With money comes lifestyle – and no group is in a better position than the baby boomers. As the nation s wealthiest group, they are starting to think about their plans as they approach retirement. For New York real estate – predicted to outdistance even Florida in total boomer home sales – the future could be bright.
Between cashing out of the stock market, taking advantage of capital gains tax exclusion, and the $10 trillion they will eventually inherit from the World War II generation, boomers have a lot to spend on real estate.
Second homes are where the money is going – empty nesters from the suburbs are now heading to Midtown or Union Square in lieu of quieter uptown neighborhoods, seeking to fully absorb themselves in the bustle of city life. Many are continuing to go big – buying classic 6s, 7s and 8s rather than downsizing.
They re also buying in Florida, too, of course. A full 21 percent of the 78-million strong demographic group (a third of the country) are considering moving to Florida, according to one recent study. But, unlike previous generations, most won t be riding off into the sunset and leaving New York behind. They will still have a place here.
“A second home is almost a normal thing now,” said Howard Lorber, who owns Prudential Douglas Elliman along with chief executive Dottie Herman. “I have four houses, and if you told me I d have four houses a while ago, I d have said you were crazy.”
Herman said the second home market has been growing every year for the last five years, and that growth is expected to continue. “It s been an amazing trend,” she said. Herman s company s “Manhattan to Montauk” slogan appears calibrated to target the second home crowd – suburban empty nesters buying in the city, and Manhattanites and Long Islanders looking for a second home in the Hamptons. The company is looking to boost its presence in Florida, where Lorber already owns another real estate company, Miami-based New Valley Corp.
Despite Florida s lure, a recent retirement housing forecast found that New York will have the highest total number of homes purchased by baby boomer retirees in the nation.
New York outdistanced Tampa, Phoenix and West Palm Beach, which finished second, third and fourth, respectively, in the study by John Burns Real Estate Consulting.
“Part of that is the sheer number of people that live in New York,” Burns said. “But it also shows people are staying there.”
Another study, by Neighborhood Scout, a service that helps match homebuyers with neighborhoods, found some 75 percent of current retirees, the advance guard for the boomers, actually stay near where they currently live.
In New York, some brokers in Manhattan said they are seeing the expected downsizing by boomers, the generation born between 1946 and 1964, now that the older members of group have kids that have moved away. The over-65 population in New York State is expected to increase 39 percent between 2005 and 2025, according to the census figures.
“It s the typical empty nest syndrome where they are moving from large three or four bedroom Park Avenue apartments that they have had for 15 to 20 years and where they have raised a family,” said Stephen Kotler, an executive vice president at Douglas Elliman. “They are typically downsizing to a two bedroom apartment comfortable for them, but with enough room for visiting grandchildren and guests.”
Moving to a smaller apartment is also a way to set aside money for a second home. “Some are cashing in at the current high prices and taking some of that money and putting it into a second home somewhere else,” said Sheldon Joblin, a broker at Stribling & Associates.
Others are downsizing to a one or two bedroom pied a terre for tax reasons. “It doesn t have to be their primary residence so they can take advantage of the tax structure in places like Florida,” said Joblin.
Other brokers said boomers – both those moving into the city and those already here – continue to buy big. Lisa Lippman, a vice president at Corcoran, said she is surprised by how many boomers continue to look for classic 6s, 7s and 8s and two-bedroom plus apartments.
“When I am the exclusive broker, I am amazed that maybe 25 to 30 percent of the people coming to see the large “family sized” apartment are empty nesters, not always just young families,” she said.
One fourth of home buyers aged 50 and older spends more on their new home than on their previous one, according to a national study by the National Association of Home Builders.
Empty nesters traditionally buy in doorman buildings uptown, said Joblin. But he said there recently has been a lot of interest in more active areas like Union Square.
According to Lippman, people she sees from age 50 to 65 don t want to be way up on the Upper East or West Side. “They prefer to be downtown, but also in the 50s and 60s, Central Park South, lower Fifth Avenue, and also lower Central Park West, to be near Carnegie Hall and Lincoln Center,” she said.
Convenience plays a major role in buying a new place for boomers. “In general they are looking for apartments in very full-service buildings,” said Lippman. “They want to be able to walk to work and possibly to the theater.” Otherwise, they are often on the go. “They often have another home someplace else as well, play golf, and travel a lot,” she said. Lippman expects the trend to continue “for the next 10 or 20 years.”
For empty nesters returning to the city, having money means not having to decide. Joblin said about half of his clients in the last few years have come back to the city after raising their children in the suburbs. Most lived or worked here before. “They try a one or two bedroom for a couple of years to see how they like it, while keeping their other home.,” he said. Eventually, they might sell the second home and buy a larger apartment here, said Joblin. Lippman said many boomers get rid of their New Jersey or Westchester home when they decide to by a second home in places like Florida, California, Arizona, Colorado or Wyoming or the Hamptons, while keeping the New York pad.
Kotler said there will be a surge in demand for homes on the eastern end of Long Island as boomers retire. He also said there will be a big market for people who don t want “the big house right on the beach,” but want “something that s smaller and more manageable, but still close.” He said Elliman is currently working with developers who are putting together plans for building multi-unit condo developments in the area.
The suburbs have seen a boom in senior housing as developers and municipalities prepare for the future. Kotler says developments may or may not be attractive to boomers depending on how they are marketed. “I live in New Jersey, and I see adult gated communities for 55 and over that do quite well,” he said. “I don t know that it is as appealing for someone in New York,” adding that he hasn t seen any clients selling their homes in New York and moving to adult communities in the Tri-State area. One reason is convenience. “If you live in New York, everything is here already,” he said. “You just walk out your door and you have it.” In New York, certain segments of the market have been positioned to attract boomers for quite a while, said Kotler. “It s sometimes marketed as a pied a terre, empty nester, or second home,” he said. In some marketing literature, 50-plus baby boomers are even referred to as “zoomers.”
“Sometimes real estate brokers may not be aware of what the buyer s interest is in the apartment and what they are going to use it for,” said Kotler. “It may be an even bigger part of the market than people are aware of.”
With the boomers strong refusal to slow down or accept growing old, it s unlikely they will ever be tagged or marketed to as “seniors”, even when the first boomers turn 65 years old in 2011. “They definitely don t see themselves as becoming senior citizens- they play sports, they exercise, they want to continue working,” said Lippman. “I go to a gym on the Upper West Side and it s filled with baby boomers who work less than they used to because they can and they have a lot of extra money. They are working out at 9 or 10 in the morning before going off to work and they are in great shape.”
Around 75 percent of boomers say they plan to do, or are currently doing, some kind of paid work in retirement and as many as 20 percent plan to work at least 20 hours per week after they “retire.” That s not including the work involved in taking care of their multiple homes, of course.