15 Feb Baby Boomer Housing Crisis??
Do you remember years ago housing experts’ predictions for a housing crisis caused by “the great senior sell-off”? Well, that’s not happening; at least not yet!
Baby boomers are a gigantic generation, including all those born between 1946 and 1964. They were the largest generation until the millennials secured that title a few years ago. Boomers are reaching retirement age, or are gliding towards that direction. While that may not seem like breaking news, the effect they are having on the local housing market may be.
Boomers breaking patterns of generations past
The one thing we definitely shouldn’t do with baby boomers is assume what their next move will be. Younger boomers are still likely to move, or relocate for a job, upsize to accommodate aging parents, or downsize as they become empty nesters. The older boomers, however, don’t seem to be going anywhere. Boomers are more lively and active at their age than their previous generations, and hardly any are ready to pack up and head off to a nursing home or assisted living facility.
In fact, 80% of baby boomers own homes, and two-thirds of them have the intention to “age in place”. Aging in place means they don’t intend to downsize, move to a retirement community, etc. Instead they will remain in their homes for their later years in life, and merely add supplementary services to accommodate their living conditions. Aside from any needed medical care, this refers also to remodeling. Many boomers are opting to do things such as widen hallways and doors to become wheelchair accessible, opposed to selling their homes.
Although this is remarkable for them as a generation, it is playing a monumental role in the local housing market. As mentioned above, millennials are the now the largest generation. In 2019, millennials are estimated to take out the largest segment of mortgages accounting for about 45% of all mortgages.
The problem is, even though the housing inventory is slowly increasing and will increase more as we roll past these winter months, the majority of new inventory will be mid to higher-end price tier. With millennials being the largest cohort of buyers you may see wherein the problem lies. If many of these millennials are first time home buyers, or are just starting to reach job titles with higher pay, they are unlikely to be able to afford the mid to higher-end price tier. This will make the demand for homes under about $250,000 higher, but the supply won’t not necessarily be there.
This means you won’t see the same price drops from sellers in the $250,000 or under price tier as you will from sellers in a higher price tier. Due to the lack of intention of baby boomers to sell, even though the inventory will modestly increase, the more affordable housing market definitely isn’t ample. With the millennials making up a staggering portion of buyer pool, the inventory coming available is causing an affordability issue. The baby boomers may have come strides past their previous generations, but it’s currently causing a major affordability issue for the younger generations.
Kelly Militzer, REALTOR
The Hermann London Group
7350 Manchester Road
Maplewood, MO, 63143