Study forecasts baby boomer homes may sell at loss around 2025 forward

[LaineyAZ]

Article in local paper summarizes study by U of Arizona professor.  (original article "The Great Senior Short Sale" is in the Journal of Comparative Urban Land and Policy" - I only read the news article).
His predictions:
1)  members of Gen Z (born between 1998 and 2015) may not be able to afford the baby boomer's homes, or, may opt for smaller homes in walkable communities instead of distant suburbs;
2)  Change in home buying behaviors by younger generations may result in glut of homes that could grow as high as 15 million by 2040;
3)  Sales of homes in smaller, distant markets may be especially difficult;
4)  The study data sources included U.S. Census Bureau and Harvard Joint Center for Housing Studies;
5)  The supply of homes of the older generation is large but the demand is small, so the mismatch will start later this decade, approx. 2025;
6)  People in declining communities may have to walk away from their homes.

I think the premise rings true but not sure if this will be across the U.S. or mainly in areas that are already fading anyway.

[Chris Pascale]

Time will tell. Some thought that the moment Boomers turned 70.5 the stock market would fall and fall, with no end in sight until they finally died.

The reasoning was that they'd be forced to withdraw from their 401(k)s.

What was missed was that Boomers had under-saved, and the gens that followed were doing much better with this.

[Paper Chaser]

This seems like it's only a problem if your retirement is predicated on selling your large family home and downsizing.
If your home is not an investment, then this probably doesn't matter.

[Metalcat]

It's hard to say.

If a work from home revolution comes, then these boomer homes in smaller communities may be exactly what everyone who needs a home office is looking for.

[Dicey]

It's hard to say.

If a work from home revolution comes, then these boomer homes in smaller communities may be exactly what everyone who needs a home office is looking for.

Completely agree. Sometimes, I think people invent these wild theories because of "publish or perish" pressure to come up with something different. He could just as easily be wrong. In fact, if the research for this article was conducted pre-pandemic, I'd bet good money that time will prove exactly that. Yawn.

[Metalcat]

It's hard to say.

If a work from home revolution comes, then these boomer homes in smaller communities may be exactly what everyone who needs a home office is looking for.

Completely agree. Sometimes, I think people invent these wild theories because of "publish or perish" pressure to come up with something different. He could just as easily be wrong. In fact, if the research for this article was conducted pre-pandemic, I'd bet good money that time will prove exactly that. Yawn.

Precisely.

Predictions like this presume to project a continuation of current trends, which ignores that trends respond to the circumstances they create.

We know that young people aren't buying single family homes because they can't afford them and are working in HCOL areas at grueling corporate jobs. However, we also know that they hate this, so who knows how this trend is going to react to itself over time.

Articles like this are little more than angels on a pinhead type of contemplation.

[LaineyAZ]

This seems like it's only a problem if your retirement is predicated on selling your large family home and downsizing.
….

I think this is his target audience - those who plan on cashing in their home for their retirement income.
But I've actually thought about this for many years in terms of some my own siblings and their adult children who are on the East Coast.  Combined, they have 5 adult successful offspring, none of whom could afford to now buy the home they grew up in. 
So how long can these current real estate prices, and their expected continued rise, really go on?

[Dicey]

This seems like it's only a problem if your retirement is predicated on selling your large family home and downsizing.
….

I think this is his target audience - those who plan on cashing in their home for their retirement income.
But I've actually thought about this for many years in terms of some my own siblings and their adult children who are on the East Coast.  Combined, they have 5 adult successful offspring, none of whom could afford to now buy the home they grew up in. 
So how long can these current real estate prices, and their expected continued rise, really go on?

I wondered this when my then-boyfriend bought his first house. It was a 2+1 cinder block house in a so-so neighborhood. He paid around $40k for it, IIRC. I remember thinking it would never sell for more than $50k. That was around 1980. Hahahahahahahaha!

[Villanelle]

I don't see how we will have a glut of homes.  We aren't losing population in drastic numbers, so we will need almost the same number of homes.  If people start preferring smaller homes near city centers, the prices of those homes will increase and the prices in bedroom communities will decrease accordingly.  But that would mostly be just a shift in price and population--low income families would continue to buy cheaper houses, but those would be in the suburbs, and higher income families would buy more expensive houses, in the cities. 

Unless the larger homes would be occupied by multiple families, we wouldn't need less housing.  So a "glut" seems like a much smaller concern than a demographic (and I mean economic, more than anything, though of course economics and other demographics go hand in hand) shift in which houses and locations are the most desirable. 

[Morning Glory]

I know tons of millennials who all want a brand new house, so it's possible that construction will continue but older homes might begin to depreciate in value if this is really a trend and not just my antimustachian co-workers. I have looked over people's shoulders when they are browsing on Zillow. They say things like "ew" and "that needs to be gutted" upon sight of a perfectly functional but dated kitchen. They refer to anything built before 2000 as "old".  I don't get it, I love my 100 year old house. I wouldn't want something with beige siding and a garage in front.

[Sibley]

We have a housing shortage in many places, if not in totality. Will prices adjust? Maybe. But until the overall population decreases, we'll still need housing.

In 50 years I could see the needed total housing starting to decrease, just based on demographics and birth rates.

[LaineyAZ]

Yes, I think the price adjustment scenario is the most likely.  Which was the focus of the original article pointing out that home prices have risen far higher than wages in the last 4 decades. 
We're approaching a cross-over point where the Gen X and Gen Z members, who are watching middle-class jobs with benefits disappear, will want to buy a house but not at the price that Baby Boomers expect to sell it for.

[Cb1234567]

This seems like it's only a problem if your retirement is predicated on selling your large family home and downsizing.
….

I think this is his target audience - those who plan on cashing in their home for their retirement income.
But I've actually thought about this for many years in terms of some my own siblings and their adult children who are on the East Coast.  Combined, they have 5 adult successful offspring, none of whom could afford to now buy the home they grew up in. 
So how long can these current real estate prices, and their expected continued rise, really go on?

I wondered this when my then-boyfriend bought his first house. It was a 2+1 cinder block house in a so-so neighborhood. He paid around $40k for it, IIRC. I remember thinking it would never sell for more than $50k. That was around 1980. Hahahahahahahaha!

 <grin>
How long? Forever. Just like the investment market. Is it a straight line up? Of course or, but it will go up overall.

My 2 cents: Remember brass? (Supposedly) “Everybody” got rid of the omnipresent shiney, golden brass and wouldn’t dream of a home that didn’t have brushed nickel, and dark, brown granite with big patterns (a lot of movement, I was informed, is the term), the granite is ripped out, in favor of farmhouse chic whites, greys and sliding barn door hardware...and now, guess what? Gold is on its way back. Dark granite is oppressive. Someday, those with rolling doors on a bathroom will get tired of the fact that they almost never hang perfectly plumb and have less acoustical privacy (sorry, personal biases showing!).

My parents’ house was bought for maybe 80K in 1979. New home construction, colonial, in what would become expensive edge of country suburbs by about 2015. Sold for about 500K. This house was not updated At All, not remodeled with major plumbing issues. Easily over 1m in 2015 if it had been turnkey. Traditional living room/dining room, original carpet, origsiding and rotting trim.
In hindsight, the rule of thumb of doubling every 10 years was met, approximately. (80-160 at 1990, 160-320 at 2000, 320-640 at 2010, 640->1m at 2020). A millennial couple bought it as their first house, totally rehabbed, and now they have a crap-ton of equity.

So. I hardly think that the suburban world of boomers homes, if that’s the premise we’re starting with (that all boomers live in the burbs), will become a deserted wasteland of ye olde homes inhabited by the have nots, who purchased on a steep discount. LOL. More likely, people like my sister (one of those parentally-subsidized failure to launch types) will move in to the parents house and stand pat, because it’s free (inherited).

[YankeeSaver]

I don't see how we will have a glut of homes.  We aren't losing population in drastic numbers, so we will need almost the same number of homes.  If people start preferring smaller homes near city centers, the prices of those homes will increase and the prices in bedroom communities will decrease accordingly.  But that would mostly be just a shift in price and population--low income families would continue to buy cheaper houses, but those would be in the suburbs, and higher income families would buy more expensive houses, in the cities. 

Unless the larger homes would be occupied by multiple families, we wouldn't need less housing.  So a "glut" seems like a much smaller concern than a demographic (and I mean economic, more than anything, though of course economics and other demographics go hand in hand) shift in which houses and locations are the most desirable.

Not to mention that home builders have been under-building for 40 years, and that Americans and many others in developed countries are renting at high rates. I think that housing has room to fall, but I just don't think we'll see anything that can be properly called a "glut".