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July 27, 2018 | Over-Housed Boomers Looking to Downsize is a Secular Shift

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Lower shelter costs, along with less consumption spending of all kinds, are necessary pillars to restoring financial viability for households in the post-debt-bubble world.  As credit levels recede through a much needed secular contraction, home prices will have to realign with more historically normal income and saving rates.

In the end this will be a boom to younger generations and the future economy, however nearer-term it will mean capital deficits for those banking on indefinitely inflated asset values to fund their future spending needs.   See Housing values may fall as baby boomers die off, or sell off, two studies say:

Will baby boomers turn into party poopers when they unload their homes in large numbers starting in the next decade? Could they create an indigestible oversupply in the market that lowers home prices and frustrates sales?

That’s a sobering scenario outlined by two new, provocative studies.

Both studies cite demographic and housing data to make their cases. Boomers — the giant generation of Americans born between 1946 and 1964 — own 32 million homes, 2 of every 5 in the country. The generations preceding them occupy another 14 million homes. Collectively, their properties are valued at about $13.5 trillion, according to the Fannie Mae study, co-authored by Patrick Simmons of the strategic research group and Dowell Myers, a professor at the University of Southern California.

All of these homeowners face key choices: Do we stay put, sell, downsize or move to a rental? At some point, the inevitable kicks in: Health issues and death will force them to dispose of their properties.

As for today’s many mega-sized abodes (artifacts of the now dying credit bubble)–adding in-house apartments or making them over into multi-family dwellings is the most likely course.  Ideas that increase resource efficiency are on the right track.

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July 27th, 2018

Posted In: Juggling Dynamite

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