Sunday, July 22, 2007

Trends to Watch: Boomer Mobility

by Osman Parvez
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Back in April, I wrote about the Benefits of Talent and Capital, long-term factors that are helping some real estate markets, despite the national slow-down. The point was that desirable places to live have (in the past) and will continue to attract (in the future) wealthy and talented people, sometimes in the face of real estate cycles.

As 76 million Baby Boomers retire and become untethered from work and social obligations, many active and well-off people will relocate to places that offer an attractive quality of life at a relatively low cost of living. They will live, at least part of each year, in these beautiful cities and towns. Where they choose to live will have a huge impact on those communities, driving everything from real estate prices to government spending. Many seniors already have acquired retirement properties, possibly fueling the real estate bubble in places like Phoenix, Scottsdale, and much of Florida's coast (to name a few).

It's not just the big, well known markets. Many small, highly desirable cities should see an impact going forward. To point, a recent article from the Associated Press by Aaron Clark (bold emphasis is mine):

Smaller Cities Buck Housing Slump

SALEM, Ore. (AP) -- Aside from being Oregon's capital city, Salem doesn't have much to boast about. Most downtown restaurants close by 7:00 p.m. and Lefty's -- the only cool bar in town, according to local college students -- is known for its karaoke fundraisers.

But the real estate market here is buzzing. For-sale signs litter front yards and the local paper is fat with ads for homes.

The community of 150,000 or so souls is a prime example of an overlooked phenomenon in the country's overheated housing market: While demand for homes has nose-dived from Florida to California, some smaller metropolitan pockets continue to thrive.

[snip]

Experts say population growth and job growth are one reason. Local factors -- like proximity to ski slopes, mountain bike trails, or nearby cities -- are also helping some Western markets escape one of the nation's worst housing downturns in years. And most of these small-to-mid-size cities weren't a part of the original housing boom and speculation that followed, so many of them are still playing catch-up.
[snip]

Bob Seltzer, a local real estate agent, said the boom there is being fueled by an influx of retirees from rain-plagued Seattle who are looking for warmer weather.

"The economy here does not support high-paying jobs," said Seltzer. But "people can come from Seattle and buy an equivalent house for half the price."

But it's not just the Pacific Northwest that's seeing double-digit home appreciation. While some of the worst hit housing markets include cities in California, Nevada and Arizona, many of the remaining strong markets are also clustered west of the Rocky Mountains.

Fifteen out of 20 metropolitan areas with the highest rates of home appreciation in the country were in Washington, Idaho, Utah, Oregon, Colorado or New Mexico, according to the federal study, which looked at markets with at least 15,000 transactions over the last 10 years.

Between the first quarters of 2006 and 2007 homes in Salem appreciated 13.4 percent, 14.5 in Boise City-Nampa, Idaho, and 16.8 percent in Grand Junction, Colo.
[snip]
The key factors (as I see it):
1. Markets that didn't see the Bubble or are playing catch up
2. Places that are attractive to live for quality of life, offering: recreation, good weather (for those aching bones), and culture. A major airport hub and leading universities are also good
3. Resulting in real estate prices that may not be tied to the job market
4. In essence, a market driven by retirees and the mobile wealthy in general

All of those points are factors that help explain our local and regional real estate market. Meanwhile our cities keep earning awards, including Best City to Retire (Ft. Collins) and Best Affordable City to Raise a Family (Louisville), among many other accolades.

This is a long-term trend to watch. The Boomer generation covers 20 years. Stay tuned.

Image: Petteri Sulonen


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