Edward Laginess enjoys sipping his midmorning coffee on an expansive veranda overlooking mountains near Palm Springs, Calif., and living the life that dreams are made of.
It's his second home, in a midrise condominium complex filled with people like him--Baby Boomers in homes-away-from-home. Normally, Laginess lives in Chicago, where he works as a vice president for Juno Lighting Group. At age 55, Laginess divides his time between two homes--enjoying golf, sun and mountains in Palm Springs and a paycheck and friends in Chicago.
There's a popular notion that Baby Boomers are making a habit of living like Laginess--buying second homes either on oceanfronts, lakeshores, mountains or lively urban downtowns. Some people are snapping these homes up now in part as investments, perhaps to be sold at significant profit to a retiring Boomers.
But Gary Engelhardt, a Syracuse University economics professor, says the notion of these waves of buyers is largely a myth. And he warns people to beware of investing based on hype that seems questionable.
In research done in conjunction with the Mortgage Bankers Association and the Radian Group credit risk management company, Engelhardt found that only a small proportion of older Americans have second residences, and there is no greater tendency by Baby Boomers than the previous generation to indulge in second homes. And there is actually more movement between suburbs by empty-nesters than into urban playgrounds.
Only a tiny fraction of suburban empty-nesters are moving to the city, Engelhardt said.
"Suburbanites like the suburbs," he said.
Engelhardt scoured government data from the 2004 Health and Retirement Study, the 2005 Current Population Survey and 2000 Census to measure mobility by early Baby Boomers--people born between 1946 and 1955. The surveys do not yet capture activities by younger Boomers, so Engelhardt can't be sure what they will do.
But other research shows younger Boomers, and the Generation X group behind them, may be more financially stressed than today's fiftysomethings as they prepare for retirement living. In particular, the growing tendency of employers to stop providing traditional pensions--with guaranteed monthly payments--is expected to weigh heavily on future retirees. Expected cuts in Social Security and Medicare could add pressure.
So Engelhardt said people now in their 40s may end up with less ability to treat themselves to second homes than people nearing retirement or already in it.
What he knows is that the data debunk the perception that recent empty-nesters are shunning the suburbs and indulging in second homes.
Engelhardt found that roughly 80 percent of the moves suburbanites made in their 50s were to a home in another suburb. Only 11 percent moved into central cities. Meanwhile, just over 52 percent of city dwellers who moved went out to the suburbs.
New condo developments in cities have major competition from suburban retirement housing, he said. "These are different retirement communities. There is no boccie ball or bingo. Instead people are attracted by golf courses, green spaces and wooded areas."
Rather than empty-nesters flocking to urban areas, the movement into the city "is not even strong enough to stem the flow out of the cities," Engelhardt said.
Movement into the nation's 10 largest metropolitan areas--Atlanta, Chicago, Dallas, Detroit, Houston, Los Angeles, New York, Orange County, Calif., Philadelphia and Phoenix--has been stronger than in smaller cities, he said. But even in the stronger environment "this is not very good news for real estate developers putting up condo projects, or individuals buying condos in anticipation of substantial capital gains."
Based on supply and demand, Engelhardt suggests that investors who are discouraged by softening prices now may not encounter markedly better conditions later.
Mark Nash, a Chicago real estate broker and author of "1,001 Tips for Buying or Selling a Home," said he has been trying to prepare people for a slower market. He is encouraging them to think of a condo in the city, or a second home, as a place to enjoy, not an investment.
Still, he has difficulty connecting Engelhardt's findings to his own experiences with empty-nesters. He says they frequently comment: "We don't want the two-story colonial in the suburbs. We want to walk to work downtown and be close to restaurants, the opera, Cubs and Bear games."
Karl Case, a real estate economics professor at Wellesley College, said he hears the same thing in the Boston area.
"I know six couples well that have sold their suburban homes and moved to Beacon Hill and Back Bay," he said. That creates the image of a mass movement. "But it is very anecdotal. It is very hard to find the results in the data."
Like other researchers who have dug into the habits of the vast Baby Boom population, Engelhardt has found more fantasy than fact.
For example, in a study of the Baby Boomer generation in 2004 Duke University sociology professors Mary Elizabeth Hughes and Angela O'Rand found that rather than a homogeneous group of affluent adventure-seekers, Boomers at midlife had a wide range of income and educational levels. And wage inequality was more pronounced in that generation than in any other group.
Rather than accumulating second homes to enjoy the stereotypical active Boomer lifestyle, Engelhardt found "there is no upward trend, and Baby Boomers own second homes at the same rate as their parents."
In 2004, 15 percent of individuals age 50 and older owned a main residence and a second home. That was slightly higher than the 14 percent of 1998, but essentially the same as in 1992, Engelhardt said.
Although, proportionately, no more Boomers are relaxing at second homes than their parents did, sheer numbers are higher. The Boomers are a huge generation--roughly 78 million compared with about 63 million in their parents' generation. So Engelhardt said that might be driving the perception that Boomers have changed the way people live.
Or as Radian Group Inc. Chief Executive S.A. Ibrahim puts it: "I know a lot of people buying second homes, so I thought there was a change of behavior. Then I realized I was just getting older, so I was in the group of people who buy second homes."
Engelhardt said people typically buy second homes in their 40s and 50s, and most sell the homes within 15 years.
About 45 percent sell them within six years, which perhaps isn't surprising given how little people tend to use them. Half of older second-home owners use them two weeks or less a year, while 66 percent use them for four weeks or less, Engelhardt said.
For Boomers, that buying and selling cycle could have disappointing consequences, he said.
The generation behind the Baby Boomers is far smaller--about 44 million people. So while older Boomers might have no problem selling second homes to younger Boomers, the number of potential buyers could then fall off sharply, based on demographics.
"The next 10 years will be pretty good for second-home owners, and then 15 to 20 years out it levels out," Engelhardt said. "Then demand really falls off at 2030 and 2035."
Economic factors could be challenging too.
"One thing we know is the mid- to late-Boomers are way levered," he said. "With high levels of debt they may desire second homes but be unable to buy them. If you are highly levered and stretched to meet primary obligations on the first home, can you take on a second?"
Gail MarksJarvis is a Your Money columnist.Copyright © 2015, CT Now