Real Estate Q & A The Changing Age Game

This Q & A column also appears in the last issue of The Sheet for 2014.

Q: When we purchased our Mammoth condo almost 20 years ago Intrawest was riding the Baby Boom demographics wave. Where do we stand today as far as demographics and real estate here in Mammoth, and for the next 20 years?

A: This is a great question and there’s plenty to discuss. Most ski resorts in North America are struggling to reinvent themselves because of the changing demographics. The Baby Boomers are still quite influential in the local real estate market, but many resort gurus think it is the Millennials that we really need to be paying attention to. And those who pay attention in real estate industry are watching them very carefully.

I went to Whistler twice in the mid-1990’s to see what more I could learn about the coming wave. Rusty took me there in 1991 so I already had plenty of insight. Intrawest was looking to other resorts beyond Whistler. The theory was simple; more mountains, more condos, more cash flow. The underlying premise for the coming boom was based on demographic work by economist Harry S. Dent and his 1993 bestseller The Great Boom Ahead. Dent described how the “pig in the python”–– the bulge of births and population following World War II would affect economic booms and busts. Those 76 million Baby Boomers were approaching their “peak spending years” that typically occurs between ages 46 and 53. They would have record amounts of disposable income. And recreation and resort condos would be a prime target.

We all know the boom that happened in Mammoth between 1998 and 2007. And Intrawest was right in the middle of it. Dent’s study pegged the Baby Boomers spending peak at 2007 (coincidentally, the original Intrawest guys sold out to a private equity firm in 2006). Dent has gone on to write numerous books with predictions about how this demographic wave will affect the economy. Most observers think he is a better demographer than economist. His most recent book is The Great Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019. He was also famous for predicting that the Dow would hit 36,000 years ago.

Meanwhile the Baby Boomers themselves have become an enigma. I’ve continued to study the Baby Boom demographics through the eyes of a late Boomer myself. As the wave moves through I wonder about the Boomers who made it through college and into the job market well before me, and they were in position to buy real estate way ahead of me, and on and on. I wonder if will there be any social security left for me (I’m really not planning on it)? Or will there be any doctors and nurses left to care for me in my aging feebleness? Being a late Boomer might not be so opportune.

But plenty of the Boomer generation isn’t in great shape. According to the data, many haven’t saved enough for retirement or haven’t saved at all (although those that can afford second homes probably aren’t in that classification). Data also shows many have suffered serious net-worth losses since 2008. And there are more workers/employment over the age of 55 than at any time in our history. Many have simply postponed retirement. Or have given up entirely on the idea of retirement (I could be one of those). And predictions are Boomers are going to live longer than their parents. All of that inevitably cuts into recreation and leisure time.

Leading edge Boomers are just turning 70 years old. Many of Mammoth’s long-time local Boomers are moving to Bishop. They are getting out of the snow, to warmer weather and to cheaper living. They certainly aren’t skiing as much. They golf more, or are out on their fancy new ATVs. And two of my Mammoth Boomer friends are spending most of this winter at their homes in Costa Rica. These old Mammoth Boomers are telling.

But Baby Boomers continue to buy new properties in Mammoth. The $1 million dollar home market has been as strong as ever, even in The Trails. And there is even new product in Sierra Star being developed to fill the demand. How long will this last? And will they ever use their property? It almost seems like some of the Baby Boomer wave has been pushed back 10 years. Is 70 the new 60? And will “geotourism” be the new rage?

RRC Associates in Boulder, CO does strategic market research for the ski industry. Their finger is on the pulse. They currently state that 77.3% of the active participants in U.S. snow sports are GenXers or younger (born in 1964 or younger). That leaves only 22.7% as Boomers, and that number isn’t likely to be going up. And currently in the United States, only 18% of the total population fits the socioeconomic profile of downhill snow sports. Of the total population, just 3.2% are active in winter sports. Is that demographic going to change for the better?

RRC Associates also makes a presentation called Income Inequality and the Aging of Wealth. It is centered around a graph that represents the change in net worth by age groups from 1983 to 2010. The growth is 70% to 150% for Boomers and older (those that the boomers will likely inherit from). The younger generations are  –21% to 26%. The ski industry hopes to milk a few more years out of the Boomers, but now the ski industry must take a serious look at the younger generations and their “likes” and their level of disposable income. And that will present a huge challenge.

There are approximately 51 million GenXers born between 1964 and 1980. There are approximately 82 million Millennials born after 1980. The Millennials are a bigger wave than the Baby Boomers. But the real estate industry as a whole has serious concerns about the Millennials. They haven’t developed the spending capacity and financial momentum of the earlier generations. Many have student loan debt and fewer good job prospects (and the Boomers aren’t helping by sticking around longer). Too many are in the “living in mom’s basement” group. Many are stalling family formation (for good reason) and are delaying the purchase of their first homes and not getting on the first rung of the property ladder. They are embracing the “sharing economy.” And some have watched their distressed parents go through foreclosure or short sales in the recent past. And even worse, the younger generations will face the outrageous public debt accumulated in the past few years. All of this will affect real estate.

There is some good news. Studies show the GenXers and Millennials place high value on technology. Mammoth’s new fiber optic and internet service is a big help. It promises to become even faster. It was only a couple of years ago that iPhones barely worked and new internet service was unavailable. And maybe Mammoth’s relative affordability and less glitzy nature will be more appealing to the Millennials. Those factors have always appealed to me. But they aren’t likely to be in the market for $1M second homes (let alone $1M primary homes). Unless they create the newest killer app.

The acquisitions of the Big Bear resorts by Mammoth may end up being a great play for Millennial business; they can more likely afford that experience and as their on-snow proficiency increases as well as their disposable income, then Mammoth is the next step, and they may be allured by the season pass. And Mammoth always seem to get past the potential social issues that resort towns will face; the increasing economic inequality between the younger generations, the local workers, and the more affluent second homeowners. It is one the hot national issues of this era. Mammoth can be like a big Petri dish. It hasn’t been a problem in the past, let’s hope it doesn’t become one.

And Mammoth is back to the capacity question again. The North Village Specific Plan (The Village and surrounding properties) was a by-product of the anticipated Baby Boom wave of real estate purchases and spending. We’re lucky we got what we got. It is fine for now but the big wave is growing older and there is no need for another thousand units. Or maybe not even a couple hundred. The younger generations like the parties in the Village plaza, but they’re being subsidized by the Baby Boomer owners in the Village.

The Plan is now looking pretty archaic. Recent challenges to the Plan are twofold; developers want even more density to make condos “viable” and proven local business people want to renovate and improve old existing properties. The Plan seems somewhat misplaced 25 years later. It isn’t relevant anymore. I can’t wait to see what the planners and developers come up with to sell the Millennials. Other mountain resorts are already thinking this way. I hope the best for all of them.

Happy New Year!

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