WITH BIDDING WARS heating up, construction booming, and mortgage rates still at historic lows, the housing market is finally on the rise — but a new problem might be on the horizon. And the baby boomers now pondering downsizing could be to blame.
When empty nesters decide en masse to try and unload those sprawling homes in Newton and Wellesley in the coming decade — and with them all the yardwork, maintenance, and heating bills — experts fear the glut of houses could burst this area’s fragile recovery. Boomer housing is “a very hot topic right now,” says Davenport Crocker Jr., regional vice president for Coldwell Banker Residential Brokerage in Massachusetts. “At the midyear meeting of the National Association of Realtors, there was discussion of that pending avalanche of homes.”
According to a 2012 report prepared by the nonprofit Bipartisan Policy Center, seniors nationwide will try to sell up to 11.3 million housing units this decade, and up to 15 million more between 2020 and 2030, which “may result in a long period of slack housing demand in the Northeast and Midwest, beginning just in time for the recovery of national housing markets in the mid-2010s.”
But the outlook isn’t quite that dire, says Barry Bluestone, director of the Dukakis Center for Urban and Regional Policy at Northeastern University. “Will this retiring baby boom generation decimate the market? I don’t think that will happen,” he says. However, “we’re not going to have another price spike,” he adds. In his Greater Boston Housing Report Card 2012, Bluestone predicted that home prices might not return to 2005’s peak until as late as 2031. (Ouch.) He says recent data suggest prices should rise sooner, “but not at extraordinarily high rates.”
One fear is that so-called millennials, burdened with college debt and weak job prospects, are financially incapable of affording their parents’ homes — especially when many of them have boomeranged right back into their parents’ basements. Plus, tighter lending rules will make mortgages tougher for them to get, if they want one at all. After watching the foreclosure crisis befall friends and family, millennials appear to have grown exceptionally wary of homeownership, driving up Boston-area rents and forcing the vacancy rate below 4 percent.
Still, there’s plenty of time for the market to adjust itself, says Karl “Chip” Case, professor emeritus of economics at Wellesley, who cofounded the Core Logic S&P/Case-Shiller Home Price Indices. “The boomers aren’t going to descend all at once; they’re spread from ’46 to ’64. That’s a long period of time.”
Experts also say a continued influx of immigrants may create new buyers, and a rise in multiple generations sharing a home could spread the expenses. If improved services can cater to their needs, many seniors may choose to age at home, rather than hopping a plane to Florida or Arizona.
Coldwell’s Crocker trusts even mortgage-averse millennials will one day decide to buy. “I believe they will come along, like each other generation,” he says. “I think they will see the value of homeownership. Why wouldn’t they?”
Bluestone is more skeptical. “I have a 21-year-old son who I don’t think will ever live in the suburbs,” he says, citing long commutes and high energy costs. “To him and his friends, the thought is appalling.”
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