Baby Boomers have the potential to wreak havoc on the real estate market by simply selling their homes. The sheer number of homes in the hands of aging Baby Boomers has the potential to cause a major real estate crash nationwide.
Boomers own a staggering 32 million homes in the United States or about one out five, The Real Deal’s Kenneth R. Harney calculated. Residences owned by those over 54 are valued at $13.5 trillion.
To make matters worse persons over 54 now own 46 million homes in the United States, Harney noted. That number includes Baby Boomers; born between 1946 and 1964, and those born before 1946.
Will Baby Boomers Cause a Real Estate Glut
This means there is a lot of property in the hands of people who are likely to die, or move to retirement communities in the next two decades.
A Fannie Mae study found that 10.5 to 11.9 million older people will sell homes between 2016 and 2026. That number will probably grow from 13.1 million to 14.6 million between 2026 and 2036.
There are 273,000 homes owned by persons over 50 in the Washington DC area alone, a Fuller Institute study found. Older people are likely to sell those homes because they have two more bedrooms than the number of people living in the house.
A realistic fear is that there will simply not be enough buyers for all those homes. A greater problem is that Millennials, Generation Z (those under 21 today) and Generation Xers (those under 54), will not have the money to buy those houses.
Are There Buyers for the Baby Boomers Homes?
Already a lot of experts are talking about the need for GI-Bill style programs to help those under 54 buy homes.
The GI Bill provided returning veterans with low-cost mortgages after World War II and triggered a massive housing boom. Such programs will be a tough sell to Congress in light of the Great Mortgage Crisis of 2007-2008. The crisis was partially caused by uncontrolled use of cheap mortgage credit.
The good news is the market will “fix” that problem at some point with lower prices. The bad news is a glut might lead to a housing crash - and large numbers of foreclosures or abandoned homes.
Finding ways of helping younger Americans afford those homes, or a use for all the houses Baby Boomers will vacate will be a major challenge for the years ahead. The issue might be forced by huge numbers of unsellable empty homes in American cities.
The bottom line is that the real estate market in the United States will be a slow-moving train wreck for the next two decades. Expect a lot of people to lose a lot of money in real estate as the Baby Boomers’ age. Those who stay out of the real estate market for the foreseeable future - might be playing it smart.
This story first appeared at Market Mad House where we love to expose all manner of market insanity.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.