Housing boom? Housing bust? It’s back to demographics again.
For years, conventional wisdom held that as baby boomers retired, they would downsize and move to places like Arizona or Florida. But, once again, baby boomers defy expectations. Instead of moving, more are staying in place, renovating or moving to only slightly smaller (nearby) places. Easier and cheaper, for them.
While this may bode well for the boomers, they are “clogging up the whole chain of home sales,” according to Freddie Mac’s chief economist Sean Becketti. By staying put, they’re not opening up housing stock that younger people may want to buy, meaning that supply is low and demand can be high.
Given that the millennial generation is larger than the baby boomers, that will increasingly be a challenge. In fact, in Seattle, housing listings in October 2015 were down 19.1 percent from a year before, while median list prices were up 10.3 percent. It’s simply harder for young people to buy houses.
My 31-year-old niece and her husband, returning to Seattle, have been house hunting all spring. The first house they put an offer on had four other offers. The second had 22. In both cases the houses sold for several thousand dollars more than asking prices.
They gave up looking for a house and bought a condo in an area of Seattle proper that her parents and I remember as being quite sketchy, but now, with spanking new apartments and condos, is much more desirable.
Demographics affect so much in our economy, and this is a good example. But watch out. According to another Fannie Mae expert, Patrick Simmons, once those baby boomers do start selling their 32 million houses, another whiplash may hit the economy. Get ready, in 10 years or so.