The real estate market has benefitted from the Baby Boomer generation since their births caused the great housing boom after World War Two. As they've grown up and had families, they've been the largest economic catalyst in the modern era, with their luxury home, vacation home, and investment property purchases spurring the most recent boom. Experts have been predicting since well before the boom that the housing market would begin to pick up a trend of ranch homes, and first floor master bedroom homes, townhomes, and condos. With the first "official" baby boomers reaching the "senior" age range (62) this year, the purchase preferences of these buyers is more forward looking than ever. Empty nesters are often looking to move on from their 2 story home to downsize into something that gives them everything they want in terms of upgrades and ammentities, but with more lifestyle flexibility.
Now that the boom of housing has moved to what everyone hopes is the trench of it's decline, let's take a look at what many expect will be the economic engine of real estate's recovery: The 1st Floor Master Bedroom Home and Townhome [FFMH & FFMT]. By comparing the inventory level of these properties, with those of non-1st floor master properties [NFFH & NFFT], we'll be able to see if the trend is emerging, or if the experts' predictions are wrong. For the purpose of this analysis, we'll be examining the Tri-City area: St. Charles, Geneva, and Batavia, Illinois.
Looking at Figure 1, below, inventory levels and sale levels for NFFT's, with FFMT's below them. We can clearly see that at the present moment, the experts' predictions are not yet materialized. Townhomes are seen as more a promising housing sector for baby boomers, with the appeal of reduced maintenance, and lower expense during retirement years. Here, however, the number of homes on the market exceeds the prior six months of sales and contract activity by almost 5 to 1 for 1st Floor Master Bedroom Townhouses. Meanwhile, the general marketplace for townhomes over $300,000 is only a 4 to 1 balance between supply and demand. 1st Floor Master Bedroom Townhomes are presently demanded less than conventional townhomes that have 2 stories, with a master bedroom up at least 1 flight of stairs. We have seen townhomes inventory overall in check, but the over-$300,000 price range is clearly still in a strong buyers market.
Figure 1
On the other side of the coin, in Detached Homes, the entire market has been far from in-check during the market's decline. As seen below, in Figure 2, the FFMH and NFFH markets are at 4 to 1 and 3 to 1 ratios of inventory to demand. With a gross 798 actively for-sale homes of the NFFH variety, and 166 with first floor masters, buyers are in the drivers seat of the entire detached home marketplace.
Figure 2
Why is this the case? Are the experts wrong? I believe it is less to do with the preferences of baby boomers, as it is the effect that the housing market has had on their ability to execute purchases of homes that meet their evolving needs. Given the challenge they face in selling their existing homes, this trend is going to continue to lay in waiting for the boomer buying boom to come.
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