As the baby boomer generation has aged, it has also stayed put. And for all the innovations builders and product manufacturers have come up with to help seniors “age in place.” they may have also made it more difficult for would-be home buyers, causing a lack of housing inventory.
According to a new report from Freddie Mac, 2019 will see a significant shortage of available homes here in the U.S., failing to meet needs by 2.5 million units. It doesn’t help that at the same time millennials are buying fewer homes at this point in their lives compared with previous generations at similar periods.
As seniors continue to prefer to stay where they are as the optimal way to live out their remaining years, housing inventory has tightened nationally. According to the report, for people between the ages of 67 and 87, homeownership rates dropped by 11.6 percent for previous generations but only 3.6 percent for the current (leading edge) generation of seniors, identified as having been born between 1931 and 1941.
New advances in information technology may be the culprit, as well as accessibility to better healthcare and education, with the report crediting those advancements as “boosting and extending” housing demand among seniors. The result? The current senior generation has become much slower in transitioning out of homeownership than prior generations.
The U.S. Census Bureau says lost units will need to be replenished at a rate of 350,000 homes per year in order to bring the market to a “well-functioning” status.
“Vacant homes increase liquidity in the market, enable prospective buyers to find a match, and give prospective sellers confidence to list their home for sale,” the Freddie Mac report states. “Vacancy rates are an important indicator of housing market vitality. Too high a vacancy rate reflects a moribund market, while too low of a rate reduces the efficiency of the marketplace.”
While this does not bode well for home shoppers, it will boost spending on renovations, according to Chief Economist Sam Kater. “We believe the additional demand for homeownership from seniors aging in place will increase the relative price of owning versus renting, making renting more attractive to younger generations.” If that is true, however, those in a position to purchase the limited number of homes available may well see their property values increase more quickly than anticipated.
Source: Realtor, Reversemortgagedaily, FreddieMacTBWS