There has been a housing shortage for awhile now, leaving a less than ideal market for millennials and first time home buyers. But Fannie Mae predicts as baby boomers begin to downsize or move into senior care facilities, more housing will be available and prices will drop, finally making homes affordable for millennials. But is this really good news for the housing market?
Will Baby Boomers Exiting Homeownership Cause a Housing Bust?
Fannie Mae’s Economic and Strategic Research Group conducted a study, The Coming Exodus of Older Homeowners, indicating the baby boom generation inhabits 32 million owner-occupied homes.
The study also predicts that the homeownership demand from younger generations may be insufficient to fill the inevitable void left by boomers downsizing and departing homeownership in the near future.
Although baby boomers have not yet begun to leave homeownership in substantial numbers, Fannie Mae predicts that the amount of baby boomers departing from homeownership will increase over the next two decades when they reach their 70s. Currently the oldest group of baby boomers are just turning 75 years old.
The number of older adults who depart from their homes between 2026 and 2036 is projected to total between 13.1 million and 14.6 million which could significantly damage the housing market and economy if younger generations cannot fill this void.
The study indicates this “generation housing bubble” can be avoided, but it is urgent that industry and public policy efforts are made to facilitate a smooth transition of homeownership from baby boomers to younger generations.
Dowell Myers, a professor at the University of Southern California and co-author of the Fannie Mae report states,
“It’s impossible to forecast price impacts 10 years ahead. We do not mean to be alarmists, but hope to spur discussion of the impending challenges and the need for public and private policies that might cushion the impacts.”
Among these options could be more down-payment assistance programs or flexible debt-to-income ratios requirements to help millennials afford the influx of homes when they are unloaded on the market. There are already financing programs that encourage first time buyers to get in the market today. Hopefully this will enable today’s buyers to grow equity to eventually purchase homes vacated by baby boomers over the next 2 decades.
About Oakland County Mortgage Lender, Julie Krumholz
Julie is a mortgage lender serving Southeast Michigan with over 30 years of experience. She has worked in underwriting, quality control, processing, closing and loan origination. Her extensive background allows her to advise Michigan borrowers with unusual expertise.
If you are looking for a mortgage expert to help you navigate through the home buying process, contact Julie from Main Street Bank located in in Rochester, Michigan by calling: 586-382-5482.