Baby Boomers Staying Home for Retirement
In 1989, Harvard economists published a study concluding that as baby boomers aged out of the residential real estate market, there would be a glut of empty homes and prices would plummet.1 That clearly hasn’t happened yet, for a variety of reasons.
Economists didn’t account for boomers’ life expectancy extending so much longer. People are living more years in retirement and choosing to age in place instead of moving to retirement homes. About 63% of homeowners over age 55 say they plan to live out their life in their current home, and 37% plan at least one more move.2
Thanks in part to the lean lessons of the recession, people are also less inclined to “trade up” and place so much of their net worth into higher-priced real estate. The average duration someone lives in one house has increased from six years (before the 2008 crisis) to around 10 years.3
Economists also didn’t imagine another generation (millennials) would one day be larger than the baby boomers’. As millennials age, they are placing greater demands on the housing market. This crossroads of increased demand and low supply has caused home prices to increase substantially in quite a number of places in the country, particularly metropolitan areas where there are good-paying jobs.
Economists at a recent Real Estate Forecast Summit, sponsored by the National Association of Realtors, predicted real estate prices will continue to rise and asserted that a recession in 2020 was unlikely.4 In a separate forecast, Realtor.com calls for a continued shortage of existing homes, but a boon from new homebuilders. They say a contingent of millennials have skipped the traditional starter home and moved straight to midpriced, trade-up homes.5
Today’s new residential market has generated a new trend: January is the new April. Spring has traditionally been the most active buying season, but in 2019, January was the busiest month in many of the largest metropolitan markets, including Chicago, Dallas, Houston, Seattle, Atlanta, Denver and San Jose. Given this current trend, industry experts anticipate fewer homes for sale this spring.6
Content prepared by Kara Stefan Communications.
1 Paul Kupiec and Ed Pinto. Los Angeles Times. Jan. 5, 2020. “Are baby boomers ruining the housing market for everybody else?” https://www.latimes.com/opinion/story/2020-01-05/are-baby-boomers-ruining-housing-market. Accessed Jan. 9, 2020.
2 Ibid.
3 Ibid.
4 National Association of Realtors. Dec. 11, 2019. “Expect Continued Economic Growth, Slower Real Estate Price Gains and Small Chance for Recession in 2020, According to Group of Top Economists.” https://www.nar.realtor/newsroom/expect-continued-economic-growth-slower-real-estate-price-gains-and-small-chance-for-recession-in. Accessed Jan. 9, 2020.
5 Diana Olick. CNBC. Dec. 4, 2019. “Next year will be hard on the housing market, especially in these big cities.” https://www.cnbc.com/2019/12/04/harsh-housing-forecast-for-2020-especially-in-these-big-cities.html. Accessed Jan. 9, 2020.
6 Diana Olick. CNBC. Jan. 2, 2020. “Competition for housing is so high, the spring market is starting now.” https://www.cnbc.com/2020/01/02/competition-for-housing-is-so-high-the-spring-market-is-starting-now.html. Accessed Jan. 9, 2020.
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