Blog posted On November 13, 2018
Less than a decade ago, housing professionals were expecting the “great senior selloff” when Baby Boomers, born between 1946 and 1964, started downsizing and selling their larger family homes. However, a new report from Harvard’s Joint Center for Housing Studies forecasts a growth in remodeling projects as more Baby Boomers choose to age in place. According to the study, out of the 80% of Baby Boomers who own homes, two-thirds of them expect to stay in their homes and make modifications to accommodate them as they age. Rather than a glut of housing for sale, today’s buyers are instead facing a tight market.
With the oldest Millennials, born between 1982 and 1996, approaching their 40s, and the oldest Baby Boomers entering their 70s, the housing market is not seeing the same smooth shift that other generations experienced. Here are some of the challenges Millennials face:
Affordability and Inventory
Typically, older generations will downsize in retirement, then families will move up from their starter homes, and more starter homes will become available for first-time home buyers. Baby Boomers who choose to stay in their homes are causing a ripple effect on housing inventory. Gen Xers do not have larger homes to move up to, and Millennials are grappling over the few starter homes that are for sale. Inventory constraints have driven home prices up for much of the past few years. Despite strong buyer demand, builders have been unable to keep up. University of Arizona professor, Arthur C. Nelson, stated, “the home building industry is now producing less than half the number of new houses it did in the mid-2000s.”
Urban vs. Suburban Homes
Millennial generations tend to prefer living closer to city centers when compared to Baby Boomers, who mostly flocked to the suburbs and exurbs to start their families. Lifestyle differences, like the desire to live closer to work, a car-free commute, and walkability are some of the reasons for this preferential shift.
Size and Type of Housing
According to the Harvard Joint Center for Housing study, about a quarter of Millennials prefer condos and townhouses over detached suburban homes. Nelson commented, “younger buyers are looking for starter homes – smaller than the big Colonials and split-levels that line America’s cul-de-sacs. The sprawling McMansions of the exurbs won’t be desirable to many of them.” With builders focusing on larger homes, because of the profit margin, they might be better off shifting toward smaller plans.
The Harvard Joint Center for Housing study predicts 90% of home buyers in 2035 will be both 35 and under and 70 and under and seeking homes that are less square footage. In anticipation of this trend local governments and developers should focus new home construction efforts on smaller homes.