Millennials have tough new competition for the condominiums and apartments heating up the nation’s housing market: Mom and Dad.
Roughly 10,000 baby boomers are retiring each day, and recent data shows that half of those who plan to move will downsize when they do. Many are seeking the type of urban living that typically has been associated with young college graduates — so much so that boomers are renting apartments and buying condos at more than twice the rate of their millennial children.
“There’s not one thing I miss about my house,” said Abby Imus, 57, who recently moved with her husband into a condo in downtown Bethesda, Md., three miles and a lifetime away from the house they lived in for more than two decades. “I was so ready to leave.”
This new generation of empty nester is reshaping the recovery in real estate after the industry suffered its worst setback in half a century during the Great Recession. Boomer demand has helped fuel a surge in high-end housing that features two-bedroom units and large kitchens reminiscent of boomers’ suburban homes. That could have big implications for cash-strapped millennials, who had hoped to snag affordable studios in buildings developed to house 20-somethings.
The data suggests that boomers who are downsizing are relatively well-off. Harvard University’s Joint Center for Housing Studies found that those ages 55 and older accounted for 42 percent of the growth in renters over the past decade. In addition, the wealthiest tier of American households made up about one-third of new renters between 2011 and 2014.
“Boomers will pay a premium if you can give them exactly what they want,” said Matt Robinson, principal at MRP Realty in the District. “Something closer to what was in their house, and that pushes up the price; they’re happy to pay for it.”
Young Americans, after all, are not well-suited to compete: Many entered the job market in the middle of the recession and during the lackluster recovery. Few have had time to build wealth, and many are saddled with student-loan debt.
Analysts worry that the trend is making affordable housing more scarce at all ages — including for some boomers. Nationally, the cost of rent has made a double-digit jump since the recession and hit a record $803 a month, according to government data. At the same time, the Harvard study estimated that the number of families who pay more than half their income in rent is expected to rise 11 percent to 13.1 million over the next decade.
Jefferson Freeman, a 25-year-old researcher at a public affairs firm, said he is one of the youngest people living in his apartment building in Southeast Washington’s Navy Yard neighborhood. Over the past two years, he said, more boomers have moved in and are willing to pay the $2,400 a month that it costs to rent a two-bedroom apartment. Freeman said that he must leave if rent goes much higher.
“A lot of people my age, if prices continue going up, will probably start moving toward big group houses,” he said.
The rebound in apartment and condo buildings has played a critical role in driving the recovery of the broader real estate market. Spending on what the industry calls “multifamily” buildings rebounded in 2011 and is growing faster than expenditures on offices and hotels. Government data shows that permits to build multifamily homes jumped 21.5 percent in August from the previous year, while approvals for single-family homes rose 8.7 percent.
The numbers reflect two trends that have become intertwined since the recession. The first wave of baby boomers hit the traditional retirement age of 65 in 2011, a point at which many begin thinking about downsizing from the family home. Meanwhile, developers began capitalizing on a shift toward urban living that is revitalizing cities and transforming suburbs into hubs friendly to pedestrians and commuters — often inadvertently creating the ideal empty nest for those who can pay the price.
That’s what happened at Vita, the 31-story luxury apartment building in Northern Virginia adjacent to the Tysons Corner station on Metro’s Silver Line. Developer Bob Kettler expected that the building would attract a crowd of young professionals, so he designed it with plenty of one-bedroom units. Vita’s promotional Web site features a couple snapping a selfie and a young family catching a movie on the lawn with their toddler.
Instead, Kettler said that the strongest demand has come from baby boomers. Many are relocating from within the region and looking for a low-maintenance lifestyle in a familiar neighborhood. Often, they are still working and not yet ready to recline on the sunny beaches of Florida.
But downsizing — especially to the confines of an apartment that might be one-third the size of the family home — is often easier said than done. Kettler said that the most frequent complaint he hears is that his apartments aren’t big enough. A two-bedroom unit generally is 1,200 to 1,400 square feet and costs from $3,000 to $4,000 a month, roughly 30 percent over the local average. One couple passed on a rental because it wouldn’t fit their side-by-side Sub-Zero fridge and freezer, he said.
Kettler has learned his lesson: The next 160 units under construction at the site are larger and designed with empty nesters in mind. Just across the state line in North Bethesda, apartment complex Pike & Rose, by Federal Realty, is touting 24 penthouse units with up to three bedrooms and two communal rooms in which to practice music. The Flats and the Vio in the District, from PN Hoffman, have underground parking and concierge services.
“Our definition of success and lifestyle has really changed over the last 20 years,” said Monty Hoffman, chief executive of PN Hoffman. “It used to be a white picket fence and a lawn and so many cars in the suburbs. That’s really being replaced.”
Of course, many boomers have no plans to move — because they can’t afford to and don’t want to. Their net worth remains below the pre-recession average, and more than half would need to take out a loan to buy their next home, according to recent research by the Demand Institute. The study found that downsizers were typically wealthier and living in pricey homes that might be expensive to maintain.
Boomers are typically defined as those born between 1945 and 1964, encompassing roughly 70 million people. They were the largest demographic group in the country until this year, when millennials took the top spot, and their approach to life in retirement is still evolving, experts said. But even divided, their numbers are large enough to shape the direction of the housing market.
For Neil and Abby Imus, the moment of truth came after the last of their three children finished graduate school and got engaged.
The couple had raised their family in a Colonial on a tree-lined, one-acre lot in Bethesda. But their kids were starting families of their own and it was not likely that they would return to the homestead. Keeping up the yard was becoming a hassle. No one used the two bathrooms upstairs. They didn’t need a living room and a study. And a finished basement. And a separate dining room.
So they sold the house a year ago, and this summer moved into a condo in the heart of downtown Bethesda.
On a recent afternoon, the last rays of sunlight streamed through the floor-to-ceiling windows while their grandson raced around their living room. Their son, Steve, and his wife had brought over wine and spaghetti for dinner.
Steve had briefly mourned the loss of the house in which he grew up, particularly the fate of the philosophy books he had left there.
But Neil Imus was clear: There is no going back.
“Forever,” he said when asked how long he planned to live in his new home. “We don’t have any plans to move.”