Condominium Hotels: Baby Boomer’s New Retirement Option

Despite national reports citing the housing frenzy approaching a freeze, there is a growing demographic that will continue to heat up the market: Baby Boomers. As they pursue their search for the ideal vacation or retirement residence, analysts suspect that this capital-rich group of retirees will keep the market momentum steadily.

Historical components from the past 50 years helped shape the Baby Boomer’s profile. Absorbing the examples of their parents, who experienced the economic constriction of the Depression and the rationing of World War II, boomers have traditionally been conservative spenders. Buying real estate, selling property, and selling houses during the time boomers had children in the late 1960s and early 1970s was not common. Everything changed with the hot economy of the mid-1990s. Riding the wave of the booming economy, conservative spenders soon became savvy investors. Although the stock market burned down with the dot-com crash in the late 1990s, low interest rates coupled with amended tax laws fueled the housing boom of the early 2000s. With kids out of college and into retirement on the horizon, boomers redirected their investment in real estate.

New research indicates that the number of second homes purchased between 2000 and 2004 has nearly doubled. Home values ​​also doubled, and the median home increased 55% during these 4 years. Keunwon Chung, a statistical economist at the National Association of Realtors, says that Baby Boomers, especially those with above-average incomes, are primarily driving the second-home market. Chung cites one of the reasons these boomers are buying houses is to diversify their financial portfolio. Another reason is to position yourself for your golden years. Tax-friendly retirement states like Florida, Arizona and Nevada have already seen explosive growth in both construction and home appreciation. Florida saw a 25% increase in home prices last year, with one in five of those homes purchased as a second home or investment property. Nevada home prices increased 17%, and a comparable rate was purchased as investment property. The US Census Bureau expects this rate to continue steadily and predicts that Baby Boomers’ second home purchases will reach 6.4 million units by 2010.

Most Baby Boomers seek luxury when buying their second home. According to a Coldwell Banker survey, the Boomer generation “… wants luxurious homes and wants to stay active.” Neil Howe, author and expert on generational theory, confirms this by stating: “Boomers want to live somewhere where they can be active. They want to be close to cultural and spiritual centers that keep them connected to community and culture.” And this generation can afford their wishes. From accumulating wealth through the stock market, home equity and inheritance, along with the purchasing power of working through retirement years, boomers have more money than any previous generation of retirees. Studies from Harvard, NAR and NAHB agree that Boomers will likely use their cash resources and home equity to purchase multiple residences that focus on a prime location and amenities. While condos traditionally met this requirement, a growing number of boomers are now turning to condo hotels, condotels, and other resort-style residential options.

Condo hotels appeal to Boomers because they market luxury and location, the two main ideals these Boomers seek to maintain their dynamic lifestyle. “Why buy a condo in the city that sits empty for ¾ of a year when they can own a condo, have five-star services available, be located in the center of a superior vacation destination, and receive rental income? ” says Steven Roszell, owner of CondoHotels.com and HotelsForSale.com. Condo rentals, provided by the hotel management company when the condo is vacant, is another major draw of condo hotels for Boomers. Bob Waun of vacation-finance.com says that while Boomers want a resort lifestyle and luxurious amenities, not all Boomers can afford it. Says Waun: “Less than 20 million (26.5%) of US Boomers will be wealthy enough to afford a second fully owned home with no rental income.” But because of the rental potential, condo hotels offer “subsidized luxury that will be a growing choice among postwar connoisseurs.” Waun also believes that the high demand for the Boomers will motivate the condo market. Quote, “If only 1% of this generation demand a condo hotel as a second home option, 1.45 million units will be needed. That is 96,000 condos. [hotel units] per year, every year … “for the next fifteen years the Boomers will retire. Considering that the United States currently has only a handful of markets for condo hotel complexes, demand is likely to outpace supply.

78 million American Baby Boomers who retire over the next 15 years will undoubtedly have an impact on the housing market. With the biggest of the Boomers turning 60 this year, realtors are reading to suit their demand. “We will see big market cycles in the condo market,” says Roszell, “and CondoHotels.com is ready for it.” Although explosive appreciation and development are not anticipated, analysts agree that boomers will help maintain a buoyant housing market.