Catherine Terpstra is beginning to see more baby boomers starting to downsize into smaller homes.
“We’re seeing a lot of people who are retired, and they may still want to go to a warmer climate. But because of the grandchildren, they don’t want to be gone the entire year,” said Terpstra, president of the MainStreet Organization of Realtors in suburban Chicago and a real estate agent with ReMax All Pro in the western Chicago suburb of Bloomingdale.
“They want to downsize here, be close to the family, to something they can come home to and afford to live in,” she said.
As a growing number the so-called baby boomer generation reaches or approaches retirement age, they have begun to prepare for their next steps in life by reducing – or preparing to reduce – the size of their living quarters.
Over the past four decades, the physical size of America’s homes has steadily increased. U.S. homes now check in at more than 2,700 square feet on average, or 57% larger than the average-sized American home in the late 1970s, according to a report issued this spring by online real estate search company Trulia.
Freddie Mac estimates those in the baby boomer generation now hold nearly two-thirds of all equity in single family homes in the U.S. The Census Bureau defines baby boomers as people between the ages of 53 and 71 years old in 2017.
Ready to downsize
But after decades of seemingly pushing for ever-larger homes, baby boomers now appear ready to downsize.
A survey by Trulia in February found nearly two-thirds of baby boomers who now own a house found if they were to buy a new home in the next year, it would be something smaller. A separate Trulia survey found about 40% of baby boomers told pollsters they wanted a home measuring no more than 2,000 square feet, and another 24% put the limit at 2,600 square feet.
“Boomers likely want a smaller home that’s easier and cheaper to maintain, especially if their current digs are bigger than they need.”
Ralph McLaughlin, chief economist at Trulia
Similarly, a 2016 Freddie Mac survey reported 20% of baby boomers believed downsizing in their next home purchase was “very important,” and an additional 32% said it was “somewhat important.”
Freddie Mac and Trulia said the desire for smaller dwellings by baby boomers is being driven partly by economics.
“A lot of boomers are telling us they want to age in place,” said Len Kiefer, deputy chief economist at Freddie Mac. “But it may be in a different place than they currently are.”
Kiefer said survey results indicate boomers, by and large, would prefer to remain in their current homes if possible. But they recognize their current homes may not be a good fit as they get older.
For starters, larger homes typically cost more – whether due to monthly mortgage payments, utilities or higher property taxes. They also require more time, labor and money to maintain and keep clean.
Kiefer noted Freddie Mac’s data back that assertion, as 46% of boomers surveyed by Freddie Mac indicated “affordability” was a key factor when deciding where to move, and 41% of those surveyed added the need for less home maintenance was also important.
Kiefer said boomers also recognize their current houses could require significant additional investments in terms of costly renovations to help them continue to live there as they age.
“Twenty-five percent of boomers said they will need major renovations to stay in their current homes,” Kiefer said. “And we believe that need may be underestimated.”
Rather than sinking money into aging homes, Kiefer said many boomers appear poised to relocate to smaller, more affordable and more accessible homes.
But where they choose to relocate could have effects that ripple across the U.S. housing market.
For decades, many retirees in America’s northern regions opted to head south to warmer climates in states such as Florida and Arizona. While those remain popular destinations for many retiring boomers, Kiefer said survey data doesn’t indicate warmer climates is the primary driver.
Freddie Mac’s data indicated boomers are seeking many of the same amenities as their younger counterparts, including walkable neighborhoods with park space, perhaps near a body of water, and close to retail shopping areas.
In other words, Kiefer said, retiring boomers are seeking nearly everything desired by millennials and the middle-aged adults of Generation X in a neighborhood, “with the exception of playgrounds.”
While some baby boomers are looking at condominiums and townhomes in urban settings, many simply want smaller single family homes near where they have been living or in suburban or rural communities.
Kiefer said boomers also have shown a strong desire to relocate near their families – and particularly to be near their grandchildren. This often means leaving the city or region where they live.
Terpstra, for example, said she knows of a family who recently relocated from their home in the western Chicago suburb of Glen Ellyn to smaller accommodations in Tennessee to be near their kids and grandkids.
In other cases, it might simply involve moving to a smaller house across town.
Kiefer said the effects of such trends are just starting to be felt. As boomers begin to downsize into smaller residences, many millennials are looking to buy those same homes as they enter the job buying market.
“It will make the competition for those houses tougher,” he said.
Kiefer predicted the increased competition for those small- to mid-sized houses will spur more new home construction to meet the increased demand as boomers and millennials vie for essentially the same available housing stock.
Kiefer and Terpstra noted inventories of available houses remain low, relative to historical standards.
Kiefer said he would expect to see significant movement of boomers from their existing homes to smaller residencies within the next four years.
“They’re not all moving at once,” Kiefer said. “But a lot of them are just beginning to approach retirement age, so we’re still a few years out from seeing the bulk of their population reach that point.”
Freelance writer Jonathan Bilyk contributed to the writing and research of this article.