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Seniors are on the ‘precipice’ of a huge sell-off wave. Here’s why that’s bad

By August 10, 2018 No Comments
Seniors are on the ‘precipice’ of a huge sell-off wave. Here’s why that’s bad
REPOSTED DIRECTLY FROM INMAN NEWS. THIS CONTENT HAS NOT BEEN MODERATED BY WFG NATIONAL TITLE.

Real estate professionals have been waiting patiently — or impatiently, depending on their point of view — for baby boomers to put their houses up for sale and alleviate the low-inventory issues that have been strangling much of the housing market.

For any number of reasons, though, it hasn’t happened. And it may not happen for several more years, if it happens at all. But when it does, if it does, instead of making things better, it could actually throw the market into a tailspin, according to new research from Fannie Mae.

If baby boomers, the massive generation of Americans born between 1946 and 1964, decide to leave their homes en masse, they might flood the market and, as a result, have trouble achieving the prices they need or want. And if younger buyers can’t absorb the “new” inventory quickly enough, it could create something of a bubble for all sellers, not just boomers, research from Fannie Mae’s Economic and Strategic Research Group suggests.

Worse, if baby boomers’ elders also vacate the ranks of homeowners in droves, the oversupply could have a disastrous impact, the study points out.

Fannie Mae isn’t the only one to sound the alarm. A second study, this one from the Stephen S. Fuller Institute at George Mason University in Northern Virginia, sees a similar possibility ahead.

Focusing only on the Washington, D.C., market — but with national implications — the Fuller Institute study says: “The significant number of older owners in relatively large homes may portend a ‘Baby Boomer sell-off’ both in the Washington region and in the nation.”

Even if only a minority of boomer-owners sell, the study added, “their dominance in the housing market, especially within some neighborhoods, could increase supply, potentially moderating prices.”

Currently, boomer-owners are a plus factor when it comes to ownership. Rather than exiting the ranks, their number has increased steadily over the past several years, according to Fannie Mae citation of the Census Bureau, “indicating no diminishment in the intensity of Boomer homeownership demand.”

According to the National Association of Realtors (NAR), over the past 30 years, owners of all stripes have remained in the same place for longer periods. Between 1987-2008, they stayed for a median of six years, NAR reported recently. But by 2017, the median was up to 10 years (and rising).

There’s no question baby boomers and their senior Americans have a huge housing footprint. Together, they inhabit some 46 million owner-occupied dwellings worth an estimated $13.5 trillion, and they account for two out of every five owners.

Eventually, they will be departing ownership for smaller rentals (perhaps in warmer, more senior-friendly climates), senior care facilities or by reason of death. The big questions: When, and by what numbers?

Authors Patrick Simmons of Fannie Mae and Dowell Myers from the University of Southern California say baby boomers are on the “precipice” of making their moves:

With the oldest Boomers now in their early 70s, the beginning of a mass homeownership exodus looms on the horizon, fueling fears of a “generational housing bubble” in which homeownership demand from younger generations is insufficient to fill the void left by multitudes of departing older owners.

Simmons and Myers base their dire warning on the attrition rates of past older owner generations, using those figures to “project the future cadence of aging-related homeownership exits.”

Historically, the number of owners in a 10-year-wide birth cohort increases through its mid 50s, remains stable through its early 70s and then “drops rapidly” as it advances into its late 70s and 80s.

Anywhere from 25 percent to 33 percent of baby boomers sell off their homes. Thereafter, the sell-off becomes far more rapid, and after 10 years, merely three in 10 (33 percent) remain as owners.

Fannie Mae’s numbers moving forward are staggering:

  • Between 2016 and 2026, cohorts age 65 or older are projected to move out of 10.5 million to 11.9 million homes.
  • Looking further out, between 13.1 million and 14.6 million senior owners will leave their homes in the 2026-2036 decade.

That, Simmons and Myers said, is “a loss at least 42 percent greater than registered during the most recent decade.”

Why do the losses increase by so much? According to the study, “The reason is that the number of older homeowners ‘at risk’ of attrition due to advancing age will balloon as the large Baby Boomer generation moves full-force into the 65-and-older age group where homeowner retention rates drop substantially.”

By 2026, the Fannie Mae study said, when the youngest baby boomers turn 62 and the oldest turn 80, the number of baby boomer-owner-occupants will likely be about 16.4 million, which puts even more seniors on the “precipice” of age-related attrition.

Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.

The views and opinions of authors expressed in this publication do not necessarily state or reflect those of WFG National Title, its affiliated companies, or their respective management or personnel.

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