away from maintaining a home. Today’s luxury apartments offer concierge services from trash pick up to package receiving to dry cleaning drop off. These service-based amenities will be crucial to winning the baby boomer tenant. And the perk of not having to handle maintenance may be the biggest selling point for this renter base. Instead of replacing a busted washer and dryer, which includes finding a new model, hiring movers and then actually installing the machinery, many renters can just log in to an online portal and request a fix from the property manager. Plus, there are community amenities that homeowners lack. These include gyms, dog runs and large community spaces.
Ultimately, boomers will have to face this decision on their own. Many factors contribute to a major life decision like buying a new home or renting. The latter could very well be a foray into an unknown market; yet the former may not provide the economic incentives it once did. Given that developers have produced communities that specifically cater to a boomer lifestyle, and that buying a home isn’t necessarily a safe investment option anymore, we say rent.