Older Americans own half of the houses in the market. Many are simply refusing to sell and others have adult “kids” moving back in since they can’t afford a place to rent or buy. It is a Catch 22 and many people are looking at countries like Italy where the number of adults that live at home is enormous. Multi-generational families just don’t coincide with the “rugged American” worldview where you go out on your own and you make it with your own two hands. Of course, many house humpers had mom and dad chip in but that doesn’t make for such a sexy story. In the end, however there are many baby boomers that simply are not selling. This is actually an interesting problem that is not going away.
Refusing to sell
Housing used to be a young person’s game. The U.S. housing market and to a large extent, the economy was driven by home buying and big ticket purchases. But that has definitely changed since the housing market imploded with the 2000s. It has also changed in terms of people marrying later, having fewer kids, and basically preferring to live in city centers versus suburbs. In other words, not a big need for McMansions.
The oldies but goodies are now occupying a larger share of housing:
Over half of homeowners in the U.S. are now 55 and older. And this figure is only going to grow over time. In places like California, the Taco Tuesday baby boomers own the housing market. This is just a fact and has kept inventory to a very low level.
But housing has gotten more expensive across all U.S. metro areas so this is a much larger trend. It has absolutely crushed the available inventory out on the market:
Inventory still remains near record lows. This is a problem for those looking to buy especially when people are competing with investors, foreign money, and house lusting individuals that simply don’t want to wait any longer even if it means buying a crap shack. Yet all of this assumes the economy continues on this 8-year bull market.
Also, while home building has picked up, it is still historically weak given the demand:
At the peak we were humming at 1.8 million housing units being built per year. We are currently at 823k. That is one million short from the peak days of the housing bubble.
So why are baby boomers not selling?
“(Bloomberg) The system is gridlocked,” says Dowell Myers, a professor of urban planning and demography at the University of Southern California. “The seniors aren’t turning over homes as fast as they used to, so there are very few existing homes coming online. To turn it over, they’ll have to have a landing place.”
In Lexington, Massachusetts, a Boston suburb, broker Dani Fleming offers pizza and refreshments to entice the mostly elderly homeowners to attend seller seminars on “how to unlock the potential of your home.”
In other words, these Taco Tuesday baby boomers are staying put. It is what we talked about in the sense that they are house rich and money poor. You need to sell to unlock that equity. And right now, living in a crap shack and buying tacos is much more appealing than unlocking cold hard cash.