Will Retiring Baby Boomers Overwhelm the Housing Market?
Paging Karl Smith! Suzy Khimm writes today about something that I remember getting a bit of attention a few years ago: namely that as we baby boomers age, we're all going to sell our houses. This is going to put an unusually large number of old houses on the market, which could keep the construction market depressed for a long time. It's our final parting gift to the younger generation.
But is it true? Suzy is writing about a new study from the Bipartisan Policy Center, so I went off to read it. In the executive summary, it says this:
Depending on assumptions about the economic recovery, seniors will release a net of 10.6–11.3 million housing units between 2010 and 2020....Between 2000 and 2010, the net release of homes totaled some 10.5 million units.
So, um, pretty much the same. The next decade will see a release of maybe a few hundred thousand more old homes than the last decade. That's a rounding error. Here's the detail, which accounts for different forecasts of economic growth:
Under the low scenario, total absorption of owner-occupied housing amounts to only 13.3 million units; after subtracting the units released by older adults, this would mean an increase of only 3.8 million in owner-occupied units for the decade, compared with an increase of slightly more than six million for the decade from 2000 to 2010. The high scenario, by contrast, would bring a projected 18.6 million new households into homeownership and yield a net growth of 10 million new homeowners.
In the medium scenario, there would be an increase of about 7 million units, compared to 6 million for the past decade. That doesn't sound especially Armageddon-like. I'm having a hard time getting too panicked about this.
In any case, this is a chicken-and-egg problem. If the economy is bad, then fewer people will buy homes. If the economy is good, more people will buy homes. No surprise there. But of course, if more people buy homes, that will help drive the recovery. Would you care to weigh in on this, Karl?
UPDATE: In fairness, I should note that the study also suggests that this release of housing will be quite different in different states, so there could be substantial issues in some regions but not in others. Also, we're going to need a lot of new retirement and assisted-living homes as the baby boom generation ages. But I think we already knew that.