Will the Baby Boomers Destroy the Housing Market?
According to US census data, there are 131,704,730 “housing units” in the United States (as of 2010) and there are 112,611,029 “Households.” If those numbers aren’t scary, let me add more concern by foreshadowing another starling danger about the US real estate market.
The baby boomer generation is reaching retirement age. In fact, many estimates predict approximately 10,000 people are reaching age 65, each day. Although many people are pushing off retirement due to recent portfolio problems, this wave of retirees is incoming. When this generation does indeed retire and decides to rid themselves of their home, there is going to be a massive correction. Now I’m not saying every baby-boomer is going to sell their home, but even if a fraction of them do – this is going to cause a major glut in housing.
According to http://www.housingamerica.org/ approximately 43,000,000 households were owned by individuals 50 years or old, additionally these individuals hold 6,600,000 second homes. That is 49,600,000 (37.6% of the 131.7 million number above.) How big really is 49,600,000 in proportion to what is going on now? Well during the July-September quarter of this year the number of foreclosures was less than 290,000 (96,666 a month), but still this number was view as if the sky was falling. That’s .5% of the inventory the the age 50+ population has.
In other-words, the baby-boomer generation has the power to annihilate the housing market if the economy does not turn around. Even if the demand for houses grows, it would be hard to imagine needing more houses to be built, which is something that is needed to stimulate our economy.
It is really important to see how bad this glut really is going to be. If you took those roughly 50 million houses and distributed them over 20 years that would be 2,500,000 homes for sale a year. This equates to an addition 208,333 houses a month. I understand these numbers are crude and incredibly blunt, but the point remains.
I’ll be the first to admit this article leaves plenty to desire. How many of the baby boomers are being foreclosed on now and how many homes are normally sold by previous generations of age 50+ year olds – these are questions you should be asking yourself. I don’t have those answers for you today, but rest assured this is a danger to the future of the housing market.
Just something to think about.
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