AGING BABY BOOMERS AND THE GENERATIONAL HOUSING BUBBLE

From Informaworld:

Problem: The 78 million baby boomers have driven up housing demand and prices for three decades since beginning to buy homes in 1970 and continuing up the housing ladder. What will happen when boomers begin to sell off their high-priced homes to relatively smaller and less-advantaged generations?

Purpose: This article presents a long-run projection of annual home buying and selling by age groups in the 50 states and considers implications for communities of the anticipated downturn in demand.

Methods: We propose a method for estimating average annual age-specific buying and selling rates, weighting these by population projections to identify states whose growing proportions of seniors may cause an excess of home selling sooner than others. We also analyze the likely supplier responses to diminished demand, and recommend strategies for local planners.

Results and conclusions: Sellers of existing homes provide 85% of the annual supply of homes sold, and home sales are driven by the aging of the population since seniors are net home sellers. The ratio of seniors to working-age residents will increase by 67% over the next two decades; thus we anticipate the end of a generational housing bubble. We also find that younger generations face an affordability barrier created by the recent housing price boom. With proper foresight, planners could mitigate what otherwise could be significant consequences of these projections.

Takeaway for practice: The retirement of the baby boomers could signal the end of the postwar era for planning, and reverse several longstanding trends, leading decline to exceed gentrification, demand for lowdensity housing to diminish, and new emphasis on compact development. Such developments call planners to undertake new activities, including actively marketing to retain elderly residents and cultivating new immigrant residents to replace them.

Read the full paper here.

Source: Informaworld via Michael Covel