From cnbc.com:
Baby Boomers putting their house up for sale could flood the market in coming years, while the younger generations may not be interested in buying, a new report says.
“It’s already happening in some states like Michigan,” says Rolf Pendall of the Urban Institute and a co-author of the report by the Bipartisan Policy Center.
“Seniors there are already putting their homes on the market and the absorption of housing is less and creating more inventory,” Pendall explains. “There’s hesitancy on the buyer’s part.”
As boomers downsize because of retirement, finances, health or death, they’re expected to release some 26 million homes onto the market by 2030, according to the Policy Center paper.
The problem is that echo-boomers, or Generation Y—those born between 1982 and 1995—may not be buying up the inventory, says Pendall, whose retired mother is trying to sell a home and downsize.
“Whether it’s jobs, confidence, tight credit or a slowdown in immigration, there could be a real slowdown in buying from the younger generation,” Pendall explains.
The Bipartisan Policy Center’s report states that young adults are struggling with higher levels of credit card and student loan debt than their elders—some of which could take decades to pay off.
Couple that with the current housing struggles and the report concludes that young people are just not in the buying mood—now or anytime soon.
“Certain areas of the country are better off than others,” Pendall says. “But if we look at the Northeast and Midwest, seniors are going to be putting homes on the market and moving to warmer climates. That means more inventory to sell. Housing will depend on the echo-boomers, and it’s not known what they will do.”
But some analysts don’t see the explosion of seniors selling homes as a hit on housing.
“It’s not that big because when you look at the market, it’s pretty good right now and getting better,” says Walter Maloney of the National Association of Realtors (NAR). “Besides, seniors have been selling homes for years, and overall inventories are going down. We believe there is pent-up demand,” Maloney adds.
Some experts say a final verdict on any kind of senior housing glut is too hard to make right now.
“The extent to which baby boomers unload their homes is a projection at this point,” says Greg McBride, senior analyst at Bankrate.com.
“I think it ignores the impact of foreign investors buying homes in the U.S.,” McBride argues. “The decline of the dollar and the global expansion of the middle class is bringing in plenty of buyers.”
But even as domestic and foreign investors help improve housing markets such as Miami there may not be enough of them to soak up the homes, says Pendall.
“The sheer number of retirees putting homes on the markets will be overwhelming,” Pendall says. “Investors can’t make up the whole difference.”
The number of homes on the market has declined in the last year. Some 2.3 million are currently for sale—down from 4.4 million in July of last year, according to the NAR. It also takes a much shorter time to sell a house—24 percent of homes on the market are selling in less than three months, down from six months in early 2011.
But other numbers are going up. Since 2011, an estimated 10,000 people in the U.S. turn 65 every day, according the Bureau of Labor Statistics. That’s up from 7,000 in 2010. Meanwhile, about 6,000 to 10,000 people retire each day.
Many of those seniors will vacate their current residence to move into nursing homes or be forced to sell because of financial reasons, the death of a spouse or because the house is just too big to maintain.
Admitting that it’s hard to say exactly what will happen to housing in the years ahead, Pendall argues that some sort of national housing policy is needed that will help both buyers and sellers at any age.
“It’s government and markets too. We need to look at the financial system, tax incentives and why credit is so hard to get these days,” says Pendall. “We need to prepare for what’s ahead.”
As usual, the news article is worse than the report – a few excerpts:
U.S. population is expected to grow by 93 million people by 2050.
To house them, we will need 43 million more housing units than exist now.
Between 2000 and 2010, the 55+ population released 10.5 million housing units net. Over this decade, they expect 11.3 million net housing units to be released from 2010 to 2020, not a big increase.
In the report they mention that seniors will be selling in the Northeast, and moving to the Sun Belt. This could be a boon to SD?
Pendall argues that some sort of national housing policy is needed that will help both buyers and sellers at any age.
Hasn’t “national housing policy” done enough damage?
Does anyone remember free markets?
Free
marketsrent!!!Agree that SD benefits from this trend. I keep going back to the data. Here’s the population data of San Diego County vs Wayne County Michigan:
link
It will be interesting to see how the demographics play out over the years. San Diego is desirable because of the weather but could be undesirable because of the high cost of living. Some house rich San Diegans may chose to downsize by moving to Texas or some other lower cost of living area while a wealthy NorEastern might pick San Diego as the ideal location to retire.
I figure we’ll probably see a lot more reverse mortgages and other similar strategies that allow people to stay put
Cali is toast. No one is moving there unless they have to. The cost of living is too high and the nanny state (and state government) are going to need to tax the hell out of everybody. The writing is on the wall!
“Some experts say a final verdict on any kind of senior housing glut is too hard to make right now.”
I’ll go with that.
dogballs is right.
Cost of living is way too high and taxes are nuts. California retirees have to pay 10 percentage points extra tax on interest, dividends, and IRA withdrawals. States like Texas and Florida have no income tax.
The vast majority of people who have worked and accrued retirement savings in low-cost states will not be able to afford retirement in California.
Affordability is going to be a key factor for many retirees.
The Real FEAR!!!
Socal Boomers not moving.
Staying put!! Not moving to lower cost retirement heaven, then the next gen takes over the homestead.
For Socal, I think that should be the biggest fear.
Reverse mortgage is not something I would consider unless I had no one to leave it to.
In San Jose, this is a big complaint, Workers pissed off retirees not moving out.
As Cali falls down farther financially and more “fees” are imposed as taxes are raised, how many boomers and native Californians will conclude at retirement, albeit painfully, that it may be in their best financial interests to sell and move to a lower tax, more financially stable state?
karma is a biatch!
all of those boomers that voted for prop 13 and now it will bite them in the arse.
my in laws want to stay close to us and the grandkids. but, if they were to sell their house they would move out of state like the majority of their friends have done.
CA is way too expensive for the average retiree.
Actually in most of SoCal they have a rule that allows people over 55 to transfer their current property tax to a new purchase as long as it was of less or equal value.
The one catch is (most of Socal), for instance if you move from SD to riverside you cannot do that, but from L.A. to SD you can.
Are they accounting for the number of retirees that are transferring their homes to their children instead of selling?
“As usual, the news article is worse than the report…”
Fear mongering. It’s not just from the mountains of Pakistan.
Prop 60 and 90 allow the transfer of the tax base to the new home up to 105% of the sold home value. And San Diego County is not allowing other County homeownews to transfer into San Diego County. Check Prop 90.
A lot of boomers who never got into the habit of upgrading to bigger places every few years will be selling homes that are more modest in size, single story and in areas that were once modestly priced but moved upscale as the years passed. How will a 1700 sq ft 1950’s ranch house within walking distance of the beach in encinitas compare to a 4000 sq ft 2005 McMansion in a more inland location when it comes time to sell?
I suspect this will affect places like detroit, cleveland, and buffalo a lot more than the receiving ends, which i presume will be low cost-low tax places like florida, nevada, and arizona.
Another side of this is what will cities like Michigan do to counteract any sort of mass exodus?
If retirees move from a city like Michigan to somewhere like Texas, depressing the home prices as they leave en masse, the local government may need to find ways to attract people. They would likely turn to incentives for businesses to relocate there, which would then bring jobs and people migrating from other states. What then would happen to the job market (followed by the housing market) in states that have a high cost for running a business?
In other words, it could, more or less, balance itself out.
I know of a few upper-middle class boomers who own multiple properties. Some of which they are only holding onto because they’re under water, but they can afford to keep them in hopes of prices going back up. How many are in that boat? How long will they stay aboard?
And don’t forget that the government wants to raise the Capital Gains taxes above 15%. When Retirees start taking their money out of their savings they will instead pay 39%.
JSG@12, given that Prop 13 was passed in 1978 and boomers are defined as having been born between 1946-1964, I don’t think it was boomers who passed that particular proposition. Many boomers weren’t even old enough to vote and I’d guess the majority didn’t even own homes yet.
For the record, one unremarked fact is that with the housing boom even though property taxes can only be raised 2% per year lots of boomers saw their home “value” increase quite a bit. I’d love to sell my little shit shack for the currently assessed value, maybe the county would like to buy it? 😆
I suppose I should get around to challenging the county assessment…
The problem is that echo-boomers, or Generation Y—those born between 1982 and 1995—may not be buying up the inventory, says Pendall, whose retired mother is trying to sell a home and downsize.
Wait, the study author’s mother can’t sell her home so the author thinks we need a government program? Oh, boy.
@Boomer
I stand corrected.
Who was it that first said, “There’s nothing price won’t fix.”?
NateTG,
Divine Marie Brown.
Go long probates.