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Wednesday, November 17, 2010

Boomers dealing with the new reality.

From IconoCulture comes this report about things impacting the older generation – the so-called boomers and matures. Iconoculture is a consumer data collection and reporting company. You can sign up to receive their weekly posts about what's happening in teh world of consumers at http://www.iconoculture.com/ .

WHAT'S HAPPENING

According to figures from the U.S. government, personal incomes declined significantly in September 2010. Personal income dropped by $16 billion, and disposable income fell even more — a whopping $20 billion. That led to unexpectedly weak consumer spending during the same period (WalletPop.com, 1 November 2010).

With incomes flat or falling, continuing unemployment and the depressed housing market, the outlook for consumers going into the holiday season is not a happy one.


WHAT THIS MEANS TO BUSINESS

Consumer spending is the main engine of growth in the U.S. economy. As long as that stays depressed, recovery will be slow and painful.

Americans seem to be retrenching in deeper thrift mode as the economy sputters.

The following remarks added by this author –

WHAT THIS MEANS TO REAL ESTATE

The bottom line from all this is that the much anticipated and bally-hooed great Boomer migration just isn’t going to happen. Boomers were supposed to be buying retirement hoes by now, but most are stuck in underwater homes that they can’t sell, much less consider buying anything else. Many Boomers were in the older groups that got laid off and found that they were now too old or over qualified for the jobs in this new economy.

Lots of Boomers burned through their savings, savings that had been ear-marked for those retirement homes or they used it to pay for their kids colleges. Now they are broke and stuck where they are, unable to find jobs that pay at the high levels of their last, pre-bust employment. In any event, they are now adjusting to the new reality of the situation of the economy and the country. That is not an easy or pretty adjustment for most. The “me” generation is not used to sacrifice or having to make the tough economic decision that current conditions demand.

One thing that this has meant to real estate is that many Boomers have delayed any plans for their retirement homes. They have not listed their McMansions because they can’t afford the losses involved. But they are tapped out and can’t afford to purchase a second property that might have been their retirement home. They are frozen in place and likely to stay in that state for some time.

So, what are we as Realtors to do to help with all of this? Well, we definitely need to do a lot of educating. Many Boomers are still in the denial phase of dealing with how things have changed and we need to help them get past that stage and accept the new reality. Then we need to help them plan for how they can get on with retirement, albeit a much different retirement than they may have initially envisioned.

Boomers need to understand that they will likely take a loss (maybe mostly a paper loss, but still a tough thing for these folks to deal with) on the sale of their current home, but that they may make some of that back on the purchase of a retirement home. A lot depends on the “from-to” locations involved. One cannot sell in the deeply depressed Las Vegas market and expect to get whole by buying in the still relatively hot South Carolina Market. Adjustments to locations and well as expectations may need to be made.

Fortunately most retirees are at least trying to downsize somewhat. We may have to recommend that they go further down the size and amenity ladder than most had in mind. A smaller, upscale condo, with a view of the ocean may have to take the place of the ocean-front luxury condo that they had in mind. Or perhaps a smaller, 2 bedroom home within walking distance to downtown may replace the grander 3-4 bedroom retirement home with guest space for the extended family.

However we finally agree upon the level of sacrifice required by the new circumstances of our clients, we can help and we should. Retirement plans delayed do not have to become retirement plans abandoned; they just need to be adjusted and refined and a good agent needs to help their Boomer clients find happiness in their new downsized reality. Maybe that could become the catch-phrase – Downsized Realty for the new Downsized Reality.

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