Housing Market Trends

Presently the housing market is experiencing some interesting twists to present day real estate. There aren’t enough houses or people to buy or rent.

There are a number of reasons for the housing shortage and here are my thoughts on a few of the challenges. 

  1. Home builders haven’t been able to build at a pace that keeps up with demand and land development in major cities is limited.
  2. People who already own homes aren’t upsizing or downsizing, which limits the circulation of homes on the market. Historically post-retirees downsize into smaller houses as their children leave the nest which allows younger families with starter homes to expand into larger houses.   In turn, this allows first-time homebuyers to buy starter homes that the younger families are moving out of.

So here is a piece of what is happening.  The cycle of homeownership has slowed dramatically.

Baby boomers are not moving, particularly those who live alone in houses that could otherwise be home to multiple people.  This limits the number of available homes for sale and those homes are subject to bidding wars causing the price of housing to rise as the inventory drops.

So Boomers are staying in their houses longer for a number of reasons.

  1. They are living longer and more independently than previous generations.
  2. They are working longer, so they have the income to stay in a large house if they want to. Boomers are staying in the workforce in record numbers and feel they will have to work well beyond traditional retirement age as they cannot financially afford to retire.
  3. They are more likely to have adult children, college age students, grandchildren or possibly aging parent(s) living in their home.
  4. Additional factors impacting the real estate market is the sheer number of boomers who are moving into the older age demographics relative to previous generations.  It is a huge age segment. 
  5. The divorce rate is at an all time high in the 55+ age range creating what was once one household is now two households.
  6. Housing affordability is also creating challenges in the market.  Selling a home may result in a nice profit but finding a less expensive home to replace that housing without spending the bulk of their profit is equally difficult.

But with all of these factors the future of the housing market is not doomed and  according to The Wall Street Journal it will rebound.  Analysis of the market indicates two-thirds of every home will turn over by 2037.  This selloff of the 21 million homes owned by boomers who will downsize, move into assisted living or will pass away will create more homes available to be sold. 

Further, it’s unlikely that the sale of such volume will cause what’s currently a housing shortage to turn into a housing surplus.  Because of the broad age range Baby Boomers cover which is between 1946 and 1964 the selloff of boomer housing would be staggered over the course of 20 years or more AND would not cause a sudden meltdown that created  the housing collapse in 2008.