(This is an excerpt from an article I originally published on Seeking Alpha on May 29, 2013. Click here to read the entire piece.)
Back in March, 2013, an intriguing article appeared in The Atlantic Cities called “The Great Senior Sell-Off Could Cause the Next Housing Crisis.” Author Emily Badger interviewed demographer Arthur C. Nelson, a professor at the University of Utah and director of the Metropolitan Research Center there. Nelson basically argues that by 2020 the supply of homes for sale from downsizing baby boomers will begin to overwhelm the demand for their homes. Mismatches in preferences (baby boomers bought extremely large homes) and declining median household incomes (from an American public education system continuing to suffer from severe “achievement gaps”) will drive the imbalance between supply and demand. By the time these motivated sellers reach a very advanced age (like 80 and up?), they will finally just walk away from the homes they are unable to sell, leaving behind plummeting values in contracting or otherwise stagnant cities. Nelson calls this dynamic the “Great Senior Sell-Off.”
Despite the doomsday possibilities, Nelson acknowledges that growing metro areas will not experience this sell-off debacle because the demand will exist to absorb the supply. So, to me, the worst case scenario abut downsizing baby boomers is that they may hasten the decline of already dying cities and/or regions. {snip}
Nelson’s research seems to rely heavily on a 2007 paper in the Journal of the American Planning Association called “Aging Baby Boomers and the Generational Housing Bubble: Foresight and Mitigation of an Epic Transition” by Dowell Myers and SungHo Ryu. In this paper, Myers and Ryu make an intuitive conclusion about the impact of an aging population that aligns with what I consider the absolute worst case scenario regarding the Senior Sell-Off:
“…it is a mix of the coldest, most congested, and most expensive states, rather than high-growth states of the South or West, which we expect to lose older homeowners most rapidly. Of greatest importance is whether a state has a growing or static population of young adults to absorb the homes its senior population will sell.”
{snip}
I will cover more of the counter-evidence for the Great Senior Sell-Off in a part two to this piece. I also appreciate any feedback that will better inform the next piece on this topic.
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on May 29, 2013. Click here to read the entire piece.)
Full disclosure: no positions