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At present housing seems to have stabilized and, short term, there is even a shortage of inventory in some markets. But, what happens when the boomers finally start selling their homes?
"Between 2010 and 2030, the numbers of people in what would be their peak buying years will be growing, but they're still going to be a quarter of what (their numbers were) in the previous 20 years.Another major factor is that the segment of the population that would historically have bought those homes just won't be able to afford them — the decline in educational funding means that this group won't have the education to get the higher-paying jobs.
Toward the end of this decade, I see 1.5 to 2 million homes from seniors coming on the market, and between 2020 and 2030, there will be a national net surplus of 4 million homes that they cannot sell. And that's a conservative figure.
Many current households with children will want to move up to these houses, but demographics and preferences have changed — about a quarter of those who would be considered in their prime buying years now want something else, like condos or town houses. And that's a significant change, because that kind of preference (from that buying group) used to be nonexistent."
"Q: Don't you think the boomers themselves will be buying, in some form?
A: That's the surprising thing. They're going to rent. Seniors, when they reach 65, are homeowners — 80 percent of them own their homes, which is the highest homeownership rate of any age group. But currently, about 4 percent of senior homeowners move each year, and about 60 percent of them move into rentals of one kind or another. That number shocked me. I re-ran the numbers, and I had one of my crack doctoral students re-run the numbers. We went back through (the federal) American Housing Survey, and repeatedly, back to 2001, it was all the same — there's very little variation in senior buying/renting behavior.
I think you'll see a surge in construction of apartments for more affluent renters. Two-thirds of all new housing demand between 2010 and 2030 will be for rental housing."
Interesting article - thanks for providing the link. If the prediction comes true, it may be a case of the "boomers getting what they deserve" as per another thread in the Economics Forum with that basic title. And just when we thought the housing market was becoming somewhat stable.
I am about to be retired "boomer" and I own a condo. I am thinking about selling and moving to a much lower COL area. I may buy a much cheaper existing house or rent one. I prefer renting because if I keep the proceeds from selling the current home in a shoebox After all a shoebox pays about the same interest as a bank account. It will be sheltered when, not if, I need long term elderly care from the rapacious providers.
One of the side effects of our current health care non-system is it will effectively eliminate inheritance for working, including most mid level managers, people. These inheritances were a source of equity for younger home buyers. What will the next generation us for down payments?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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If that happens, I think you will find many retirees going back to buying, taking their equity to pay cash or have a very low payment compared to rent, which will become unaffordable for retirees. Like most we know, we have planned to sell or 3,000 sf house in the next 8-10 years when the value has gotten back to what it was in 2007, and at the current appreciation rate here that could even be sooner. We plan to buy but in a less expensive area, if before retiring it will mean a long commute for a few years. Currently homes in our area are bought within a day or two on the market with multiple offers over asking, and a large number of the boomers have already turned over their homes to young families.
With there being so much in the way of demographic and job opportunity shifts the outcomes will probably be as much location driven as anything. Will there be jobs in the area where the boomer is selling to attract younger employed folks? Or will they be selling in an area where younger folks are moving away looking for jobs?
"Q: Don't you think the boomers themselves will be buying, in some form?
A: That's the surprising thing. They're going to rent. Seniors, when they reach 65, are homeowners — 80 percent of them own their homes, which is the highest homeownership rate of any age group. But currently, about 4 percent of senior homeowners move each year, and about 60 percent of them move into rentals of one kind or another. That number shocked me. I re-ran the numbers, and I had one of my crack doctoral students re-run the numbers. We went back through (the federal) American Housing Survey, and repeatedly, back to 2001, it was all the same — there's very little variation in senior buying/renting behavior.
I think you'll see a surge in construction of apartments for more affluent renters. Two-thirds of all new housing demand between 2010 and 2030 will be for rental housing."
I'm surprised indeed that 60% of those who move plan to rent, that doesn't make sense as a permanent housing solution IMO.
Regardless, if it's only 4% of seniors who move, it seems unlikely to result in a big change in the overall rental market. That's only 2.4% of seniors, or 2.4% per year moving to rentals.
But if there is a big change, rentals will become more expensive and home prices will drop and the equilibrium may just revert to normal.
And I assume builders are way more cautious about building these days anyway, understandably after the recent bubble crushed many of them. Presumably the ones still standing were generally the smarter builders, they're not going to throw up senior apartments on speculation. We'll see...
If that happens, I think you will find many retirees going back to buying, taking their equity to pay cash or have a very low payment compared to rent, which will become unaffordable for retirees. Like most we know, we have planned to sell or 3,000 sf house in the next 8-10 years when the value has gotten back to what it was in 2007, and at the current appreciation rate here that could even be sooner. We plan to buy but in a less expensive area, if before retiring it will mean a long commute for a few years. Currently homes in our area are bought within a day or two on the market with multiple offers over asking, and a large number of the boomers have already turned over their homes to young families.
Good luck with that (the bolded part)! It may take much more than the 8-10 years you are talking about. Good luck also with your wish that "the current appreciation rate" in your area will continue until such time as the value reaches 2007 levels. Personally I don't think it will happen in our lifetimes. It would be a damn shame if it does because the 2007 levels were quite simply insane; just look at the immense suffering which resulted from that bubble bursting. At 2007 price levels for real estate, the vast majority of people will be renters; absent the former practice of giving loans to everyone with a pulse, how will anyone qualify to purchase real estate at those prices?
Persoanlly I thni there is alot pf pentup buyers that haven't bought and wouldn't eb for a few ears despite interest rates. boomers that could have likely done it just that it took longer to seel i some areas. I nw i sold and moved. Do not think the demnads will reach 2007 levels because the fiancining for many just isn't possible anymore. nor will rpocies gain back what has been loss in these fopur years.Renters will increase but rents have really gone up in most areas also.
1. Many boomers don't have the home equity of previous generations to downsize and pay cash for their retirement housing hence the reason to rent. Sell the family home and just cover the mortgage payoff/moving expenses.
2. If the real estate isn't going to appreciate like in previous years then the taxes/hoa /sales commission may cost more than the cost to rent the same property.
3. Lack of solid retirements (small 401k, no pension, little or no savings, etc).
Previous retirees had free and clear homes, pensions and savings (in addition to no debt like credit cards). Boomers are missing that trifecta!
Some seniors sell their homes in order to move into assisted living facilities/nursing homes. These are rentals. This is part of what is skewing the numbers to show that seniors are becoming renters. It's not always that they decided to sell the home and rent a condo. Instead, they are at a crossroads in their life and have to move into a facility that has the care that they need.
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