Written by NJ.com Friday, 05 February 2010 08:25
 Baby Boomers have largely shaped the real estate market for the past few decades.
They created demand for three-car garages, amenities such as outdoor kitchens and pools, and McMansions.
But who will buy their houses when they’re gone? Their children? Maybe, but that group might not have the wherewithal to handle the mortgages.
Still, the age of homebuyers in New Jersey is skewing younger. In 2003, the median age of a New Jersey homebuyer was 40, according to the New Jersey Association of Realtors. At the end of last year, it had dropped to 38.
Sherry Chris, the chief executive of real estate franchise Better Homes and Gardens Real Estate, thinks boomers are going to be replaced by their younger counterparts. She spoke recently with Your Business about how boomers are faring in the post-recession.
Q. Now that the recession is officially over, how are homeowners reacting — Baby Boomers in specific?
A. Current economic conditions have slowed the real estate market in general. But if we look at the Baby Boomer population overall, it’s about 78 million Americans who have been driving the economy and have really been driving the real estate market for the last 30 years.
Their needs are different than they were in early years. They were buying their first home, their second home. They were buying homes for their children. Now, they are starting to slow. When we look at the new demographic of buyers and sellers and consumers in general, we call them echo boomers — 18 to 34 year-olds. That’s the group that is going to be driving real estate in the future. As for Baby Boomers, they are more concerned about their net worth, their retirement plans and how the recession itself is affecting their plans. So, it’s all muddled together.
Q. What are boomers doing now that the value of their homes has been hurt by the recession?
A. Baby Boomers are investing in their homes now. Think about this: in some cases their children are moving back in with them because of the recession. So they’re remodeling and redesigning. And, maybe, in some cases, they’re looking to cut costs by purchasing smaller homes.
Q. How will aging boomers affect luxury real estate?
A. The aging New Jersey Baby Boomer living in a luxury home is not selling unless they are in financial distress. They will wait a few years for the market to improve. Conversely, aging New Jersey boomers will likely not purchase luxury real estate, either.
Their investment portfolios have probably been affected and they likely prefer to focus on securing their retirement. That said, there are luxury homes for sale all over New Jersey and that market will belong to the echo boomer, who is younger and has a more long-term financial horizon.
Q. New Jersey has a bout 4 percent of the prime “jumbo” borrowers in the nation. What is going to happen to towns like Franklin Lakes and the rest of affluent Bergen County as they start selling?
A. Clearly, homes in New Jersey command a premium price and represent a lot of jumbo mortgages. According to the New Jersey Association of Realtors, the median price of a New Jersey home in 2009 was $320,000, compared with $185,000 nationwide.
I think those jumbo mortgages will be assumed by the rising numbers of echo boomer homebuyers and affluent areas of New Jersey will likely remain attractive because of their proximity to Manhattan and other major metropolitan areas.
Q. So, what is going to happen to McMansions?
A. Real estate is cyclical, so it is imprudent to make a final determination on a whole segment of home styles. But I will say that the National Association of Home Builders reports that 2008 saw the single largest drop in median square-foot size of homes in the U.S. in 12 years.
So we are in a cycle of people doing more with less and that includes home sizes. I can’t predict when the economy will turn up, but when it does, I suspect it will buoy home sales in all segments, including large homes.
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