The world is rapidly embracing the leasing model. It applies to cars – think Zipcar, Uber, etc. – to airplanes, and to homes. I recently discussed buying versus leasing a car, and buying versus leasing a home that applied mainly to Millennials. But what about that same decision regarding one’s home for my generation, the Baby Boomers?
We were the lucky demographic, where home ownership was both relatively easy to achieve – thanks to long-term, low-cost, and accessible mortgage financing – but for most Baby Boomers, home ownership was also generally a profitable investment. So much so that many of us got enthralled with home ownership and opted for a second home. There are even tax incentives with mortgage interest deductions to incentivize owning that second dream home, so many took advantage of that.
But life changes and the world changes, and the costs of home(s) and the convenience of them has made Baby Boomers reconsider leasing versus purchasing their nests.
For almost all segments of the population, renting a home as opposed to owning has increased in popularity. Based on research from the Joint Center for Housing Studies of Harvard University, from 2005 through 2015 the aging Baby Boomer demographic showed the greatest increase in rental demand growth. Many reasons explain the growing popularity of renting among that demographic. For one, the fear of outliving their retirement funds weighs heavily on the minds of adults as they age. And for many individuals, their biggest asset is their home.
Quite frankly, many Baby Boomers just like to have fun. Currently, that demographic is approximately 50-70 years old. (Remember that 60 is the new 40!) All downsizings are not purely for financial considerations. In fact, many individuals have shared with me that downsizing does not necessarily save them money. More downsizings are about simplifying – cutting down time and hassle – as well as making it easier to lock the door, leave for fun events, and travel with children and grandchildren.
One of the biggest challenges I hear about in downsizing is parting with all the material things that there is no longer room for. That’s a real dilemma. The kids certainly don’t want them. Shocking that those youngsters don’t want great-great-grandpa’s shaving mug, huh?
Many Baby Boomers just want to have fun while they can, recognizing that they might not live too much past 100. It’s a new world.
The two-story homes with acre lawns and three-car garages are no longer the dream. Many Baby Boomers want simplicity, conveniences, and friends nearby. There are more than 1,400 active retirement communities nationwide, and Texas alone has 44. The website www.55places.com is a great resource for those looking to join such a community, most of which offer both purchasing and leasing options. The range of activities offered runs from music lessons to polo, line dancing, camping, digital photography, archery, debate, classic cars, and more. Maybe 60 is the new 20?
Should Baby Boomers consider leasing versus buying? Absolutely. Property taxes are a problem in home ownership. If you are going to buy, consider purchasing in a county with a homestead exemption that includes controlled escalation in your later years. Some retirees even consider buying in states where their grandchildren can get in-state tuition or at least weekend meals at grandma’s. If you want to buy, seriously consider long-term mobility issues, such as homes without stairs, and remodeling costs for site and mobility retrofits. Community interaction, enjoyment, safety, and emergency service accessibility are also important factors in determining the right neighborhood for aging buyers.
It is no wonder that leasing is becoming more popular, because it is more flexible as your life changes. Always consider your tax implications and the reputation of any landlords and certainly rent escalation clauses. Enjoy your Baby Boomer years, and don’t forget to wear a helmet on your Harley.