Over the next decade, millions of homes could hit the market thanks to aging baby boomers.
By now, you have seen the experts predict a “Silver Tsunami,” a massive influx of homes poised to hit the housing market as seniors downsize over the next several years. Where or when will the “Silver Tsunami” arrive?
In 2020, the U.S. Census reported that 1 in 6 Americans were age 65 and over, compared to less than 1 in 20 in 1920. Talk of the wave has risen again, thanks to financial analyst Meredith Whitney’s comments to attendees at the Yahoo Finance Invest Conference in November 2023.
Whitney, who successfully predicted the 2007-2008 financial crisis, thinks that the boomer shift is about to start and could be just the solution to quench the thirst of buyers sitting on the sidelines waiting for more selections to arrive on the market.
“You’ll see a supply-demand dynamic shift,” Whitney, founder and CEO of Whitney Advisory Group, told Yahoo Finance’s Invest Conference Whitney cited data from the AARP stating that 51 percent of people over 50 — a group that owns more than 70 percent of U.S. homes — are set to downsize to smaller homes. Whitney believes this could bring 30 million units of housing onto the market.
In our experience, this is what we think she gets wrong: Just because they are set, predicted, or expected to downsize doesn’t mean that will happen.
For many boomers, moving is more expensive than staying in their current homes, and many will ultimately remain in place whether it makes sense or not.
This generation is less concerned with following previous protocol and more concerned with their own personal happiness, and that joy means:
- having all their special collections and heavy furniture
- having space to house all their complicated (and expensive) hobbies and materials to complete said hobbies
- large garages to house their cars and boats, they will not stop driving.
Most importantly, boomers do not want anyone to tell them what to do or sacrifice their independence. Boomers are going to do it their way, and they will not go quietly into a nursing home and forfeit their homes and personal freedoms as quickly as generations before them. They want it all and are not about to slow down anytime soon.
Critical income data for 2023 from The Motley Fool tells a story many of us are not discussing. Income is either going to create barriers or gateways for this population.
- The average income for U.S. adults 65 and older is $75,254.
- The median income for U.S. adults 65 and older is $47,620.
- Average annual expenses for adults 65 and older are $48,872.
- The average monthly Social Security benefit for retired workers is $1,681 and is set to rise to $1,827 in 2023.
The Social Security Administration reports that 12 percent of men and 15 percent of women rely on the program for 90 percent or more of their income.
Since the pandemic, seniors have become bullish on aging in place, remodeling their homes to be safer places to stay, and avoiding higher levels of care. They are still traumatized by the pandemic lockdowns and are worried about losing their freedoms.
Change is coming.
The populations affected the most will, once again, be Gen X and millennials. They will be the family members and workforce who ultimately will shoulder the bulk of the responsibility of downsizing tasks, becoming caregivers, and figuring out how to utilize the wealth to pay debts and invest for parents’ and grandparents’ future retirement.
What can we count on seeing?
- Increase in demand for 55+ living with luxury amenities and many expense-heavy HOA fees for maintenance-free living.
- Increase in demand for off-site storage solutions.
- There has been an increase in boomers renting instead of being homeowners, which has increased rents and reduced rental inventory for millennials and Gen Z.
- There has been an increase in seniors competing for smaller “starter” homes by paying cash, further limiting the affordability of affordable housing for millennials and Gen Z.
- Increase demand for “age in place” home conversions to stay in the current home.
- There has been an increase in demand for skilled auctioneers who will obtain top dollar for any prized items seniors are willing to part with.
- Increase in demand for residential assisted living options. This newer trend is becoming a popular alternative to traditional assisted living. A large residential home is converted to accommodate a small group of seniors in the Golden Girls style, where they live, help each other, and share caregivers. This is mainly unregulated and very much the Wild, Wild West of senior care.
What we think the experts have wrong. Really wrong.
The most significant thing housing analysts have done is that boomers will want or can afford to retire. Many boomers do not desire to retire fully and take up less space. This is the first time in history that five generations have collaborated in the workforce. The silent generation (think President Biden), boomers, and even Gen X admit they will work as long as possible because they like to work. Many are uncomfortable with their retirement savings and need the extra income.
Baby boomers are still deciding whether to retire: According to a new survey from Harris Poll and staffing agency Express Employment Professionals, 79 percent of workers between the ages of 57 and 75 want to work part-time instead.
Also wrong? We assume that the entire group will make a move. Many will modify their current homes, and the wealthiest will opt to have multiple homes. This cohort will make moves but be different from their parents.
According to a
- According to a Merill Lynch Age Wave report, 65 percent of older Americans plan to stay home and are comfortable in their current home.
- Also, in the report, 49 percent of retirees have upsized into a larger home.
- Seniors want a completely different retirement and care experience than they encountered caring for their parents. They refuse to be “pigeonholed” into “tired” senior living communities of the past. They are looking to leverage their “freedom threshold” after age 61, figuring out how to maximize their life around living their “best life” and choosing where they want to live.
Boomers are outliving their parents, and thanks to modern medicine, many of them are living much longer than they planned. Unfortunately, their quality of life will be challenging if they do not take measures to preserve mobility and if they have other pre-existing conditions such as obesity, diabetes, and heart and pulmonary issues.
What everyone needs to understand about the future of homeownership in this country is that accessibility is the master key to offering the most value to homeowners.
Traditionally, the pathway is to move to a safer, more manageable home because the norm is a home that is not built for all seasons of life. However, none of these options work if people cannot afford them or simply don’t want to go.
The Census Bureau reports that only 10 percent of homes are aging-ready with a step-free entryway, a bedroom, a full bathroom on the first floor, and at least one bathroom with accessible features.
As real estate agents, we have an ethical responsibility to help seniors choose homes with the features they need to age in place and improve their quality of life.
Boomers drive electric cars; they need charging stations in garage spaces for recreational vehicles, high-speed internet, and top-of-the-line intelligent appliances. They associate technology with modern living. They want cutting-edge experiences, are fearless of new experiences, and always want high-quality customer service. They want to travel; they want pickleball. They enjoy theater, music, adventure, and having all their doctors nearby. They want health and fitness offerings, golf, tennis, clubs, and social experiences.
The “Silver Tsunami” is here, but it’s not just affecting housing; it’s rippling through all areas of our economy and personal lives. Instead of bracing for the impact, we must build a big boat to withstand these headwinds and push us into the new horizons ahead.
Resources cited
Yahoo Finance Invest 2023 https://finance.yahoo.com/news/yahoo-finance-invest-2023-054547625.html
U.S. Census https://www.census.gov/library/stories/2023/05/2020-census-united-states-older-population-grew.html
Passive Income for Retirees – Income Ideas for Retirees — PaidLetter.Com | PRLog. https://www.prlog.org/12957009-passive-income-for-retirees-income-ideas-for-retirees.html
Seniors Struggle to Live Off Their Social Security Benefits. https://nationalinterest.org/print/blog/politics/seniors-struggle-live-their-social-security-benefits-200606
Clueless About Net Worth, Millennials Instead Count on a Windfall | The Fiscal Times. https://www.thefiscaltimes.com/2016/04/26/Clueless-About-Net-Worth-Millennials-Instead-Count-Windfall
Retirement doesn’t have to mean leaving your career behind. https://www.douglascapitalmanagement.com/resources/2023/05/18/retirement-doesnt-have-to-mean-leaving-your-career-behind
Will the Silver Tsunami Change the Housing Market?
https://realestate.usnews.com/real-estate/articles/will-the-silver-tsunami-change-the-housing-market