Home buyers and real estate agents across the country should prepare for an influx in large-scale home listings over the next few years as baby boomers age out of their dream castles. During the economic booms of the 90s and 2010s, many baby boomers took advantage of low rates and access to extensive lines of credit and loans to purchase their dream four, five, and six-bedroom homes. Now those homes are sitting vacant on the market with no signs of movement.
The McMansion Boom
During the 90s the economy was booming. Credit was handed out like candy, and many wealthy professionals went to warm weather climates like Florida, Texas, and Arizona to purchase their dream homes. Developers took advantage of the boom too, constructing hundreds of four to six-bedroom behemoths of eaves and windows critics have called ‘McMansions.’ The houses cost anywhere from a half million to multiple millions but are now sitting heavy on the market.
North Carolina’s Buncombe County real estate market has more than 34 homes priced at or above $2 million but only 16 percent of houses in that price range sold in the past year according to Premier Sotheby’s International Realty agent Marilyn Wright. Wright works with the Asheville, North Carolina Sotheby’s office, a destination for many of the high-end homes purchased in the housing booms.
Another warm-weather destination Scottsdale Arizona has more than 300 homes on the market with price tags above $3 million. According to Real Estate Pros, high-end homes built before 2012 have seen price decreases up to 50% since the original listing. The inventory is inspected to increase as more baby boomers move to smaller homes. Baby boomers currently own 32 million homes across the country.
The price drops are cutting into many baby boomers’ biggest assets. According to data from real estate resource Trulia, the prices of McMansions (categorized as homes with 3 to 5,000 feet) have dropped from a median price of $598,000 in 2007 to just $485,000 this past year. Many sprawling estates were foreclosed on during the housing crisis of the late 2000s, but as many other markets have recovered and accelerated, many of the so-called McMansions have been left vacant.
The New Home Buyer
Unfortunately for baby boomers, the McMansion doesn’t appeal to the new home buyer. The modern home buyer is looking for fewer expenses, smaller homes, and more manageable properties. They don’t want to deal with the maintenance and cost associated with large estates, and the McMansion doesn’t appeal like it used to. The price ranges of these 90s dream homes are far outside what the modern consumer is looking for or can afford.
Realtor.com ran a survey of over 1,000 home buyers who plan to purchase over the next 12 months. Almost half of those surveyed were looking for homes priced below $200,000, which have seen the most significant declines in inventory of the past few years. Only 6 percent of those surveyed were looking for homes at or above $750,000, the segment which has seen the most substantial growth in inventory.
Most of the new homebuying generation don’t have the buying power that the previous generation had. Millennials have higher debts, lower-paying jobs, and less savings than their parents did, which makes a million-dollar home a laughable prospect.
It’s an altruistic movement on top of a financial one. Many millennial homeowners are going in the opposite direction of their parents as seen in the low inventory on small footprint houses and the proliferation of the tiny living movement. Millennials are seeking low footprint homes with smaller environmental impact and lower costs all around. What was once seen as luxury is now seen as gimmicky and wasteful.
To top it all off, many new home buyers laugh at the gaudy architecture and sprawling footprint of McMansions instead of seeing them as palaces as baby boomers did. Whole websites and blogs are dedicated to pointing out their architectural deficiencies or odd planning choices which most new homebuyers find aesthetically unappealing.
Plenty of Inventory, No Movement
Large houses that flew off the market during the 80s and 90s seemed like an excellent investment for baby boomers flush with cash, but the new home buyer doesn’t want the costs, maintenance, and gaudiness that comes with the McMansions. If you’re looking to grab a warm-weather palace now is the time to make your move with prices at all-time lows and inventory at all-time highs. If you’re a real estate professional looking to move the massive five- and six-bedroom estates of the previous generation, you need to hope for a drastic change in the market.