Something Else to Worry About
Few would dispute that we’re in the throes of a severe housing downturn. But most economists are predicting that the downcycle will bottom out in two years and then start to return to normal. Many homeowners are counting on this scenario.
But don’t exhale yet. A new study by USC researchers is predicting a “generational housing bubble” in a couple of years, when baby boomers hit retirement and start putting their homes on the market, according to this column by housing expert Lew Sichelman:
Now, 78 million boomers are about to enter their twilight years when homeowners tend to become sellers rather than buyers. And as a result, the USC duo expects there will be “many more homes available for sale than there are buyers for them.” As the elderly become more numerous than the young, and shift into seller mode, the researchers postulate, the market imbalance could come quickly around 2011, causing housing prices to fall.
In other words, there will be more older people putting homes on the market than there will be younger people to buy them.
[The researchers] project that the ratio of those age 65 and over to people ages 25 to 64 will surge 30% in the decade between 2010 to 2020 and 29% more in the 2020s, altering the balance between buyers to sellers for the foreseeable future.
This is only a study; we won’t know for several years whether these predictions will come true. But it underscores the need for caution and perspective. Since it’s possible that we never again will see the appreciation of the past few years, we should think of our home as a place to live (we all need a place to live), and an inflation hedge instead of an investment. (That’s what a house was to our parents and grandparents.)
If we’re entering a protracted buyer’s market, every buyer should be thinking about resale. If you have to sell your house, it will be competing against many others, so yours will have to stand out. Location (location, location) will be crucial. And if you’re not planning to live somewhere for a long time, renting may be the wiser choice.
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