Economist: More Inventory Coming, But Who Will Buy?
A wave of available homes is expected to douse the inventory-starved market in the coming years, driven mostly by aging baby boomers seeking to downsize. One in eight owner-occupied homes—about 9 million residences—are expected to come to the market through 2027, according to an analysis by Issi Romem, founder and economist at MetroSight, a housing research institute.
Romem predicts that by 2037, seniors will have vacated about a quarter of the U.S. housing stock. Many of these homes will likely be in traditional retirement communities in Arizona and Florida, he adds.
Housing analysts are concerned that Gen Xers, the generation following baby boomers, may not produce enough demand for the homes that will eventually come to the market. Gen Xers are fewer in number and not as financially secure, and have different housing preferences than baby boomers. “One problem is that the bulk of the supply won’t necessarily be in places where these new buyers want to live,” The Wall Street Journal reports. “Gen Xers and millennials have so far preferred to live in cities or suburbs in major metropolitan areas with plenty of shops and restaurants within walking distance. They have shown little interest in migrating to planned, age-restricted retirement enclaves in sunnier corners of the U.S. lined with golf courses, community centers, and manmade lakes.”
Younger generations also may not be financially able to absorb the coming housing inventory, researchers note. Households in which the head is between 50 and 64 years old are less likely to own a home than prior generations, according to research from Harvard University’s Joint Center for Housing Studies. They’ve faced stagnant income growth since 2000 and are more debt-burdened than previous generations. "To the extent the local economy is dependent on a vibrant senior population, then it will be more difficult,” William Frey, a senior fellow with the Metropolitan Policy Program at the Brookings Institution, told the Journal. "Homes will be up for sale and not bought as quickly.”
But some economists are more optimistic that the market can absorb the homes left by baby boomers. They’re most confident that affordable cities in the Midwest will be able to attract enough millennials to fill any gaps left from baby boomers. Also, they note the wave of homes to hit the market will come slowly and incrementally—not all at once. Also, some economists predict that the villages and towns that were created to serve older people could transform, lifting age restrictions or reinventing themselves into more affordable retiree enclaves.