How will an aging population affect housing supply?

New MBA research examines the future of the housing market as homeowners grow older

How will an aging population affect housing supply?

A significant portion of existing homes for sale over the next 10 years will come from the aging and mortality of baby boomer homeowners, but this is expected to have minimal impact on the housing market, according to new research from the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA).

Sustained demand from population growth and younger generation households will keep home price reduction and excess housing supply at a minimum, even as baby boomers are expected to provide 4.4 million homes annually in the coming years, the report revealed.

“Aging and mortality are glacial and largely predictable. Based purely on changing demographics and population growth, there is enough homebuyer demand to meet most of the existing inventory that will come on to the market over the next decade and beyond from older homeowners,” said Gary V. Engelhardt, author of the MBA RIHA report and professor of economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Engelhardt examined data on housing, demographics, and mortality to determine what impact the aging and eventual death of homeowners aged 50 and older will have to the housing market. What he found was that only a modest excess of supply will come from baby boomers and that this will lead to “no measurable decline in home prices.”

According to the study, housing supply from baby boomers will only lead to an excess of around a quarter-million units annually through 2032, with most of the adjustment to the excess inventory coming from a reduction in housing starts and completions, alongside some leeway in the rental market.

“RIHA’s study skillfully uses multiple data sources to get a detailed picture of America’s aging population and its effect on the housing market,” said Edward Seiler, RIHA executive director and MBA associate vice president, housing economics. “The impact from baby boomers exiting their homes is not insignificant but will happen over a few decades without significantly disrupting the housing market.”

 

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