Baby Boomers, born between 1946 and 1964, will soon become the largest class of retirees that the United States has ever seen. Forbes Magazine reported, that this generation controls more than 70% of the total net worth of American households, totaling $7 trillion. With such an enormous control on the overall spending power in the country, how will baby boomers retiring affect the housing recovery?
As the population ages, baby boomers will begin to seek newer, smaller homes more suitable for empty nesters. Many will seek out warmer climates, and researchers expect retirees will continue to move toward traditional retirement areas such as Florida and the desert Southwest, specifically Arizona. Many cities are looking to cater specifically to the baby boomers, where builders offer special deals to downsizers, and adult communities are full of activities for its residents. Several home building companies indicate that 60-80% of boomers want to retire to less urban areas.
What will happen to baby boomers home’s as they want to retire and move away? The Atlantic Cities published a May 2013 article entitled The Great Senior Sell-Off Could Cause the Next Housing Crisis. It details what some researchers are calling “the great senior sell-off,” which is set to begin sometime later this decade. They estimate 1.5 to 2 million homes will come on the market every year from senior households selling off without enough new buyers waiting to buy. Also, as these homes begin to sell off, the shift in housing preferences for younger buyers becomes more obvious. 25% of today’s households with children are demanding condos and urban townhouses, a shift from the nearly zero percent of families who sought out those options previously.
Because of overall growth in cities and surrounding areas, researchers acknowledge that metro areas will be able to absorb the supply of boomer housing without a huge effect in the market. A second article also proposes that some seniors will be able to leave behind homes and still generate economic activity through the rental market.
Can we conclude for certain that baby boomers will flood the market with homes? No, but it is likely that they will begin to sell in the later part of this decade, as their adult children move out and they move closer to retirement age. Be sure to stay abreast of the changes in the housing market by following the Shorewest blog, where we regularly report on housing trends.
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