If you are looking to buy a house you may want to wait until 2026. Home sellers would probably be wise to sell before 2026. Likewise, if you are looking to downsize, it would be to your economic advantage to do it sooner rather than later. The reason, of course, is the outsized impact of the baby boomer generation.
Many have heard the statistics that 10,000 boomers a day are hitting the age of 65 in the United States and have been for several years now. A 2018 study by Fannie Mae’s Economic & Strategic Research Group predicts that baby boomers exiting the market either to retirement homes or rentals will create a slow-moving tidal wave of housing supply. They predict (as reported in the WSJ, October 12, 2018 edition) that demand from millennials and Generation X will probably not be strong enough to offset the sell-off which will create a huge buyer’s market.
Approximately 14.6 million Americans age 65 or older are expected to exit the housing market between 2026 and 2036 which reflects an increase of at least 42% over the number in that age group who exited between 2006 and 2016. Thirty-two million homes are currently owned by baby boomers which account for 2 out of every 5 homeowners in the United States.
Baby boomers have also frequently traded up to larger houses over the years and there may not be a sufficient supply of millennials that need these larger homes since they have younger families or are just entering the housing market. Larger homes could be at particular risk. My wife and I downsized a couple of years ago and this was certainly in the back of my mind when we did it.
Market dynamics can change very quickly when the mindset moves from homes as a potentially appreciating assets to one that could be dropping in value. No one wants to take a mortgage on a property that may go down in value which could potentially drop demand even more.
Frequently, prophecies of doom and gloom do not materialize but if you’re looking to hedge your bets on one of your most important assets, demographic trends are something to consider.
Gary Peterson, MAI, MBA
PresidentMore Research. Better Results.