As baby boomers – the generation born between 1946 and 1964 – reach retirement age, and the last of their adult children moves away from home, will they decide to stay in the suburban home or flock to a smaller place near the city? It’s a question that housing analysts are paying careful attention to, since the large generation’s housing choices can have significant implications for the housing market.
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About 10,000 baby boomers hit retirement age each day. As boomers exit the labor force, their retirement “could lead to a downshift in housing consumption if boomers adjust their housing costs to match the reduced earnings of retirement or if they decide to relocate once proximity to work is no longer a consideration,” according to a new commentary by Fannie Mae researchers. One theory is that as Baby boomers retire and become empty nesters, they will increasingly choose to downsize from their suburban, single-family homes to urban multifamily residences.
But for now, many boomers appear to be staying put, even with shrinking households and declining participation in the labor force. So far, boomers have not appeared to be altering their housing consumption by abandoning detached single-family homes. In fact, the number of boomers who are residing in single-family, detached homes rose between 2006 and 2012, Fannie researchers note.
A survey in 2010 by AARP found that nearly nine in 10 baby boomers say they prefer to remain in their current residences for as long as possible. Also, economic and housing market conditions may be forcing some baby boomers to stay put, even if they did prefer to move. Some boomers may still be trying to make up for lost equity following the housing crisis.
“Declining home values and the recession-scarred economy have suppressed boomers’ residential mobility, thus slowing the rate at which they can adjust their housing consumption,” notes Patrick Simmons, Fannie Mae’s director of strategic planning economic and strategic research group. Between 2006 and 2012, the percent of boomer households who moved during the preceding year fell from 10.2 percent to 7.9 percent, according to Fannie Mae data.
But Fannie forecasters do expect that the stability of single-family detached occupancy among baby boomers will eventually come to an end, either eventually by choice or the inability of boomers to maintain a single-family home as they age.
“Coming changes in the housing consumption of the baby boom generation have potentially far-reaching implications for the U.S. housing market,” notes Simmons. “The housing situation of boomers bears continued close monitoring, even if some indicators have yet to reveal major signs of change.”