Many analysts continue to focus on the Millennial generation when analyzing housing demographics. However, a recent report from Freddie Mac indicates that the housing choices made by Baby Boomers will have an even greater impact on future tends and patterns.
How Age Affects Home Ownership
An aging population affects homeownership is a variety of ways. Currently, nearly two thirds of all tangible home equity is concentrated among those over the age of 55. As a result, the housing-related decisions made by the 55+ age group will have significant repercussions for younger generations, especially the Millenials.
If aging Baby Boomers decide to stay in place, the supply of homes available to those under 55 will remain limited, which may exert upward pressure on market pricing. Conversely, if Boomers choose to explore senior-oriented housing options, that segment of the market will experience substantial growth while overall housing affordability may improve due to increased supply.
Why Baby Boomers Control the Housing Market
Over 50 percent of Baby Boomers own their homes free and clear, and as a group, they account for only one-third of all mortgage debt. In terms of relocation and financing, this flexibility presents some interesting questions as to exactly how Baby Boomers will influence the market moving forward:
* As a group, will Boomers downsize and relocate or age in place?
* How will the Baby Boomers respond to senior-focused housing options?
* What was the financial impact of the 2007 recession on the Baby Boomer generation?
* How will Baby Boomers manage their significant home equity?
No matter how these questions are ultimately resolved, there is no doubt the Baby Boomer generation will largely determine the future direction of the housing market, financial industry and national economy for several decades to come.