Aging Boomers could further burst housing bubble

The bad credit and housing markets has helped to breath new life into an old story – that boomers retiring (or dying) will lead housing prices down, starting by about 2010. It is worth reading.

Aging Boomers could burst housing bubble – SF Chronicle

“[A]according to a study by two University of Southern California researchers, a bubble of even more monumental proportions lies just ahead. They call it the “generational housing bubble,” and maintain that it will be fueled by the same Baby Boomers who have been bidding up prices since 1970 as they moved higher and higher on the housing ladder.

Now, though, the 78 million Boomers are about to enter the years when people tend to become sellers rather than buyers. And as a result, they expect “many more homes (will be) available for sale than there are buyers for them.”

Myers’ and Ryu’s foreboding prophecies bring to mind a 1989 study by a pair of Harvard economists, who predicted a 47 percent decline in housing prices during the 1990s because Boomers would stop buying as they aged. Housing-industry economists lambasted that forecast as pure poppycock, and it eventually blew up in smoke.

Mankiw and Weil “may have miscalculated the timing of the decline, predicting its beginning 20 years or more prematurely,” the new study says. “But the Baby Boomers will finally start retiring from the housing market.”

….

Myers and Ryu project that the ratio of those 65 and over to people 25 to 64 will surge 30 percent in the decade between 2010 to 2020 and 29 percent more in the 2020s, altering the delicate balance between buyers to sellers for the foreseeable future.

Historically, seniors don’t become net sellers in Arizona, Florida and Nevada until they reach 75. In 12 other states – Arkansas, Colorado, Delaware, Georgia, Hawaii, Idaho, New Mexico, North Carolina, Oregon, South Carolina, Tennessee and Utah – they become net sellers when they hit 70.

But the opposite is true in 13 other states – Alaska, California, Connecticut, Illinois, Indiana, New Jersey, New York, Maryland, Massachusetts, Michigan, Minnesota, Ohio and Rhode Island. In those states, the crossover point starts at age 55.”