August 12th, 2008
For many retiring Baby Boomers and some of their parents, there's no place like a second home.
For Baby Boomers some of their parents, there's no place like a second home. In fact, one of the hottest segments in real estate is second-home development, in which well-appointed occasional-use or vacation residences typically sell for $300,000 to $1,000,000.
Based on our estimate of more than 6 million second homes in this country, spending on these residences exceeds $19 billion a year (a 46 percent increase from 1995). And that total doesn't include the initial costs of buying and furnishing the home. Over the next decade or so, because many Baby Boomers (now 39 to 57 years old) will enter the prime life stage for buying a second home, the high growth rate in spending on such real estate should continue.
The growth rate of second-home buying is now about 5 percent per year, up from less than 2 percent per year in the 1990s. The increase is nearly keeping pace with the Boomer-driven growth in households headed by 55- to 64-year-olds, the age cohort most likely to purchase such a residence. Most second-home buyers today are high-income, high-asset, middle-age or older couples, who have children nearing adulthood or have no children living at home.
Information from the BLS surveys has enabled us to paint a portrait of second-home owners as middle-aged or older people who have an income of more than $80,000 a year and are college graduates. An average of 55 years old, Baby Boomer second-home owners are a little older than all homeowners, who are 52 years old, on average. About half are 45 to 64 years old and about another quarter are 65 or older. Very few second-home owners are under 35, and only about 9 percent are 75 or older.
Despite the expense of two homes, these second-home owners are about 5 percent less likely than people who own one residence to have a mortgage on their primary dwelling. More than half (51 percent) of second-home owners graduated from college, compared with a third (34 percent) of single-home owners. One in five second-home owners (17 percent) earned an advanced degree. It should therefore come as no surprise that they are strong earners: Their annual income averages $83,600, versus less than $43,800 a year for those who own just one home.
The higher income is all the more remarkable, because 24 percent of second-home owners are retired, compared with 18 percent of those with one home. About 62 percent of second-home owners are salaried employees, compared with 66 percent of other householders.
Second-home owners spend far above average on hiring someone to care for their properties. People with two homes spend, on average, five times as much as those with one home on, among other things, lawn care, home security, pest control and housecleaning.
Perhaps the biggest surprise was how much money people with more than one home contribute to churches, charities and educational groups: four times the average. This is partly because many of them are in the age range and income bracket where contributions are the largest. But even after accounting for that, owners of multiple homes seem to be uncommonly generous.
The Baby Boomer Generation is realizing the advantages of owning a second home!
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