Millennials, Baby Boomers and Real Estate

Every once in a while I see an article or bit of information I really want to share with you.  An article by Melissa Dittmann Tracey fits that slot. The article is entitled “Generation Showdown,” and was published in the May 2016 issue of Real Estate, a monthly magazine produced by the California Association of Realtors (CAR).

Ms. Tracey provides an insightful projection of future real estate activities of two generations called Millennials and Baby Boomers.  The symbiotic relationship of these two generations may well have a long-lasting effect on residential real estate markets.

The Millennials, that generation in their 20s and 30s, have not as yet followed suit with generations before it.  Due to various factors, they have not formed families and purchased homes in the same places in their chronological age cycle as generations before them.

Baby Boomers, although reaching a point in their life cycle which has previously signaled a curtailment of real estate transactions, are poised to be a driving force for yet another few decades.

Using the Reverse Mortgage as a Tool

As an adjunct to Ms. Tracey’s article, I would like to focus your attention on the Reverse Mortgage as a tool to allow Baby Boomers to accomplish critical long-term financial and housing objectives.  Ms. Tracey made no reference to Reverse Mortgages in her article, however I see two applications that can be very beneficial for Millennials, as well as Baby Boomers. The first is use of equity to help family members with the down payment for their own home acquisition. And second, to allow the sale of the old homestead and then to provide the remaining funds to acquire the optimal home.

Ms. Tracey states that “…CAR surveys show the majority (Baby Boomers) are concerned about their children’s ability to become homeowners.”  Since 75% of Baby Boomers own their own homes, and of those 92% have equity in their homes, the numbers speak for themselves. Relatives, Millennials or otherwise, can be helped when Baby Boomers refinance with a Reverse Mortgage to provide needed capital for down payments. Thus the link between Baby Boomers and Millennials.

A few years back, I saw the results of a CAR survey that alleged that 86% of Baby Boomers were going to stay where they are.  I think the Baby Boomers believed they had no choice but to stay where they were at. Even today, I think most believe they must remain in that residence which would not be their first choice.

My experience reveals, most certainly, that a significant number of Baby Boomers are living in homes that are not optimal.

In so many cases, seniors live in homes where they raised their children.

That house may be 30 years old or older. It is often too tall, too old or too big for the aged owners.

Baby Boomers are a social bunch.  They want to be where the action is. They want to be near other family members.  They want to live near the best medical facilities. And they want to be where recreation will help occupy their time.

More and more seniors are learning they can sell that old place and move into a home that fits their needs.  

Two steps are necessary: sell the old place, then buy the optimal home using some or all of the proceeds as a down payment for the new place.  A Reverse Mortgage can cover the difference between purchase price and down payment.

This is slick.  

No monthly mortgage payment.  

Depending on the circumstance, a senior can buy up in value or buy down.  If a larger home is needed to include the children and grandchildren, a Reverse Mortgage can be used to purchase a bigger home.  Or if they want to downsize, seniors can purchase a smaller residence, using less of the proceeds of the sale from the old house. I believe this is the best-held secret regarding Reverse Mortgages; using it to finance a more optimal residence for seniors.

A refinance alone can be “just what the doctor ordered.” 

When their homes are not owned outright, Baby Boomers can eliminate the monthly mortgage payment, providing an even greater tool for their own financial well being.  Be sure to consider that financing or refinancing a home, from a Baby Boomer perspective, may only be possible with a Reverse Mortgage, because a forward loan may not be available without cash flow or an income stream sufficient to justify the forward loan.  This feature is not an issue with Reverse Mortgages, as long as it is determined that the borrower is capable of paying property taxes, homeowner association dues and property maintenance, and insurance.

Wisdom comes from knowledge.  It is my intent to educate Baby Boomers about how a Reverse Mortgage may be their best tool to deal with future financial and housing problems.  Call me today with your questions. Let’s strategize the optimal plan for you.


(909) 273-5556 / (760) 407-6740

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