The Coming Housing Wave… What’s a Boomer to Do?
Beginning in 1946, the country experienced a major spike in birth rates due to soldiers returning home from World War II. This population burst lasted until 1964 and became known as the Baby Boomer generation. There are two things which cannot be debated about people in this generation: there are a lot of them and they are getting older. According to the most recent U.S. Census, there are 75.4 million Baby Boomers who are now between the ages 54 and 72.
What effect will the Baby Boomers have on the housing market as they sell their homes en masse due to retirement, downsizing or moving to assisted living? The answer is quite a bit. A recent study by the University of Southern California and Fannie Mae’s Economic and Strategic Research group attempts to predict when this sell-off will occur using statistical analysis of patterns from past generations.
The problem facing Baby Boomers or the housing market in general has to do with the generation following it – Generation X. This generation is generally considered to be made up of those people who are currently between the ages between 37 and 53 or those born between 1965 and 1981. According to the U.S. Census, there are only 65 million people in Generation X. With such a large disparity between the size of these two generations, there will be more supply than demand when the sell-off begins. This could cause major pricing pressure on Boomer’s homes which are generally considered to be those higher end, more expensive houses.
The question then becomes if Gen X can’t absorb all of the supply, can the generation after Gen X save the day? That scenario is hard to imagine since that generation, the Millennials, have gotten off to a late start with homeownership. This is due in large part to the fact that they came of age during the housing boom and bust that coincided with the collapse of Lehman Brothers. The task of buying up properties owned by Baby Boomers will most likely fall to the “Middle Child” as Generation X is known.
When will this sell-off happen? The Fannie Mae/ Univ of Southern California study offers their interpretations of the data and they provide two different scenarios. Neither looks good if you are a Boomer selling into that wave. According to their study, the number of homeowners that reach age 65 or older who will shed their homes will increase by at least 42% starting in 2026 and ending in 2036.
So what’s a Boomer to do? Of course, every situation is unique and everyone has to weigh their own circumstances. That said, it is also important to be armed with knowledge. For starters, homeowners should understand what the likely selling price of their house is if they had to sell tomorrow. They should also have a good understanding of their retirement needs and wants. Will they need to sell their homes to live on the equity or can they age in place? Finally is ageing in place something they want to do?
If you are a Baby Boomer, it is important understand your options. Ask a Realtor© to provide you with a comprehensive CMA (Comparative Market Analysis) which provides the likely selling price of your house and an absorption report which describes the supply and demand for your particular home. Maybe it makes sense to stay in your current house and discuss transferring it to your children or maybe now is the time to downsize into something smaller and more affordable, something within reach of a Millennial when you go to sell again in the next 10-20 years.
For more information, or if you need a referral for a knowledgeable Realtor© in your area, contact:
Coldwell Banker Residential Brokerage
211 South Street
Morristown, NJ 07960
(O) 973-267-8990 x153