After Baby Boomers, What’s Next for Housing?
by George Masnick Senior Research Fellow | February 19, 2015
As baby boomers age, the decline of this mammoth generation will have a “dampening effect on household growth,” according to a new report by Harvard’s Joint Center for Housing Studies. However, this decline in growth will occur over several decades and may be offset by the millennial generation starting households of their own.
Read more about baby boomers: As Millennials Wait, Housing Bets on Boomers
But the big question is whether the housing left by baby boomers will be desirable to younger generations?
“Many homes vacated by aging seniors will not be in demand by tomorrow’s young adults, being in the wrong part of the country or otherwise unsuitable,” according to JCHS researchers. “Some will be simply too expensive. Some ‘affordable’ vacated homes in desirable locations will be torn down and replaced by larger and more energy efficient/amenity rich houses targeted to older buyers. Many houses will sit on the market for long periods of time before sellers are willing to recognize that they are overpriced. Some homes in declining communities will become abandoned.”
As such between now and 2030, new construction will be needed to meet the housing demand from the large number of those under the age of 30 that are currently in the pipeline – which will be even further escalated due to future immigration trends, researchers note.
Later this decade, the adult population growth is expect to turn sharply, according to recent Census Bureau population projections. Growth in the population age 20 and older is expected to see a 40 percent decline, gradually falling to about 1.5 million per year by 2050.
“Despite their improving life expectancies, the oldest baby boomers will soon turn 70, and begin to die off in ever-greater numbers,” notes JCHS’ report. “Today, there are about 2.6 million deaths every year, but this number will rise to over 4 million a year by 2050.”
Baby boomers have long had a thirst for real estate. As they aged, the share heading an independent household rose from 53.4 percent in 1990; 56.1 percent in 2000; and 58.5 percent in 2010.
On the other hand, younger age groups have been slower to enter the housing market. “Higher minority shares and delayed marriage have had a negative effect on headship rates, as has the Great Recession’s impact on employment and income,” JCHS researchers note.
So what does this mean for the future of housing?
“Projected declining adult population growth because of increasing deaths will have several effects on housing markets,” JCHS researchers predict. “But it will not have an immediate and proportional impact on household growth for a variety of reasons. First, many initial baby boomer deaths will occur to married couples, leaving the surviving spouse to continue to head a household. Many deaths will also occur to people who do not head a household, but rather live in a household headed by children or other relatives, or in institutional settings (assisted living or nursing facilities).”
The decline in household growth due to the aging baby boomers will occur over many decades. By then, aging millennials could cause “the changing age structure effect to be more positive, similar to what baby boomers exerted as they passed into middle age, offsetting the effects of declining adult population growth.”
Source: Harvard Joint Center for Housing Studies’ Housing Perspectives Blog