BUSINESS STRATEGY
Gray is the New ‘It’ Color Retiring Baby Boomers are having a major impact on the construction and private lending industries. by Jeffrey N. Levin
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top by a Sherwin-Williams store and you’ll see that gray is replacing beige as the go-to neutral color for interior decorating. This anecdote provides a platform for a plethora of bad puns, because the graying of the Baby Boomer population is having a major impact on the housing market. The aging of Baby Boomers presents both an important opportunity and a series of challenges for real estate developers and the companies that finance them. The pattern of retiring workers selling the big family house and relocating to condos in Arizona or Florida is shifting. Over the past several decades, the number of retirees purchasing condos 28 PRIVATE LENDER
in multi-unit housing has been declining, according to Trulia. Some retirees are opting to rent, some want to “age in place,” and still others are looking to buy even larger houses. This, coupled with debt-laden Millennials holding off on purchasing, is upending a time-honored pattern of generational purchase activity. The good news is that this new dynamic is keeping the market humming. Most Millennials and GenXers, like their parents before them, aspire to live in larger homes (excluding those folks attracted to tiny houses or hipster lofts). Their parents’ generation, however, is exhibiting an aspirational divide. While some in the over-54 category are upholding
the honored tradition of downsizing and moving to warmer climates, other Baby Boomers are just as likely to buy a bigger home, even taking out a mortgage during retirement to buy it. This behavior is now as likely as downsizing to a condo in Florida. There are still other Boomers bucking tradition and deciding to rent, even though they could afford to buy. Now other factors including the shortage of available housing stocks in certain markets are coming into play. Questions about when and where Boomers will retire—and what kind of houses they will buy—represent a complicated subject for economists making predictions on what’s in store for the housing market. Baby Boomers represent 31 percent of all homebuyers, second only to Millennials, who represent 35 percent. 53 percent of Boomers live in houses that are between 1,400 and 2,600 square feet, while a much smaller slice (12.5 percent) live in larger houses of 2,600 square feet or more, according to Trulia. Will they trade up or down in size?