One item that has been on our mind as of late is whether or not the looming exodus from the housing market (as baby boomers age) will create an over-supply of inventory that lowers home prices and stalls sales. Fannie Mae warns that demand from younger generations is insufficient to fill the void left by older departing owners. The result may be gluts in some marketplaces. A Fuller Institute study, which focuses on the DC region, concurs.
Demographic data makes the case. Baby boomers, born between 1946-1964 own 32-million homes, or 2 of every 5 in the country. These homeowners face some key choices: sell, stay put and age-in-place, downsize or rent.
Fannie Mae estimates that between 2016-2026 between 10.5 million and 11.9 million older homeowners will end their ownership status. Between 2026 and 2036 that group will add another 13.1 to 14.6 million. The implications of this massive unloading remain to be seen.
Not surprisingly, there are some detractors. Lawrence Yun, the chief economist for the NAR (National Association of Realtors) sees some positive developments underway which might offset the “sell-off”: strong population growth within the US and the rise of over-seas buyers.
But don’t panic, the sell-off hasn’t happened yet. A recent study from Harvard’s Joint Center for Housing Studies says that we’ve got at least 10 years before the glut kicks in. Many boomers are expecting to age-in-place which may well result in a robust remodeling boom.
Millennials (those born between 1985-2004) have recently surpassed Boomers as the largest generation (both around 74 million), though they’ve been slow to jump on the home buying bandwagon, largely due to affordability. They tend to prefer smaller homes closer to city centers. The areas most likely to be affected by the sell-off are the exurbs and rural areas, where demand will be slight.
Where is all of this going? Who the hell knows. But it’s good to be aware of the issue and consider strategies for your future self.
Articles of interest:
And another Realtor Magazine article