In the next 20 years, a seismic shift will take place in residential real estate. Increasingly, America’s aging baby boomer population (born from 1946 to 1964) will begin to downsize and sell their homes. At 76 million strong, Americans aged 50 and older and are slowly starting to retire and sell their primary residence. By 2030, Boomers are expected to balloon by 20 percent, reaching over 132 million, with one in five being at least 65, according to a new report by Harvard’s Joint Center for Housing Studies.
This massive demographic change — let’s call it the Big Shift — will have lasting and deep repercussions on housing. Harvard predicts that the Big Shift could lead to an unprecedented number of America’s aging population to face a lower standard of life — or even financial hardship.
“The U.S. Department of Health and Human Services (HHS) estimates that nearly 70 percent of people who reach the age of 65 will ultimately need some form of long-term care.,” the Harvard study reports. “This care can be costly, adding to the pressures on financially stretched older adults.”
The Harvard study said that many boomers want to “age in place,” meaning they would prefer to stay in their current homes and not sell and move.
“In its recent survey of 1,600 people aged 45 and older, AARP found that 73 percent strongly agreed that they would like to stay in their current residences as long as possible, while 67 percent strongly agreed that they would like to remain in their communities as long as possible,” the report said.
It’s unclear whether boomers will “age in place” or whether new housing trends will encourage many to move from larger homes to smaller dwellings. But the study points out that a third of boomers are paying more than 30 percent of their income for housing. Moreover, 23 percent of owners with a mortgage are severely burdened, paying more than 50 percent of income on housing.
Regardless, millions of boomers with small or no mortgages will likely sell their homes in the coming decade. “Moreover, two-thirds of homeowners aged 65 and older no longer have a mortgage to pay, so they haven’t had to worry about going underwater or facing foreclosure,” writes Paul Taylor, a senior fellow at the Pew Research Center, and author of the new book The Next America (Public Affairs 2014). Taylor argues that housing has been a much better investment for the old than the young.
But who is going to buy the millions of Boomer homes?
“Hispanic buyers are the one group most likely to power future home sales and mortgage borrowing,” argues Miller.
Miller claims that another demographic shift is taking place in America that offers housing an opportunity for new sales. Simultaneously, as Boomers are entering retirement and selling their homes, Hispanics are entering the workforce and starting families. This convergence could fuel home sales and push home values higher, Miller argues.