The recovery of the housing market is now starting to influence the decisions of many retirees. And these decisions could have wide reaching effects on local real estate markets across the country.
I’ve been in Oregon for the last week, visiting my parents and throwing them a retirement party. They live in Oregon wine country, where rolling hills covered in grape vines make the landscape look quite similar to northern California.
This is just one of the reasons that some Californians make the northern migration to Oregon. Another – perhaps more compelling reason – is because your dollars go a lot further in Oregon than California.
Home prices in places like Portland are considerably less than big cities in California. For comparison sake – the average home in Portland sells for around $300,000, compared with $1 million in San Fran.
Now, Portland is no San Francisco. But smaller “discounts” can also be found in small cities and towns in both states – your dollars simply go further in the north.
This allows Californians to sell their homes, move to a comparable home in Oregon at a decent discount. The extra cash from the sale of their home can then be used to help fund retirement.
The house next door to my parents just sold to a California couple. They bought the 10 year old, 2,538 SF home for $340,000. The attractive ranch home was a real steal – it cost +$450,000 to build, excluding the building lot.
The Oregonians call it “The California Retirement Plan.”
Now, this trend isn’t new. It’s this type of migration – from high cost-of-living areas to low, as well as from stagnant growth areas to booming growth areas – that presents one of the biggest and most overlooked opportunities in the investment world.
More people retire every day. According to the Pew Research Center, over 10,000 baby boomers retire each day – and at least that many will retire EVERY day for the next 16 years.
That means we’ll continue to see the great migration of the baby boomers. Recently retired people will sell their homes in places with a high cost of living, and move to smaller cities where the cost of living is considerably less.
This trend will likely benefit desirable but more affordable places like Sun Valley, Idaho; Madison, Wisconsin; Charlottesville, Virginia; Saratoga Springs, New York; and Portland, Oregon.
In big cities where there is a vibrant and growing economy, the exodus of the baby boomers will have little impact on the real estate market. For example, high tech millionaires who are paying cash are buying the homes of baby boomers who are leaving San Francisco.
Meanwhile, slower growth cities will also see an exodus of the baby boomers. Those cities where there aren’t thousands of new millionaires each year may see their real estate markets suffer when boomers pull up their tents for greener pastures.
How is your local real estate market being affected by the baby boomers? Are you a baby boomer who has relocated or is planning to relocate in the next few years? If so, I would love to hear about your decision. Send me an email at [email protected] to tell me your story.
With home prices so crucial to the wealth of many Americans, I’ll continue to regularly check in and discuss the latest in real estate in Income & Prosperity.