Senior Sell-Off = Housing Bust in ~2020? (2013, investment, mortgage, mortgages)

[checkup]

As someone born in the late 80's, this seems very appealing

The Great Senior Sell-Off Could Cause the Next Housing Crisis - Emily Badger - The Atlantic Cities

Moderator cut: copyright issue

[Hemlock140]

That actually sounds pretty close to us. We have been planning to retire right about 2020 and sell our 3,000 sf house. Maybe I'd better do it sooner and avoid the rush. With the kids gone we really don't need this much room even now. Thanks for the heads up.

[MrRational]

Originally Posted by checkup

As someone born in the late 80's, this seems very appealing
The Great Senior Sell-Off Could Cause the Next Housing Crisis - Emily Badger - The Atlantic Cities
We can predict the next housing crash, and that’ll be in about 2020.

Meh.

“Ok, if there’s 1.5 to 2 million homes coming on the market every year at the end of this decade from senior households selling off,” Nelson asks, “who’s behind them to buy? My guess is not enough.”

A vast majority of today’s households with children still want such houses, Nelson says.
“Even if the numbers matched,” Nelson says, “the preferences don’t.”

Preferences be damned. The issue is in the logistics of getting to/from their jobs.
If that can be managed... most will welcome the big yards and other amenities of those older 'burbs.

Because most of that managing will be easier within the radius of the older suburbs...
the "hinterland" cornfield neighborhoods well outside the cities are objectively riskier properties.

In that environment, he says, there will be two classes of seniors in America: those “aging in place” voluntarily, and those “aging in place” involuntarily because they can’t sell their homes.
Nelson is critical that “aging in place” will really be feasible for many seniors.

The feasibility will be expressed in whether the folks "age in place" in their own home...
or if they live in a home shared by more generations as was common in the past.

I suspect there will be more "in law" apartments and "The Waltons" like generations sharing
dinner and household chores together. On the whole... that will be a benefit to everyone.

“It’s romantic for the first 15 years when you’re turning 65 and retired,” he says.
“But aging in place among 90-year-olds? 95-year-olds?”

Aging in place is about the decades from 65 or so leading up to the time seniors will need help.
For most that independence will end well before 90 (let alone 95).
Most know and accept this... but don't dwell on it.

The issue is in managing the shuffle of RE investment value represented by the several types
and sizes of property that are owned among the several generations within each family.

But because the exchange ratio among these several generations within each family is small
it shouldn't be difficult to manage even direct inheritance from Boomer Grand Pop to one of
his two children; and in time from that Dad/Mom to one of their two children.

[Nerys52SoSilver]

Not sure if this applies to the USA but over here in Europe we have a large graying population and now some middle aged children are stuck with unsold homes of their elderly parent(s) the houses remain unsold because they are unwanted old style/outdated with lots of repairs and restyling etc to do and for the same price you can get a modern house you can move straight into.

[Red Wolf]

Many areas that built retirement communities have faced/are facing that.

There was such a demand in the 70's and houses got built at a brisk pace.
Those people are now dying off at a brisk pace and many houses flooding the market.

Building new there has come to a halt and it has nothing to do with the housing slump.

Too many existing homes about 30+ years old flooded the market and brought down prices.

[trickymost]

This argument is lifted from the biggest shill out there - Harry Dent.

Here's why I don't buy it. Start with these 3 generally agreed upon premises:

1. The population will continue to grow. Even if the pace of new household creation is below historic averages, the actual number of new households will still be higher since the population is larger.
2. Interest rates will eventually rise, most definitely by 2020. I would imagine they would be in the 5-7% range at that point, maybe even higher. But they won't be 3-5% unless the economy is still stuck in reverse.
3. Housing will be more expensive. Between limiting the mortgage tax deduction, government killing or greatly reducing the roles of FNM/FHA/FRM, higher inflation, lower dollar value.

Taking all that into consideration, and I'm repeating something I said here a couple years ago, home ownership as we know it will change. Property assets will be passed down through generations (the better built one anyways, and more importantly the land upon which they're built). Home ownership will become multi-generational.

Toss in 3 less widely agreed upon premises:

1. Medical technology, nanotechnology, biotechnology, robotics will continue to innovate at an exponential rate, making the elder years more pleasant for our boomers and beyond.
2. Self driving cars will be on the roads in meaningful numbers in the next decade.
3. One of the biggest economic growth sectors over the next decade will be "elder care", as many companies rush in to make the golden years the best possible years for the largest generation of elders the world has ever seen.


So even if seniors needs to "leave" their homes en-masse in ever increasing numbers over the coming 10-20 years, I just don't see it happening.

I see the elderly going to live with children, and passing the home on to their grandchildren so they can start their families without having to worry about saving for mortgages. Better to invest 50-100k in a 500k home that's paid off than to take out a 500k mortgage.

I see technology enabling the elderly to stay in their homes. Whether it's the robots to help with chores and medicines, from telepresence or other virtual technologies to keep them connected, or nanotechnology to help doctors monitor health, or the self-driving cars which will drive them to the doctor, on errands, to visit friends.

I see the elderly being more healthy and living better thanks to better medicine. I would expect more sudden death - eg they seemed healthy and fit and were playing tennis yesterday, but less chronic debilitation and less being infirmed requiring others to care for you.

I see there still being plenty of families being created to absorb those homes. That's even if the gulf between the classes expands. The population is going to keep growing and the slow down in home building over the last 5 years will also affect where people can buy homes.

I see mortgages being much much more expensive. Higher interest rates, less deductions, higher fees, and more money required for downpayments (20% being the minimum, probably more for the best interest rates) as private industry picks up the slack in the mortgage market and seeks to limit risk.

Anyway, adding all of that together, I can imagine far more scenarios where the inventory gets absorbed than scenarios where it does not.

The only place where I can see this being a serious risk is San Francisco/Bay area. Silicon is going to hit the physical limitations of quantum mechanics around then, meaning semiconductors can't get smaller, meaning unless the next generation of semiconductors is commercially ready by then (quantum computers), there should be a Detroit style crash as the silicon computing era ends.

[sware2cod]

Lots of retirees sell their home so they can move to a different state...such as FL, AZ, NC, etc.

This creates continious demand in states that get retirees. However, those same states continiously lose retirees that moved to nursing homes, passed away or moved in with their children.

New generations do the same thing. It's just that the locations tend to shift....the original home where they raised their family/worked is usually farther into the suburbs than the prior generation. The crime ridden areas are avoided, even though they were utopia a generation ago.

Eventually some of the crime areas can abecome popular again if the location is great and the crime subsides and the infrastructure is good. Investors come in and fix up properties in the prior bad areas, which makes them more desirable if enough places are fixed up and the neighborhood improves. Then folks begin migrating to these areas.

Constantly shifting.

[jghorton]

Somebody just needs to fill their 'column space.' -- What about the dire warnings of the great number of 'baby boomers' retiring now --- where is their 'sell off.' Sometimes it looks to me like the media's mission is to find something to hype --- whether it's real or not!

[mkarch]

Supposedly the baby boomer sell-off was going to depress prices during the middle of the last decade. That never happened. A lot of future retirees lost their homes during the market crash, so that should reduce the # of motivated sellers going forward by a good margin.

The article mentions 1.5-2M homes per year. At current sales rates that would not have much impact on total inventory. maybe over time it will slow new construction, however the millions of people in those homes still need to live somewhere. What I expect is some markets and areas will see a surplus of these older homes, but it's not going to be across the board. Run down older suburbs with a concentration of outdated homes with poor schools will likely be the hardest hit.

[casper324]

The reall issue is that our kids born in the 1990's are so saddled with Suudent Debt that they will never qualify for a loan. Who loans an unemployed 19 year old 60G anyway?