Changewave Research: Baby Boomer Homes & Communities Benchmark Survey

ChangeWave Research: Baby Boomer Homes & Communities Benchmark Survey

ChangeWave Research Report:

Baby Boomer Homes and Communities BenchmarkSurvey

The LatestTrends in Home Buying, Downsizing and 2nd Homes

Overview

As the first wave of Baby Boomers hits 60, we aretaking an in-depth look at emerging trends and buying habits among this exceptionally important demographic. Between July18–24, we surveyed 2,466 Alliance members, age 42 and older, to learn more about their home buying habits – includingtrends in home downsizing and 2nd residences.

Bottom Line:While the vast majority of current home owners live in single family houses (90%), better than one-in-four respondents say they’ll downsize in the future.As expected, respondents over 60 are most likely to have already downsized.

Among those planning to downsize, the consensus estimate for when is 6.6 years – a trend that bodes well long term for both the Townhouse and Condominium markets.

Focusing on 2nd residences, one-in-four Alliance respondents currently owns a 2nd home, while another 28% plan on buying one in the future. Not surprisingly, the top two locations in the U.S. for 2nd homes currently are California and Florida.

But when we look at differences between current 2nd home locations and planned future 2nd home locations, a far different picture emerges – with North Carolina (+4), South Carolina (+4) and New Mexico (+3) showing the greatest positive growth momentum.

States with Growth Momentum in 2nd Home Market

State / Location
of Current
2nd Homes / Location
of Planned Future
2nd Homes / Change
Score
North Carolina / 4% / 8% / +4
South Carolina / 1% / 5% / +4
New Mexico / 0% / 3% / +3
Colorado / 4% / 6% / +2
Arizona / 2% / 4% / +2
Utah / 1% / 3% / +2

On the downside, New York (-3), California (-2), Illinois (-2) and Maine (-2) have the least growth momentum in 2nd homes. We note that Floridahas also dropped 1-pt in 2nd home growth momentum (from 14% of current 2nd homes to 13% of future 2nd homes).

Trends in Sales of 2nd Homes. While 47% of 2nd home owners currently have no plans to sell, the consensus estimate among the 43% who do have plans to sell is 6.5 years.

We also focused on the impact of rising home insurance rates, and found that respondents owning 2nd homes in Florida are more than three times More Likely to sell their 2nd homes because of high insurance rates. Clearly,the severe hurricane seasons of recent years – which have led to skyrocketing home insurance rates – have had a negative impact on the Florida 2nd home market.

Additional Key findings:

(A) Other Primary Residence Trends

Single Family vs. Townhouse vs. Condo Ownership. While the vast majority of current home owners live in single family homes (90%), another 3% own townhouses and 5% own condominiums. We note that respondents more than 60 years of age are slightly more likely to own a townhouse or a condo.

Boomer Plans to Downsize. More than a quarter of total respondents (27%) plan to downsize their primary residence, while another 4% say they’ve recently downsized.

Note that a higher percentage of respondents more than 60 years old (7%) have recently downsized their residence – in line with the finding that this group is more likely to own a townhouse or a condo as their primary residence.

Timeframe for Downsizing. Among respondents planning to downsize, the consensus estimate for when they plan to scale back is 6.6 years.

Timeframe for Downsizing Primary Residence – Breakdown by Age

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than 60 Years
of Age
Consensus Estimate / 6.6 years / 9.0 years / 6.3 years / 4.3 years

As expected, the timeframe for downsizing is directly correlated with age.

(B) Other 2nd Residence Trends

Reasons for Owning a 2ndHome. Nearly a third of current 2nd home owners (31%) say they use their 2nd home for Rental Income. Another 29% use it as a Vacation Home, and 17% use it to“Split Time Between their Primaryand Secondary Residence.”

Differences Between Current 2nd Home Owners and Planned Future Purchasers. The reasons forbuying a 2nd home among those planning to buy one in the future are vastly different from those who currently own a 2nd home.

Reasons for Owninga 2nd Home – Current Owners vs. Planned Future Purchasers

Current Owners:
Purpose of
2nd Home / Planned Future Purchasers:
Purpose of
2nd Home / Change
Score
Split Time Between Primary
and Secondary Residence / 17% / 39% / +22
Vacation Home / 29% / 32% / +3
Investment for Future Sale / 16% / 12% / -4
Rental Income / 31% / 12% / -19

Nearly two-in-five planned future purchasers (39%) say they’d use their 2nd home to “Split Time Between Their Primary and Secondary Residence”– far more than the 17% of current owners. Conversely, only 12% of planned purchasers say they’d use their 2nd home to generate Rental Income – sharply lower than the 31% of current 2nd home owners.

Summary of Key Findings

The ChangeWave Alliance is a group of 8,500 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 3

The Findings...... 5

(A) Primary Residence Trends...... 5

(B) 2nd Residence Trends...... 7

ChangeWave Research Methodology...... 14

About ChangeWave Research...... 15

I. The Findings

Introduction

During the week of July 18-24, 2006, we surveyed 2,466 Alliance members age 42 and older to gain insight into their home buying habits, downsizing plans and 2nd residences.

(A) Primary Residence Trends

(1) Question Asked: Do you currently own or rent your primary residence?(n=2,466)

Own / 92%
Rent / 7%

Home Ownership. More than 9-in-10 Alliance respondents (92%) over 42 years of age own their primary residence. Note that home ownership outside the U.S. is slightly lower among Alliance respondents – 93% U.S. vs. 87% non-U.S.

(1A) Question Asked: Which of the following best describes your primary residence?(n=2,279)

Single Family Home / 90%
Single Family Home - More than 3,000 square feet / 39%
Single Family Home - Less than 3,000 square feet / 51%
Townhouse / 3%
Townhouse - More than 2,500 square feet / 1%
Townhouse - Less than 2,500 square feet / 2%
Condominium / 5%
Condominium - More than 1,500 square feet / 3%
Condominium - Less than 1,500 square feet / 2%

Type of Primary Residence – Breakdown by Age

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than 60Years
of Age
Single Family Home / 91% / 93% / 91% / 88%
Townhouse / 4% / 3% / 4% / 5%
Condominium / 5% / 4% / 4% / 5%

Single Family vs. Townhouse vs. Condo Ownership. While the vast majority of current home owners live in single family homes (90%), 3% own townhouses and another 5% own condominiums. We note that respondents more than 60 years of age are slightly more likely to own a townhouse or a condo.

(1B) Question Asked: Do you have any plans to downsize your primary residence?(n=2,279)

Yes / 27%
I Recently Downsized My Primary Residence / 4%

Boomer Plans to Downsize. More than a quarter of total respondents (27%) plan to downsize their primary residence, while another 4% say they’ve recently downsized.

Demographic Analysis:

(i) Plans to Downsize Primary Residence – Breakdown by Age

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than 60 Years
Of Age
Yes / 26% / 24% / 30% / 25%
Recently Downsized / 4% / 2% / 3% / 7%

Importantly, three-in-ten‘Older’ Boomer respondents (30%) aged 51-60 say they plan to downsize – 4-points higher than for the overall sample.

(1C) Question Asked: When do you plan to downsize your primary residence?(n=611)

Within the Next Year / 6%
In 1-2 years / 13%
In 3-5 years / 29%
In 6-10 years / 29%
More than 10 years / 20%

Consensus Estimate – Overall: 6.6 years

Timeframe for Downsizing. Among respondents planning to downsize, the consensus estimate for when they plan to scale back is 6.6 years.

Demographic Analysis:

(i) Timeframe for Downsizing Primary Residence – Breakdown by Age

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than 60 Years of Age
Consensus Estimate / 6.6 years / 9.0 years / 6.3 years / 4.3 years

As expected, the timeframe for downsizing is directly correlated to age – Younger Boomers (age 42-50) plan to downsize in 9.0 years, Older Boomers (age 51-60) in 6.3 years, and respondents over 60 in 4.3 years.

(ii) Timeframe for Downsizing Primary Residence – Breakdown by When Respondents Think They’ll Actually Retire

Total / Retire in
1-2 Yrs / Retire in
3-5 Yrs / Retire in
6-10 Yrs / Retire in
10+Yrs
Downsizing
Within Next Year / 6% / 9% / 3% / 3% / 3%
In 1-2 years / 14% / 41% / 9% / 14% / 6%
In 3-5 years / 27% / 31% / 61% / 28% / 12%
In 6-10 years / 28% / 16% / 19% / 41% / 33%
More than 10 years / 22% / 0% / 5% / 11% / 40%

There is also a direct relationship between downsizing and the timeframe for retiring – as you can see from the chart above. For example, respondents who think they’ll retire in 1-2 years are also much more likely to downsize their primary residence in 1-2 years.

(B)2ndResidence Trends

(2A) Question Asked: Do you currently own a 2nd residence?(n=2,279)

Yes / 26%
No - But have owned a 2nd residence in the past / 11%

2nd Home Ownership. Nearly 2-in-5 Alliancehomeowners (37%) say they either currently own a 2nd residence or have owned one in the past.

Demographic Analysis:

(i) 2nd Home Ownership – Breakdown by Age

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than 60 Years of Age
Yes / 26% / 22% / 28% / 30%
No - But have owned a 2ndhome in the past / 11% / 8% / 10% / 16%

Note that respondents over 60 are more likely to have previously owned a 2nd residence in the past.

(2B) Question Asked: Do you plan on buying a 2nd residence in the future?(n=2,279)

Yes / 28%
No / 48%
Don't Know / 8%
No Answer / 18%

Plans to Buy a 2nd Residence. Twenty-eight percent of current homeowners (28%) say they plan to buy a 2nd home in the future.

Demographic Analysis:

(i) Plans to Buy a 2nd Home in the Future– Breakdown by Age

Note that 37% of Alliance ‘Younger Boomers’ (ages 42-50) say they plan to purchase a 2nd home in the future – compared to 26% of ‘Older Boomers (51-60) and 18% of respondents over 60.

(3A) Question Asked: Where is your current 2nd residence located?

(Respondents Who Own a 2nd Home in the U.S. by Location(n=498))

State / Current 2nd
Residence Owners:
Location of Home
California / 15%
Florida / 14%
Texas / 8%
New York / 5%
North Carolina / 4%
Colorado / 4%
Pennsylvania / 3%
Washington / 3%
Nevada / 2%
Georgia / 2%
Arizona / 2%
Illinois / 2%
New Jersey / 2%
Oregon / 2%

* States with 2% or more of total2nd residences

State Breakdown of 2nd Residences.Among respondents owning a 2nd home in the U.S., 15% are located in California, 14% in Florida, 8% inTexas and 5% in New York.

(3B) Question Asked: Where will your 2nd residence be located?

(Respondents Who Plan on Buying a 2nd Home in the U.S. by Planned Location (n=435))

State / Future 2nd
Residence Owners:
Location of Home
Florida / 13%
California / 13%
Texas / 8%
North Carolina / 8%
Colorado / 6%
South Carolina / 5%
Arizona / 4%
Hawaii / 3%
New Mexico / 3%
Virginia / 3%
Georgia / 3%
Utah / 3%
Tennessee / 2%
New York / 2%

*States with 2% or more of total planned future 2nd residences

Planning to Buy a 2nd Home.We asked respondents who plan to buy a 2nd home where they think they’ll buy – andFlorida (13%) and California (13%) tied for the top spot.

States with Growth Momentum in 2nd Home Market

State / Location
of Current
2nd Homes / Location
of Planned Future
2nd Homes / Change
Score
North Carolina / 4% / 8% / +4
South Carolina / 1% / 5% / +4
New Mexico / 0% / 3% / +3
Colorado / 4% / 6% / +2
Arizona / 2% / 4% / +2
Utah / 1% / 3% / +2

On the downside, New York (-3), California (-2), Illinois (-2) and Maine (-2) have the least growth momentum in 2nd homes. We note that Florida also dropped 1-pt in 2nd home growth momentum (from 14% of current to 13% of future 2nd homes).

States with Least Growth Momentum

State / Location
of Current
2nd Homes / Location
of Future
2nd Homes / Change
Score
New York / 5% / 2% / -3
California / 15% / 13% / -2
Illinois / 2% / 0% / -2
Maine / 2% / 0% / -2

(4A) Question Asked: What is the key purpose of your 2nd residence?(n=601)

Rental Income / 31%
Vacation Home / 29%
Split Time Between Primary and Secondary Residence / 17%
Investment for Future Sale / 16%
Other / No Answer / 7%

Reasons for Owning a 2ndHome. Nearly a third of current 2nd home owners (31%) say they use their 2nd home for Rental Income. Another 29% use it as a Vacation Home, and 17% use it to“Split Time Between their Primaryand Secondary Residence.”

(4B) Question Asked: What will be the key purpose of your 2nd residence?(n=627)

Split Time Between Primary and Secondary Residence / 39%
Vacation Home / 32%
Rental Income / 12%
Investment for Future Sale / 12%
Other / No Answer / 4%

Reasons for Owning a 2nd Home – Current Owners vs. Planned Future Purchasers

Current Owners:
Purpose of
2nd Home / Planned Future Purchasers:
Purpose of
2nd Home / Change
Score
Split Time Between Primary and Secondary Residence / 17% / 39% / +22
Vacation Home / 29% / 32% / +3
Investment for Future Sale / 16% / 12% / -4
Rental Income / 31% / 12% / -19

Differences Between Current 2nd Home Owners and Planned Future Purchasers. The reasons forbuying a 2nd home among those planning to buy one in the future are vastly different from those who currently own a 2nd home.

(5) Question Asked: Looking ahead, when – if ever – do you plan on selling your 2nd residence?(n=601)

Within the Next Year / 4%
In 1-2 years / 6%
In 3-5 years / 13%
In 6-10 years / 10%
More than 10 years / 10%
No Plans to Sell / 47%

Consensus Estimate – Overall: 6.5 years

Trends in Selling 2nd Homes. While 47% of 2nd home owners say they currently have no plans to sell, the consensus estimate among the 43% who say they do is 6.5 years.

Demographic Analysis:

(i) Plans to Sell 2nd Home– Breakdown by Age of Boomer

Total / Younger Boomers
Age 42-50 / Older Boomers
Age 51-60 / More Than
60 Years
Of Age
Consensus Estimate / 6.5 years / 7.4 years / 6.5 years / 6.0 years

Again, the trend is apparent – as the age of respondents rises, the timeframe for selling their 2nd home becomes shorter.

(ii) Plans to Sell 2nd Home– Breakdown by Key States

Total / California / Florida / Texas / New York / Colorado
Within the Next Year / 4% / 5% / 8% / 3% / 0% / 0%
In 1-2 years / 6% / 8% / 8% / 10% / 9% / 0%
In 3-5 years / 13% / 11% / 14% / 8% / 22% / 11%
In 6-10 years / 10% / 12% / 8% / 10% / 4% / 0%
More than 10 years / 10% / 8% / 14% / 10% / 13% / 21%
No Plans to Sell / 47% / 45% / 35% / 55% / 39% / 53%

In a bad sign for Florida, 16% of 2nd home owners in the statesay they plan to sell within the next 2 years, compared to just 10% overall.

(6) Question Asked: In recent years, home insurance rates have skyrocketed in many parts of the U.S. Has this made you more likely to sell your 2nd home, less likely, or has it had no effect on your decision to sell your 2nd home?(n=601)

More Likely / 9%
Less Likely / 1%
No Effect / 86%

Impact of Rising Insurance Prices. When it comes to home insurance rates, nearly one-in-ten (9%) respondents who own a 2nd home say they are More Likely to sell based on skyrocketing prices. Only 1% say they are less likely.

Impact of Rising U.S. Home Insurance Rates– Breakdown by Key States

Total / California / Florida / Texas / New York / Colorado
More Likely / 9% / 4% / 32% / 13% / 9% / 6%
Less Likely / 1% / 0% / 0% / 0% / 0% / 0%
No Effect / 86% / 91% / 65% / 85% / 91% / 94%

We also found that respondents owning 2nd homes in Florida are more than three times More Likely to sell their 2nd homes because of high insurance rates. Clearly,the severe hurricane seasons of recent years – which have led to skyrocketing home insurance rates – have had a negative impact on the Florida 2nd home market.

II. ChangeWave Research Methodology

This report presents the findings of a recent ChangeWave Alliance survey on trends and buying patterns among Baby Boomers (age 42-60) and Pre-Boomers (age 61+). The survey was conducted from July18-24, 2006, and a total of 2,466Alliance members age 42 and older participated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master’s or Ph.D.) and 93% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

III. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 8,500-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 8,500 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at