Are Baby Boomers Causing Shortage in Real Estate Inventory?

Posted by Staff Reporter ( on Dec 02, 2015 08:40 PM EST
  • email
  • print
House Prices Hit New High In The UKmore big
LONDON, ENGLAND - JUNE 03: A couple look at property details displayed in the window of an estate agent in Camden on June 3, 2014 in London, England. Figures from the Nationwide, the UK's largest building society, have shown that in the year to May, the annual rise in house prices was 11.1% which represents the greatest rate of increase in seven years. (Photo : Oli Scarff/Getty Images)

Economists now argue that baby boomers - the people who rocked at Woodstock and were active in campus protests - who used to take out mortgages and buy lots of real estate are not downsizing fast enough and aren't putting their houses for sale as earlier generations did. As they refuse to move, it contributes to inventory shortages and an increase in prices, Chicago Tribune reports.

Boomers are among the factors "clogging up of the whole chain of home sales," says Sean Becketti, a chief economist at Freddie Mac. "They appear to be staying in the family home longer than previous generations," he wrote in a new outlook report, "and the imbalance between housing demand and supply continues to boost prices."

For decades, boomers' behaviors have always had outsized effects on the national economy, and an enormous footprint in real estate. Based on Federal Reserve's most recent survey of Consumer Finances (2013), households 55 and older has control of two-thirds of all home equity. At an aggregate value, the federal estimate of their houses is at $8 trillion.

In past generations, the trend is empty nesters downsizing or opting for small single-family houses once the kids move out. However, babyboomers this age are not going for either. According to a report Patrick Simmons of Fannie Mae, there is absence of statistical evidence showing that baby boomers are thinning in their single-family occupancy rate, going for homes with less number of rooms, or pushing demand for apartments. Patrick Simmons, economics and strategic research group director, says that between 2010 and 2013, "the number of boomer apartment renters did not change significantly," while there's nearly half a million increase in the number of millennial renters in a year.

Why the concern with boomers staying put longer than expected?

It's those in the build and sell industry who care so much about this trend - it's their bread and butter - as do potential buyers who are confronted with high home prices and rents.

But boomers are not to be responsible says economists. While their slower-than-expected rate of downsizing and selling affect the supply, demand, and pricing in local markets, they are not the root cause.

There are multiple factors to be considered. Lawrence Yun, chief economist for the National Association of Realtors especially points out the effects of the housing bust and the Great Recession. While David Crowe of the National Association of Home Builders factors in a feedback loop effect where boomers are discouraged from listing and selling because of high prices due to limited supply.

But Fannie Mae's Simmons believes that this boomer logjam is not going to be here for long. "Boomers will not inhabit this vast inventory (32 million homes) forever," and with the change in circumstances i.e. aging, watch out. "Their actions will reverberate through the housing market."

Like Us on Facebook

Get the Most Popular RealtyToday Stories in a Weekly Newsletter
© 2017 Realty Today All rights reserved. Do not reproduce without permission.
Real Time Analytics