Real Estate Success

In the 1980s baby boomers didn’t save money. Instead, they bought expensive items, such as luxury cars, and took extravagant long-distance vacations. But for the last decade, because of consumer satiation and the responsibilities of raising a family, these couples are starting to play it more carefully. They’re investing–rather than just spending–their income. And one logical step, is to invest in a second home.

Households that are headed by someone who’s between the ages of 45 and 54 own the largest share of vacation homes (households that are headed by someone between the ages of 55 and 64 years of age own the second-largest share). This suggests that the baby-boom generation is just entering the prime years for ownership.

Nationwide, 22.8 million households that don’t own recreational property say that there’s some likelihood they’ll purchase such property in the next 10 years, and 13.5 million of those households indicate that there’s “a 50-50 chance or better” that they’ll buy recreational property in the 1990s.

The recession in 1973 and 1974 was a harbinger of the upsurge in the primary house market during the late 1970s. That was the result of baby boomers going from one life stage to another, buying their first home. The recession of 1982 and 1983 preceded the surge in demand for upscale housing in the late 1980s, as baby boomers traded up.

When the boom hits, market within 100 miles or so of a major urban area are likely to be the biggest beneficiaries. Middle-aged baby boomers with children aren’t interested in long trips anymore, even when the trips are taken in Volvo station wagons and BMWs.

For Washingtonians with a thirst for waterfront property, the Eastern Shore, the Atlantic coast, or Virginia’s Tidewater region and Northern Neck are likely places for investment. But circumstances other than the sluggish economy may make waterfront property scarce in the future.

Those in search of countryside will look to the west of Washington, to places such as Paw Paw, Shepherdstown, and Charles Town, West Virginia; Leesburg, Virginia; and Towns along the Potomac in Western Maryland. Bucolic Retreats in Nearby Pennsylvania are also likely to attract Washingtonians looking for proximate weekend getaways.

Markets to the west of Washington are benefiting from the scarcity of waterfront properties and the traffic congestion on highways that lead to waterfront resorts.

Many of the baby boomers are buying second homes in anticipation of retirement. Some of them are financing their second homes by borrowing against or cashing in securities and taking out five-year balloon mortgages. Such buyers plan to sell their principal homes someday and use the proceeds to pay off the mortgages on their country homes–thus retiring without debt. This type of money management is likely to have a large appeal in these uncertain economic times.

Now is definitely the time to buy. So, you can still beat the crowds into the second-home market–before the baby boomers’ boom hits.

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