Will the passing of the baby boom kill the housing market?

Posted by: Peter Coy on February 11, 2008

aging baby boomers.jpg
Check out this recent post over at Seeking Alpha predicting that the aging of the baby boom will kill the housing market. The gist is that boomers propelled the market upward by trading up to bigger houses, renovating and expanding, and acquiring second and third homes. But now the oldest boomers are hitting the downsizing age, so a big source of demand is starting to go away.

The post is based on an article in the Journal of the American Planning Association called “Aging Baby Boomers and the Generational Housing Bubble: Foresight and Mitigation of an Epic Transition.” You can see an abstract of the article, and get a chance to buy it for $28 if you’d like, by clicking here.

Let me save you time by giving you the bottom line of the JAPA article:

Results and conclusions: Sellers of existing homes provide 85% of the annual supply of homes sold, and home sales are driven by the aging of the population since seniors are net home sellers. The ratio of seniors to working-age residents will increase by 67% over the next two decades; thus we anticipate the end of a generational housing bubble. We also find that younger generations face an affordability barrier created by the recent housing price boom. With proper foresight, planners could mitigate what otherwise could be significant consequences of these projections.

I raised this same issue in my recent cover story called Meltdown. (Search on Mankiw.)

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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