Monday, July 23, 2012

Boomers Changing the Housing Market...Again

When Baby Boomers started families in the 1970s, builders rushed to supply them with homes. By the 1990s, when boomers were more economically secure and wanted bigger homes, the market responded.

In fact, between 1990 and 2010, boomers accounted for 80 percent of the demand for new homes, said Arthur C. Nelson, director of the Metropolitan Research Center at the University of Utah. They wanted larger, more expensive homes, and builders delivered, he said.

Since 2010, however, boomer demand has been leaking out of the single-family housing market. In coming years, that leak will become a flood.  Boomers, the demographic born between 1946 and 1964, are hitting retirement age, the time when most people look to downsize their housing.

That means that while the home construction business is slowly recovering from the upheaval of the Great Recession, the housing market is unlikely to return to the level of growth seen in the first years of this century.  No matter the number of new housing starts, the types of products demanded by the market will change. Baby boomers entering their senior years will begin to shed their large, detached houses on spacious lots in favor of smaller living spaces in apartments, condominiums or townhouses.

Between 1990 and 2010, the demand for large single-family homes constituted 80 percent of the demand for new housing nationwide, Nelson said, but that is starting to flip.  From 2010 until 2030, the demand for large single-family homes will constitute only 12 percent of the total demand for new housing and multi-unit housing will constitute 80 percent.

In some cities in the Midwest and the Northeast, the demand for peak housing — large, expensive single-family homes — will actually be negative which means some sellers will not be able to unload their homes because there will not be enough buyers.

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