Will Aging Baby-Boomers Cause a Supply Glut in the Ownership Housing Market? I Think Not.

Last fall, analyst Meredith Whitney, predicted a wave of baby boomers would start downsizing their homes which, in turn, would cause a surge of home listings enough to push ?home values to start to fall across the U.S. due to inventory levels exceeding market demand.

As I find this to be a particularly interesting subject, I thought it worthwhile digging into the numbers to see if her prediction holds water.

At face value, it’s not a bad hypothesis. The most recent census data available (2022) shows that there were over 96.6M Americans aged over 60, and that 44% of them owned their homes.

Given that the aged 60+ population is expected to account for 32% of the total adult population over the next decade, it is not unreasonable to deduce that they will own close to half of the nation’s housing at some point between 2028 and 2032.

By that same rationale, if one was to assume that most of these owners will sell at some point, then the supply-demand dynamic could certainly shift the market from one which has favored sellers for over a decade, to one that will start to favor buyers.

Moreover, for some time now, real estate brokers and their clients have been wondering when the market will see a much needed, tangible increase in supply. But given Ms. Whitney’s prognostication, should they be careful about what they are wishing for?

Hers was a forecast that also got the attention of my colleagues over at Fannie Mae who have just published a fascinating paper which offers a very different perspective to that of Ms. Whitney.

Fannie Mae undertook a survey of a nationally representative group of homeowners aged 60 plus. Of this group, approximately 2/3 were already retired and, of those still working, a majority plan to retire in the next five years.

What they found contradicted Ms. Whitney as most homeowners interviewed stated that they had no plans to move during retirement.

Of course, this finding contradicts the general belief that retirees will downsize because their homes have become too big for them and that they wish to release equity for use in retirement.

However, the survey showed that most were comfortable with their financial situation, were not planning on using home equity as retirement income and wanted to age in place.

What do I think? Well, it’s my belief that we will see supply levels rising as some retirees downsize; however, I certainly don’t foresee a “tsunami” of new listings from these Boomers, and I do believe there will be adequate demand for their homes coming from the nation’s move up buyers who are in their late 40’s and early 50’s and who have been waiting for retirees to actually move!

I also believe that any additional inventory – albeit, likely priced at the upper end of the market – would be a positive rather than a negative development. ?If move up buyers have more choice, then it's not unreasonable to believe that demand for their homes will be met by the coming surge of younger millennial and aging Gen-X first-time buyers.

The bottom line as far as I am concerned is that, although Ms. Whitney’s forecast might appear reasonable at face value, in reality, the market will be able to absorb additional supply without home values becoming distressed because, as has been widely discussed, we have a national ownership housing shortage to the tune of 3.2 million units .