What is the housing market going to look like going forward to 2050? Projections are a fun statistical way of making major mis-calculations. It is still worth looking at what some of the obvious conditions going forward may be.
The Bipartisan Policy Center put together a paper on the future of the national housing market.
As the Baby Boomers begin to retire and die, they will be releasing their housing units to the market. Most of these will be owner occupied housing.
- 2000-2010: approx 10.5 million housing units (net release of housing unit by Baby Boomers)
- 2010-2020: 10.6-11.3 million housing units (net release of housing units by Baby Boomers)
- 2020-2030: 14.4-15.0 million housing units (net release of housing units by Baby Boomers)
Owner-occupied units will account for about 80 percent of the releases, and most will be single-family detached dwellings. Total demand for new housing in the coming years is difficult to judge, but it is certain that the release of senior-occupied units will account for a growing share of the total inventory of housing stock while new construction will constitute a declining share. The likely consequence is that growing numbers of states and metropolitan areas will experience softening market conditions and weak demand for new construction.
The paper goes on to discuss the nature of the housing that will be released. The main points are that these single family homes were built when energy was cheap, and financing was easy, and the economic future looked bright. In short, they are suggesting that there will be no need for these big suburban homes and people will want to live closer into the central city.
While there is some merit in their points, I disagree with some of their premises. The main reason I disagree is the baby boomers aren’t this predictable, they will zig when we think they will zag. I also disagree that buyers prefer smaller homes, but this is a subject for another post and discussion.
Basically there are 2 segments that will be absorbing the baby boomers homes; The Baby Bust generation (my generation, generation X) and the Echo Boomers (Millennials, Generation Y). Since Generation X is the generation that everyone overlooks primarily because of their small numbers, the paper focuses on the Millennials.
This paper seemed to overlook Gen X and Gen Y soldiers are returning from war. I believe they will be a market force once they are able to pick up with their lives again and focus back in family and career. Many are starting over and it will take time for them to become a force in the job and housing market.
This paragraph from their paper raised my eyebrows a bit:
Echo Boomers have been hit hard by the recession. In fact, even before the recession they had experienced weak or no real income growth since 2000. About 22 percent of those 18 to 24 years old in 2010 lived in poverty. And in another grim statistic, the median income of people 15 to 24 years old dropped nine percent between 2009 and 2010 alone. Nearly half of 25- to 34-year-olds who had moved in with family and friends to save money would otherwise have lived below the poverty line… …
Other factors, however, could inhibit household formation and homeownership. Young adults carry high levels of credit card and student loan debt; even young people who already had formed households had higher debt loads in 2009 than people of the same
age 10 years earlier.31 Rates of marriage declined in the 2000s from 8.2 per thousand to 6.8 per thousand..
My thoughts from what the Millenials have been through is that this generation may actually become a 180 from the Baby Boomers and more in line with the WWII generation or Depression era generation. Meaning they may become far less materialistic and a lot more fiscally conservative going forward. Thoughts?
There are a couple key points I took from this, although I am still digesting a lot of this.
- Reading between the lines – there is approx 100 million more people over the next 38 years… …that’s approx 1,196,172 new households per year. (they have to live somewhere!)
- Housing Policy (regulations etc) and Economic conditions going forward is going to be the deciding fate of what happens with homeownership going forward.
- Echo Boomers and Home Ownership; Redwood Trust’s Loss; Thoughts on Agency Condo Policies (mortgagenewsdaily.com)
- Housing dependent on young, struggling Americans (housingwire.com)
- 43 Million More Housing Units to Sell and Rent (speakingofrealestate.blogs.realtor.org)
- Attitudes of Young Americans Bode Ill for Housing Recovery (forbes.com)
- More Boomers Selling Homes, but Who Will Buy Them? (tarpon.wordpress.com)
- Will Retiring Baby Boomers Overwhelm the Housing Market? (motherjones.com)
- Next up for housing trends: A younger, diverse population (mysanantonio.com)
- Millennials: Growing Up, But Are They Ready to Be Home Owners? (speakingofrealestate.blogs.realtor.org)
- The American Community Survey and Total Housing Units (calculatedriskblog.com)
- Baby Boomer Legacy (captain capitalism)