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Housing Inventory and Demographics: The Next Big Shift
Last week I saw the following tweet by my friend Logan Mohtashami, Lead Analyst for HousingWire.com about existing home inventory.
I asked Logan about the timing, and he pointed out that several housing perma-bears had been predicting a flood of new inventory in the 2015 to 2025 timeframe as baby boomers downsized. That was obviously incorrect.
In 2021 I wrote Housing and Demographics: The Next Big Shift. In that article I reviewed how demographics had helped me call the apartment boom in the early 2010s, and the home buying boom in 2020.
I also noted:
No cohort is monolithic - some people will age-in-place until they pass away, others will move in with family (or family will move in with their parents), and some will move to retirement communities.
There is no magic age that people reach and start to transition, but looking at prior generations, it seems to start when people are around 80 years old.
This graph shows the longer term trend for two key age groups: 60 to 79, and 80+.
This graph is from 2010 to 2060 (all data from Census: current to 2060 is projected).
The leading edge of the Baby Boom generation is currently 75 (born in 1946), and these people will be turning 80 in 2026.
The peak of the boomers will be turning 80 in 2035 or so, and the tail end turning 80 in 2044 (born in 1964).
My sense is there will be a pickup in Boomers selling their homes in the 2nd half of the 2020s and lasting until 2040 or so. These homes will be older - and most will need updating - but many of these homes will be in prime locations.
Now the leading edge of the Baby Boom generation is 77. My view is we will see a pickup in downsizing later this decade, but mostly this will be a 2030s story.
NOTE: The graphs in that 2021 article were based on Vintage 2019 estimates. There are questions about these estimates, and I’ll update these graphs soon with more recent data and projections.
Many of these Baby Boomer homes will require renovations. Last week, Conor Sen commented on a WSJ article by Veronica Dagher: Nobody Wants to Buy a Fixer-Upper Right Now
Anything that sits on the market for more than a month is usually either overpriced or in need of significant repairs or updates, said Taylor Marr, Redfin’s deputy chief economist. Homes stay on the market for a median of 27 days, up from 19 days a year ago, according to Redfin.
“Most home buyers right now simply don’t have enough money left over to invest in major repairs or remodelling,” said Marr.
It is a real estate maxim that the three most important factors in buying a home are location, location, location! And many of these homes that will come on the market will be in prime locations, near work, parks and other amenities.
Location will trump deferred maintenance!
Around 2013 I was on financial TV and mentioned that we would likely see a buying boom around 2020 due to demographics, and few people cared - it was too far in the future. That is probably true about the “next big shift” in the 2030s, but I’ll have more on this topic anyway!
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