Though the housing market is finally hitting its recovery stride, a University of Utah researcher suggests another housing crash will take place in 2020, and from a most unlikely source – senior citizens.
Early last year, the housing market began to turn around, and now, there are many projections for the housing market that are quite rosy, with sales, prices and even delinquencies all expected to improve noticeably in the next two, three years.
But there are always skeptics, and in this case, appears to be Arthur C. Nelson, the director of the Metropolitan Research Center at the University of Utah, who not only predicts that the next housing crash will take place in just seven years, but that it will come from the most unlikely of sources – senior citizens.
The Great Senior Sell-Off and the Housing Crash of 2020
Nelson’s argument is a straightforward one:
- In the last 20 years, 77 percent of new housing construction demand came from baby boomers, who sought large-lot, single-family homes in suburban locations.
- And that disproportionate demand, Nelson says, has created an imbalance of supply. Very few starter homes were constructed in that time period, and sans a few of the nation’s growing metro areas (Atlanta and Dallas, for instance), many of the U.S.’ housing markets will face what Nelson calls “the great senior sell-off,” where 1.5 to 2 million senior-owned properties will hit the market every year at the end of the decade – and there will not be enough buyers to absorb that supply.
- The reason for that is two-fold: one, 74 percent of new housing demand will come from baby boomers looking to downsize; and two, though there are plenty of Echo Boomers looking to buy large single-family homes, a quarter of that generation wants to buy condos or urban townhouses, which represents a radical shift in homebuyer interest. “[That demand] used to be almost zero percent, and if it’s now 25 percent, that’s a small share of the market, but a huge shift in the market,” Nelson told Atlantic Cities. “Even if the numbers matched, the preferences don’t.”
The Politicization of Housing
And inevitably, politics plays a role as well. Minorities in America, Nelson points out, will eventually become a majority of the population, but given the achievement gaps widely documented among the nation’s demographics, a majority of U.S. residents will be incapable of generating the kinds of incomes necessary to buy those big, suburban single-family homes.
“That’s going to hit us,” Nelson told Atlantic Cities. “Not right now. But my guess is that about the turn of the decade, that number will become a real number. It’s only a few percentage points now, but it’s like a glacier, and if it keeps moving and building and growing, it’s going to be a big number in about 2020.”
“Between changing preferences and declining median household income because of poor education – because we’re not willing to spend money on education,” Nelson concluded, “that means we can predict the next housing crash, and that’ll be in about 2020.”
We should point out that Nelson’s hypotheses, though logical in their presentation, are nonetheless quite outside of mainstream scholarship on baby boomer housing. Though various trade groups have covered the topic (the NAHB has been particularly energetic in its coverage), no studies have carried quite the apocalyptic overtones of Nelson’s. The Urban Land Institute, for instance, released a study late last year that, though admitting to the challenges of housing the U.S.’ large baby boomer population, avoided the doom and gloom of Nelson’s analysis.