Real Estate Blog - When Baby Boomers Die Off, Will the Housing Market Die with It?

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When Baby Boomers Die Off, Will the Housing Market Die with It?

In a recent study at USC,two researchers in Urban Planing and Demography at the School of Policy,Planning and Development, concluded in their study that as the Baby Boomers die off, they could create a glut of properties on the market that housing values would be expected to decline.

They further concluded that it will create, in their own words, a Generational Housing Bubble" and for the surviving elders, their equity will shrink and would have a negative effect in their retirement nest egg.

The only positive aspect of their predictions is that it won't affect all markets- at least at the same time. They based their theory on the historical relationship of age and housing demand. As one goes up the other goes down.

What's your Opinion?

Posted by San Diego Real Estate Voice authored by William Johnson GRI CRS e-Pro CDPE on 04/03/2008 05:25 PM

Comments (47)

senior housing market, usc, urban planning and demography age and housing demand

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47 Comments on When Baby Boomers Die Off, Will the Housing Market Die with It?

APR

2008

Great question, I'm curious to see the insight of the other members.

I've never seen a study on this, but the thought has occurred to me. I guess there's no way of know for sure, 'til it happens. And other economic factors will come into play, blurring any evidence of cause and effect.

as soon as I make enough money, I'm buying a funeral home!

Hi Mark, I am as well. Thanks for dropping by. Stay tuned.

The Boomers just started turning 60 so they could live a few more years, I'm not concerned yet.

But what is a net egg

Hi Peter, I was just ready to write Margaret a response and I started to laugh out loud. Come to think of it, that seems like a pretty good investment and may pay huge dividends. The Boomers have money and from all I can tell, don't want cheap caskets. However, a thought just occurred to me. Our Costco sells them on line. I would guess for less. I wondered though where people must be storing these if you must buy them in advance of need. Can't store them in a closet or under the bed? Well, at least mine wouldn't fit there. I have it standing on end in the living room with a wall clock mounted on the front of it. Most people think it is an out of scale Grandfathers clock.

Hi Margaret, I started to write this and laughed out loud at Peter's comments. I suspect we will all find this out together. I am always afraid of these studies as the media has a field day with them and it may become tomorrows Headline. " Boomers Dieing Off and Housing Market Values Collapse".

Interesting question, I have not read anything on it. Guess I need to. It will stay tuned to see what others think.

Hi Jane, A net egg is what you get when a net is in the reproductive cycle. Actually, a typo and thanks for pointing it out. As for Boomers living a few more years, there is reason to believe they will live well past a hundred and maybe, way way longer. Now just think of what we have to look forward to on our highways in the future,lol . Perhaps the auto companies will develop rubber cars. Oh no, not for the elders, for us to keep from being crushed by all the big old cars they would drive as they peer up over the edge of the steering wheel.

Hi Denise, Me too! Thanks for dropping by. I guess they might have it on line. Look under USC's School of Policy, Planning and Development. The gentleman that researched and wrote the study are Dowell Meyers from USC and Sungho Ryu, a doctoral candidate at USC.

I like giving opinions. Especially when asked.

Nonsense. For every baby boomer that dies off, they will be replaced with two immigrant who, after saving for 9 years will be ready to buy. The immigrants could buy properties up so fast that they could create a shortage and prices could skyrocket, depending on the interest rate, which really controls demand.

Nonsense again. The elderly will all have Reverse Mortgages and live comfortably in their homes until they are put on life support which may even be in the spare bedroom.

My opinion is that, give me any study from any cloistered university type with no experience in the field in which they write and I'll debunk it.

Thanks for the lite note.

Hi Lenn, When I first read your comment, I read it as, two immigrants after serving for 9 years. I was laughing uncontrollably at your audacity of hopelessness.

Either way I suspect you would be right.

William. Actually, that is not far from the truth, "serving for 9 years". My experience with immigrant home buyers is that the immigrant family, two, three generations, works in low paying jobs (serving being one of them), construction, house cleaning, labor, etc., saves for 6-9 years before buying.

The Costco casket line has declined significantly since the evaporation of the home equity lines, many frozen. The home owners are unable to finance the addition to their home to store the caskets.

Rather than taking a HELOC to finance the addition to the house, they rented a storage facility which, in a pinch if they can't finance the burial plot. . . . .

Watch the Costco stock go down.

Finally, and this time I meant it.

Did anyone notice that the boomer is selling as a FSBO?

OK, my mind and your mind are not in sync on this one. My thoughts elicited by the word "serving" and yours are two different types of serving. Me bad!

Lenn, I guess several of those caskets standing on end in a row with wall clocks mounted on the front don't really conceal the satin linings slipping out the edges, do they?

Oh...God...I don't even want to think about that.....just trying to get through this... :)

Hi Konnie, I suspect we are all in the same mode. But it is an interesting thought. I loved Peter's idea of buying a funeral home. I thought that was so funny ,until I started to think about the best future business's. Consumables and I don't want to do that, Technology and others are way ahead of me but funeral homes I could do. We could provide additional services like podcasts to download the pictures for anyone that couldn't be there , itunes could sell special music selections suitable for the occasion and my mind was racing and.........., reality set back in and I dismissed the whole thing. I best stay focused on listing and selling homes.

Are these the same fools that convinced cities and towns to zone against affordable housing because the boomers kids would clog the schools, or.horrors...need new ones? In reality...We've been turning the schools into condo's and office space....of course this could be the start of the "senior housing bubble"(ramps and bars included)

Hi Joan, Could be the same fools, I don't know them personally? Schools into senior housing? Wow what a concept. I am staking out the nurses lounge, it has the best bed and the smallest windows as I remember. The only problem with most of the kitchens is that you could seriously hurt yourself trying to get the refrigerator door open. The Seniors also would be crawling in there looking for left overs.

Very interesting study. I've also heard that it will be hard to sell the McMansions as the Gen y like to live in the cities and don't care about the biggest house on the block.

Hi Missy, That is an interesting thought thrown into the mix of this study. Lenn, weighed in and I feel or I should say she strongly disagrees with both the nature of the study and also the doctoral candidate that helped generate the study. When all this ideas are considered as a whole, there may be more to that sort of future. Since we have nothing in our past to rely on, it is all theory and we hopefully will live long enough to see this all manifested as a market condition. It is a bit scary when one considers all the possibilities. Guess we should spend a lot of money on research and try to provide more and more a longer life. If that doesn't work, maybe the government will come up with a plan to buy them and all the land , federal property. They could become our new spaces. One here, one there, sure, that will work,lol

APR

2008

Hi William,

I don't think it's much of an issue at all. We have such an influx of immigrants (legal and otherwise) which will continue the need for housing. Although a question, I didn't understand the comment of shrinking equity, if anything you would think it would continue to grow over the years...that is unless they use a reverse mortgage.

BTW, if you're read Harry Dent, he talks about the aging boomers no longer needing that "trophy house" at one point.

Hi Lynda, The shrinking equity for the surviving elders is because supposedly the huge influx of homes that won't sell so quickly will cause prices to fall. I guess I should have made the point more clear. Thanks for the lead on Harry Dent , I will check it out. Always nice when you come by and share you insight.

The studies are always interesting, and one of them at some point will be proven correct. I for one have lived in very large homes, and when I left Hawaii to pursue a life in RE in NC, I downsized to postage-stamp-size living, and love it! Low maintenance, easy to clean, and all I need. Now I wonder why people need huge living spaces but of course I only have to worry about my cat! One of the best 'greening' features in the world is lower square footage.

Hi Susie, You make a good argument for what our future lifestyles could be. I would ask you, what will happen to the megalith ( McMansions) as some refer to them when the baby boomers try and sell them in large numbers as they downsize or move to smaller and or pass on. With the desired concentration of the Y Generation moving to the hubs of commerce and enjoying the enriched density, the suburban areas and the mini estates become available. Who will buy them , except at lower prices as they become the maintenance nightmares and so much more expensive to operate? I think that was more the real issue of the study.It is all a guess as we have no historical basis other then the age to housing demand and that is a bit weak, itself. It will be interesting to see how the media will sell this one. You can figure that if the media drives that bubble, it can not be to positive-for that we would all agree.

There will be quite a few opportunities to purchase some nice 'residential' corporate retreats! It also comes to mind that in my opinion fewer people will chose the marriage trap/route so the McMansions could serve as 'private' communal living for those who are single, without children and/or significant others, but wanting to share expenses and enjoy a possible sense of security (as opposed to living alone with a cat).

Awhile back I was asking my college graduated son when he was going to start thinking about buying a home and his answer was never. He will be married in less then a year and his future wife totally agrees with him.

Our future generation is not interested in owning a home for several reasons.
They don't want the mundane lifestyle of their parents.
They will trade up jobs every 2 to 3 years and will not want the hassle of trying to sell a house.
Our kids will not want to be tied down with a house and all that goes with it.
For what they will pay in property tax they can rent a very nice house.

I just wonder if anyone else has noticed this trend.

The future of real estate needs to be concerned about the boomers and now our future generation too.

Please help me to understand this mindset of these kids.

Samatha
Sparks Home Realty

Hello Samatha,

One of the unique characteristics of our society it that provides for just about any lifestyle. I dare say, I have heard other scenarios not so unlike what you have shared about your son's belief of what he intends his lifestyle will be.

Experiences in life sometimes dictate changes in mindsets and that may also be the case here. At least that possibility always exists. Part of the understanding about owning versus being a tenant ( short or long) is that more wealth has been created over a lifetime owning a home as opposed to the creating that wealth wealth for a landlord. Flexibility in being mobile may be a bit more cumbersome as it involves the same tasks associated with ownership, when that ownership may choose anther location for residency

Understanding the positives and negatives of tenancy vrs ownership are varied and way beyond the convenience of owning your space and creating your own environment and even the wealth building aspect. There is anchoring of the individual to a community, family etc that can be underestimated.

In this post I illustrate the possible changes in the Baby Boomer aspects of future ownership. Doing an article on the value of ownership vrs tenancy may be a natural followup as we consider the dynamics of these varied lifestyles.

I certainly thank you for you detailed comments and the conundrum that lifestyles we may face on home ownership in the next decades.

Hi William- The Irish have a saying "let me be in Heaven 1/2 hour before the Devil knows I'm dead"......well, on that theme.....I would want to make sure I die before all the other Boomers.....heck forget the house, I will have to live with a whole generation that would think I needed parenting.....LOL :)

Hi Kathy, It is always great when you drop by. You are too funny! I expect I would fall into that same category. One comment suggested that schools might be the new Seniors housing. Can you imagine? One would likely need a wheel chair to get down all those long corridors. Forget those wheelies! They would have lower all the basketball hoops as well. A couple sections might have to be off limits. The Biology and Chemistry labs and also the wood shop. Tools in the hands of the elderly might become weapons, especially if they have the same cafeteria personnel preparing the food. Too funny in my mind. What a way to spend your senior years,YUK!

APR

2008

William- Hey I didn't like school when I had to go, so I sure have no plans to live in one LOL :) Ok......I think I would read a different stufy, oone that lets us live a blessed life :)

APR

2008

William- I read the same article.. I'm with Lenn on this one.. won't make any difference.. In CA we are well behind in building enough housing to meet the needs of our continually growing population. The biggest problem with this is the assumption that 55+ homeowners will be selling.. not so.. most will remain in their homes as long as they can . If all of us over the age of consent were to sell immediately.. then there might be an impact.. but it's not going to happen..

APR

2008

That is a very interesting question. An article about the study can be found at latimes.com. The areas that are going to notice the most are areas that are warm climates and are currently attracting Baby Boomers. There are 'boomer communities' that will be effected as Boomers go from the dominate population to the minority.

APR

2008

I've often pondered that same question. It makes perfect sense. I like the idea Peter mentioned on investing in a Funeral Home. I have a client right now who's a casked sales person...which would be another good line of business.

I think the boomers were more "intelligent" with their money. I believe in todays world, there are too many people in money trouble and bad credit. I think within the next 20 years if the economy does not turn around and we get ourselves out of debt, the housing market will go down with the ship.

APR

2008

Hi Kathy - well,conversly, I loved school but like you, I wouldn't want to live in one. We have options- like camping or living with Sally at her pool in Hawaii,LOL.

Kaye - in retrospect, I believe you are right. Even with our glut of homes in the market, California, for one state, still has a housing shortage. Hopefully, the Boomers selling and the Immigrants buying will keep our markets viable well into the next century. Nice to see you here again. Hope you're doing well. We should keep on eye on all this anyway. It is worth seeing what the media will do with it. They seem to control the hearts of minds of way too many people these days with their un-news.

Wayne - see my comments to Kaye. LOL, She and Lenn make a great point about our expanding population and the offset of Boomers eventually dying off by the ever expanding immigration. Thanks for droppping by. Always appreciate hearing from you.

Christopher - that was my first reaction as well. Guess by the sounds of the theory behind my post, we will need quite a few more. Where will all the folks be buried? Maybe to "Flower Fields Everyone", along with all the other good people.

Chuck - Do I sense a note of pessimism in your voice? I have every confidence we will get all this mess sorted out hopefully we will all be well past it by that time.

William

you have some of the most infomative articles there are.

Sincerely

Tom Braatz

Thank You Tom, That is so nice of you to say that. I will say honestly to you, that it feels good to know that things I know and can share of interest to our members. Why my passion for this industry really comes through, even I can feel it. It occurs to me that I love to teach real estate, not a sales person, but as a technician with passion. Buying and selling a home is really that not hard. What is hard is enabling the Buyer or seller to understand better how to car it, how to recognize value and how to think in their own best interests. One would believe that that last statement is all about price and it isn't. It is about the care and respect our homes deserve as the safe harbor they provide. They can don't it with us but with our care and belief that their bones are worth it, they can be dressed beautifully, kept healthy and provide enjoyment for all that partake of them. A home that used can be loved and it gives so much back when properly cared for. One might say that all homes deserve a lot more respect they get. Short cut remedies hurt them, poorly designed space abuses them, and dirt and germs make then unhealthy.

APR

2008

William, in some ways I'm sure there will have an impact. When we were in school they had to build more schools. As we became adults, they needed to build more housing. As we continue to age they are now redefining senior housing and designing to meet our demands. There is no doubt we have made an impact! How the future will deal with life after we are gone will be interesting. As Lenn said, there will be other segments of the population that will grow, but I believe we will have a far-reaching impact on the world. Of course, I may be a bit bias:)

APR

2008

The average baby boomer is endowed with the ability to see into the grave. The average baby boomer expects to take the house with them OR just blow the equity and leave the note.

APR

2008

Hi Diane, So nice to see you. It looks like I missed seeing your comment. My apologies. From all the reports I am hearing, maybe it will all be a moot question. With life expectancies increasing, and the advent that SS may not be available, people may opt to work longer requiring them to stay in their homes longer. There will be pressure to import many others from other countries that will help absorb the inventories as well as complete for the newer high tech jobs. What may happen though is that there will be a greater pressure to prevent homes values from escalating like they have over the past 20 years. That taken with the new lower levels when things finally stop dropping in value, may be the new threshold. What do think?

Hi William, I definitely agree that we baby boomers will work much longer...perhaps into our 70's which will make the impact more gradual. Plus, I think our generation is more active and less likely to move in to a senior living community until much later in life. That will make the impact on housing more gradual. There has been so much social change that I can only speculate as to what the family and extended family Will look like! BTW, I love your graphics and header!

Hi Andrew, I hadn't thought about that and it may be true. We will have to see how all this shakes out over the next decade or so. But I will remind that a cancer curing machine has been discovered and if it proves to be all that is believed, we may in fact be able to live and count the 100 candles. I saw this new device on 60 minutes and it is pretty amazing. It will change the dynamics of life itself if cancer can be eradicated as easily as is believed. We will be hearing a lot more about this and it uses simple radio waves to kill cancer cells that have been injected with metallic particles that heat up and destroy the cancer cells while leaving surrounding tissue healthy.

Hi Diane, Thanks for the compliment on the header. Read my note to Andrew. Had you heard about this new cancer machine. We may in fact be able to work comfortably well into our 70's and it will delay the cycle. If we keep importing people from other countries and sustain the special visa for technology and medical jobs, then we could still face housing shortages, never mind the Baby Boomers,:-).

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