Will the Silver Tsunami Change the Housing Market?

Talk of a “silver tsunami” – an influx of housing supply due to baby boomers downsizing or passing away – has flared up once again, thanks to financial analyst Meredith Whitney. Whitney, who successfully predicted the 2007-2008 financial crisis and has been called an “oracle” by business publication Bloomberg, told attendees at the Invest Conference last month that the wave could hit this year.

“Today, there’s a demand-supply imbalance where there’s too much demand and not enough supply,” she said at the event. “That’s going to invert as more and more boomers start to sell and downsize. Then you’ll see a supply-demand dynamic shift.”

A possible “silver tsunami” has been talked about for years. In 2019, Zillow released a report showing that over 20 million homes would hit the market by 2037 thanks to baby boomers aging out. Whitney says it’s actually more like 30 million.

Just what impact could that have on the housing market? Experts say it may be more muted than you’d think.

A Silver Tsunami’s Impact

According to AARP, 80% of people 50 or older own a home. As these homeowners start to downsize, pass away or cash in on their equity, that will inevitably release more homes on the market.

“The downsizing phase of this generation is set to inject a substantial volume of properties into the housing market,” says Matt Dunbar, senior vice president at Churchill Mortgage.

As Whitney mentioned, that supply is much needed. The housing market is currently about 5.5 million units short of demand, according to the National Association of Realtors. That shortage keeps prices elevated and makes it harder for consumers to both find – and afford – homes.

Once more supply enters the market, it should “reduce upward pressure on prices,” says Mark Fleming, chief economist at First American Financial Corporation. “Notice I didn’t say ‘cause price declines.’”

That’s because Fleming – and other experts – say the process is going to be gradual. Those 30 million homes aren’t going to hit the market in one day or even in one single year.

“Baby boomers are a generation spanning almost 20 years,” Fleming says. “As with all demographic influences, it will take many years.”

There’s also a large supply deficit to make up for, and not all boomers will sell their homes when moving either. Some will hand their properties down to children or loved ones instead.

As Aaron Buchbinder, a real estate broker at Compass in Boca Raton, Florida, explains, “Half of my clients are inheriting their parents' properties. If the parents bought at the right price, own the home outright and the carrying cost is not too high, many decide to keep the property as a family or vacation home, unless they really need the nest egg.”

For these reasons, the impact of boomers leaving their homes may be muted for the larger American housing market. In fact, according to a 2022 report from the Mortgage Bankers Association and the Research Institute for Housing America, the change in housing supply will be “modest” – about 250,000 housing units per year – and result in no “measurable” price reductions.

“It won't be a tsunami,” says Aaron Gordon, branch manager at Guild Mortgage in Henderson, Nevada. “It will be a rideable wave.”

Certain Markets Will Get Hit Harder

The national market may only be slightly impacted by demographic shifts, but in boomer hotspots in Florida, Arizona and other parts of the country, the story could be vastly different.

“There may be too much supply and declining prices in markets where the share of baby boomer homeownership is high,” Fleming says.

According to Zillow’s report, the cities that will see the biggest boomer-related supply boosts by 2037 are Tampa, Miami and Orlando, Florida; Tucson, Arizona; and Dayton, Ohio. Tampa is expected to see 33% of its currently owner-occupied homes released by that time.

In other markets – like New York City, for instance – the shift could also change the type of housing that’s available.

“The baby boomer generation in New York City owns some of the most desirable apartments in the most coveted co-op buildings in the city,” says Kate Wollman-Mahan, a real estate agent at Coldwell Banker Warburg. “A lot of the best Park Avenue and Fifth Avenue prewar co-ops are owned by homeowners who are currently in their late 70s or 80s. As these apartments start to come to market, not only will it increase inventory in these desired locations, but it presents real value play opportunities for buyers."



Source: usnews.com


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Drawing on his decade of experience in finance, investment management, and holistic financial planning, and as a Chartered Financial Analyst ( CFA ® ) charterholder, he leverages his financial acumen and analytical focus to help his clients navigate the sophisticated San Francisco market.
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