Home Builders may be bucking the old adage to not change horses in the middle of a stream. With the ongoing uncertainty surrounding Millennials’ entry in home ownership, builders are once again courting good old Baby Boomers.
The number of 55 and older homebuyers continues to increase. These are home buyers that have homeownership experience, stable income, assets and equity in their current home. All which make it easier and advantageous to move up, or down, into their retirement home.
Baby Boomers usually make much larger down payments which make it easier for them to qualify for any mortgage financing they may need. This is good for the Builder and the lender. Having previously bought, sold and financed homes, they are more familiar with the process which minimizes problems and delays.
They know what they want and when they find it they are quick to make their decision to make the move. The biggest challenge to most Homebuilders is in producing homes in the range desired by most Baby Boomers. Ironically, this is the same range wanted by the entry level Millennials; somewhere south of $250,000.
So, Builders may find they still need to build more economical units, whether for Millennials or Baby Boomers. The difference is that the Baby Boomers may have an easier time qualifying, with more money to put down, leaving fewer affordable homes for the Millennials.
This may still help the Millennials. As the Baby Boomers buy, they will sell their existing homes. Most will be at prices above the $250K mark. Move-up buyers purchasing these homes will also be selling their homes and many of those may well be in the price range more desirable to the Millennials.
So, hopefully, one way or the other, we’ll get more affordable housing on the market for both Baby Boomers and Millennials. That may help Baby Boomers find and finance their retirement homes.
With interest rates still relatively low and more loan down payment programs, Millennials will also have a much better shot at affordable housing and their realization of the American Dream. As long as the economy cooperates!
If so, lenders need to be prepared to service past, present and future generations, as they have done in the past.