The Wealth Effect

Why Today's Home Buyers Have So Much Money

By John Burns

November 12, 2003 (All day)

Today's home buyers have more wealth and income than any generation before them. Where is all the money coming from? Here are 8 significant reasons why so many of today's home buyers have so much money.

1. There are more double-income households than ever. Look at the surge in employment growth from 1976-1985, when more women than ever entered the workforce. Many of these women are now high-paid managers and business owners.

2. Workers make far more money than their parents because they went to college. Today, 27% of the population over 25 years old graduated from college in comparison to only 8% 40 years ago.

3. Today's workers have fewer dependents. The Early Baby Boomers averaged 2.0 kids per woman, while the average was 3.0 kids just 20 years earlier.

4. Households love to borrow. The average household has $6,600 in consumer credit - 10 times more in today's dollars than the average household 35 years ago. While high debt is a problem for lower-income households, it is generally not a problem for homeowners.

5. Current homeowners have made a lot of money on their home. The median home price has increased nine times in the last 35 years.

6. Current homeowners have also made a lot of money in the stock market. Look at the inflation-adjusted stock market returns since 1985.

7. Older homeowners have retirement nest eggs, thanks to the 401(k) laws of the 1980s and the excellent stock market returns. The average retirement savings per household, in current dollars, has more than doubled in the last 25 years.

8. Today's homeowners are healthier and more active than the generation before them, and they are working longer. Since the first Baby Boomer was born, life expectancy has increased 10 years.

More information on these topics is available in John Burns' Retirement Housing Boom Report.

John Burns publishes three free Building Market Intelligence e-mails each month: U.S., Local and Strategic. He helps real estate executives develop and execute strategic plans, conduct market research and maximize profitability.