What the Long-term Housing Forecast Means to You

Why You Should Sell Now, Not Later, if You’re Hoping to Retire on Your Home’s Equity

Building of House

In 2005, I was a stay-at-home mom, but always an extrovert, out and about dealing with people each day, keenly aware that middle class Americans were obsessed with fix-n-flip houses, that home prices were skyrocketing, and that no-money-down mortgages had become the financial scam du jour. I was also well aware (and appalled!) that the U.S. government had strong-armed financial companies into making mortgage loans to people with poor credit histories. That was a recipe for disaster, and a race to the bottom ensued with each financial company vying for mortgage business from a large pool of unqualified buyers.

Inevitably, Americans of the home-owning and investment ilk experienced the falling dominoes of real estate, bond and stock prices. The thing that amazed me, though, was that I have rarely met a soul who also anticipated the housing crash. When I talk to investors, they beg me to let them know when I foresee another major drop in housing prices. Today I am ringing that bell.

Baby Boomers are getting older. A tremendous number of them own large homes that they’re having trouble maintaining. I don’t care how healthy you think you are, one serious knee problem and you are not going to be climbing the stairs very often to the second story of your house, or descending stairs into the basement where your washer and dryer are located. You’ll also be hesitant to continue doing outdoor chores: climbing a ladder onto the roof to clean out gutters, pushing a lawnmower around, bending over to pull weeds, raking (ouch – that shoulder injury!).

A vast majority of Boomers will be downsizing in the coming decade; selling the big homes in which they raised children and buying small homes, such as condos with one level and no yard to maintain. Added benefit: they can then extract equity from their big homes with which to finance their retirement years.

All across America, but especially in the Northeast and the Midwest, Boomers will be putting their homes up for sale, and often leaving those areas for warmer climates. (And not to be morbid, but there will also be a subsection of Boomers who die, and their heirs will be selling those homes.)

Are you with me so far? Massive numbers of homes will be going up for sale in the next decade.

The youngest of the Boomers were born in 1964. They’re age 55 right now. The oldest Boomers are 73. And of course, members of the Silent Generation who still own homes are even older. They’re less physically mobile. Their bodies are not cooperating with the basics of living within and cleaning a large home and yard. They’re going to sell their homes.

If you are a Boomer and own such a home, right now you’re probably grasping at hope, thinking, “It won’t be a problem. The younger generations will buy homes from the Boomers.” Well clearly I would not bother writing about this topic if demographic projections pointed toward an evenly matched assortment of future buyers and sellers, so take a deep breath and keep reading.

Reasons Behind the Coming Housing Crash

There are a variety of reasons that Millennials and Generation Z are not expected to pick up the slack in the housing market. Off the top of my head, here are some lifestyle situations among those generations that make them different from Boomers, and less likely to purchase houses:

    1. They’re very comfortable with renting. In fact, they’re expected to push rental occupancy more than 20% higher than historical norms in the coming decade.
    2. They’re having smaller families. They don’t need a large house in which to raise three or 10 kids.
    3. They’re burdened with significant college debt that prohibits them from saving for a house down payment.
    4. They’re burdened with significant rental costs that prohibit them from saving for a house down payment. Current rental prices are more than 50% higher than they were prior to the housing crisis, a decade ago, while housing prices are less than 15% higher.
    5. It’s much harder to qualify for a mortgage in this post-housing crisis era. In a gig economy, it can be very difficult for the masses of self-employed workers to meet mortgage lending requirements that demand more predictable income and job stability.
    6. They’re more likely to be single parents at younger ages and possibly working in retail or lower-level corporate jobs that barely cover rent, transportation and living expenses, let alone health insurance. Home ownership can be vastly less expensive than renting, but if you don’t have cash for the down payment, then you’re locked out of the housing market.

Housing takes up much more of a family’s income today than it did when you or your parents bought houses. My father was a newspaper reporter for 36 years. He supported a family of six, and was able to own a home and a car in the 1960s, and two cars by the 1970s. Can you imagine a newspaper reporter supporting a family of six on their salary in 2019?!

The housing analysis that I read projects home buying volume to be more than 50% below normalized long-term levels in the coming decade. FIFTY PERCENT LOWER!

That means people who sell their homes very soon will get much higher prices for their homes than people who sell their homes later in the coming decade. Home values are projected to steadily fall because there will be a glut of available homes and a lack of qualified buyers.

If the bulk of your net worth is tied up in your home, and you were planning on selling in order to tap into the equity to sustain you during retirement, you need to understand that your long-term plans might be thwarted by market forces that you had not anticipated.


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