The "Silver Tsunami" and its Effect on Real Estate

The average homeowner has $274,000 in equity today vs. $182,000 before the pandemic. In just 5 years, that's an increase of 51%! Who holds most of this equity? It’s the baby boomers who bought long ago and rode the appreciation wave the whole way to where they are today. Their housing wealth totals over 18,000,000,000,000 (yes, that is 18 trillion) - more than triple that of millennials.?

I’ve been hearing a lot that younger people think that there is a “silver tsunami” coming, where boomers are going to decide they all want to cash out their equity at the same time, flooding the market with inventory, and as a result, bringing prices down. This, in theory, would give young people a perfect opportunity to enter the market. Let me share my thoughts on this.?

With millions of baby boomers reaching retirement age, this demographic shift is presenting new challenges and opportunities for the real estate market. The thought is that, as baby boomers grow older, a significant number will start downsizing or "resizing" their homes. This surge will likely influence the demand for different types of housing (for example, homes with a first-floor primary bedroom, second homes in warmer climates, maintenance-free homes, technological adaptations, assisted living centers, etc.). Ultimately, this shift could reshape the overall housing market. And, if these moves happen in a big wave, it could cause a significant uptick in the number of homes available for sale.

So why isn't this likely to happen in 2024? For one, according to AARP, this demographic simply isn't ready to move - at least not permanently. Over half of the people over 65 that AARP surveyed said they plan to stay put and age in place. Locally, we've seen a variety of scenarios transpire with this demographic. We've assisted families who have moved out of state permanently - either for tax reasons or simply because they prefer a more temperate climate. We've helped numerous families purchase second homes out of the area so they can have a place to go during the winter months, yet still, call the Chicagoland area "home". We've assisted families in making modifications to their existing homes so they can age in place, and we've assisted families in downsizing/resizing locally. We've even helped families transition from a single-family home to an RV so their lifestyle is more of an adventure on the road!

Clearly, not every baby boomer is going to move. And because the baby boomers cover almost two decades of births, the transitions will happen over a longer period of time. In our opinion, there will NOT be a silver tsunami. Instead, there will be a gradual tide of transition for more accommodating homeownership.

To determine the right strategy for your next real estate transaction, you need to have the right real estate expert in your corner. Give me a call today for more info on this, and everything else real estate!