The first "Baby Boom" occurred after WWII, between 1945 - 1955. With the arrival of a new born, families tend to "upgrade" to bigger houses in the suburbs. Hence the boom in home prices across most countries after WWII. In UK, from 1945 - 1955, house prices shot up 167% between 1944 and 1945.
Most OECD countries went through an economic boom because the pre war generation had to work harder and consume more for their expanded families. Stock markets boomed. The DJIA shot up by 13.1% p.a. in that decade, making it the best decade post WWII.
The "echo boom", children of the baby boomers, began from 1970 and lasted till 1985. House prices in the UK rose by 9.1% p.a.. The Dow 6.1% p.a. The boomers were in their mid careers and wealthy. They were upsizing to bigger homes with gardens in the suburbs. The urban sprawl in most cities was at its peak.
The "mini echo", children of the echo boomers, began from 1995 and will end in 2015. UK's house prices rose by 8.9% p.a., while the Dow rose by 7.3% p.a. Note that with each "boom", the number of children born reduces. Children from mini echo is smaller in number vs. those from the echo boom, which is in turn dwarfed by the baby boom. Because as women enter the workforce, the number of children per household shrunk, and people per household also shrank.
The Baby Boomers will enter into retirement from around 2010. Here are the potential impact:
1. Pension funds will increase allocation to bond funds to pay for the retirement of the Baby Boomers. Allocation to equities will decline. We could see suppressed bond yields for many decades.
2. Baby Boomers, suffering from the empty nest syndrome, may downgrade to smaller homes closer to the city. Home sizes are likely to shrink, and demand for middle and inner suburbs rise. Echo Boomers are insufficient in numbers to buy the homes of the Baby Boomers. Prices of outer suburb homes may stagnate.
3. Demand for aged home / care homes will rise. Consumption will fall, as will tax revenue of governments facing greying populations. Consumption patterns will shift from luxuries to medicine, hospital care etc.
4. Mini echo boom generation is likely to end in around 2015, as most of the Echo Boomers approach at least 35 years old. Demand for large homes in the suburbs may taper off.
5. We could see demand for retirement villages rise, and a shift in preference to apartment living, or smaller homes with downsized gardens. Some Baby Boomers may shift closer to their children and grand children, hence the demand for properties around good schools may rise.
“The age of suburbanization and growing homeownership is over,” McIlwain said in a recent report, “Housing in America: The Next Decade.” “The coming decades will be the time of the great reurbanization as 24/7 central cities grow and suburbs around the country are redeveloped with new or revived walkable suburban town centers.” This transition will be fueled by the growth of two-person households, an end to baby boomers’ suburban infatuation, and public policies designed to stimulate compact development. In his report, McIlwain points to four key demographic trends to watch:
1. Older baby boomers (ages 55 to 64): McIlwain divides the traditional baby boom generation into two subgroups, with the older group comprising roughly 26 million Americans. Today, many older baby boomers are stuck in their suburban properties because of the real-estate bust, which has put them underwater — owing more on their mortgage than the property is worth. But McIlwain says older baby boomers who can sell their homes aren’t necessarily following the road maps of previous generations. “Those that can move are no longer flocking to the Sun Belt, choosing instead to move closer to their children and, more importantly, their grandchildren,” McIlwain says.
Noting that they are healthier than their parents’ generation, McIlwain predicts that older baby boomers will likely defer transitioning into retirement communities for at least a decade, thereby limiting demand for such facilities. They will instead prefer to purchase condominiums in the “mixed-age and mixed-use communities” of more urbanized settings. “Walkable, urbanized suburban town centers will see an influx of aging boomers,” McIlwain says. He points to town centers in Bethesda, Md., and Reston, Va., as examples. “Once the boomers can sell their homes and buy condos, these centers will thrive during the decade ahead.”
4. Immigrants: There are roughly 40 million foreign-born people living legally or illegally in the United States today, and this demographic is expected to grow swiftly in the coming years. McIlwain notes that immigrant populations tend to cluster together. “These clusters have moved from the central cities where they tended to gather in the past to the inner suburbs over the last two decades,” he says. Housing demand from immigrants may one day flow to the larger suburban homes that are expected to face downward pricing pressure in the coming years. “The reduced prices of these homes and their larger size … make them an attractive option for larger immigrant families, though prices will have to drop considerably for this to happen,” McIlwain says.
Most OECD countries went through an economic boom because the pre war generation had to work harder and consume more for their expanded families. Stock markets boomed. The DJIA shot up by 13.1% p.a. in that decade, making it the best decade post WWII.
The "echo boom", children of the baby boomers, began from 1970 and lasted till 1985. House prices in the UK rose by 9.1% p.a.. The Dow 6.1% p.a. The boomers were in their mid careers and wealthy. They were upsizing to bigger homes with gardens in the suburbs. The urban sprawl in most cities was at its peak.
The "mini echo", children of the echo boomers, began from 1995 and will end in 2015. UK's house prices rose by 8.9% p.a., while the Dow rose by 7.3% p.a. Note that with each "boom", the number of children born reduces. Children from mini echo is smaller in number vs. those from the echo boom, which is in turn dwarfed by the baby boom. Because as women enter the workforce, the number of children per household shrunk, and people per household also shrank.
The Baby Boomers will enter into retirement from around 2010. Here are the potential impact:
1. Pension funds will increase allocation to bond funds to pay for the retirement of the Baby Boomers. Allocation to equities will decline. We could see suppressed bond yields for many decades.
2. Baby Boomers, suffering from the empty nest syndrome, may downgrade to smaller homes closer to the city. Home sizes are likely to shrink, and demand for middle and inner suburbs rise. Echo Boomers are insufficient in numbers to buy the homes of the Baby Boomers. Prices of outer suburb homes may stagnate.
3. Demand for aged home / care homes will rise. Consumption will fall, as will tax revenue of governments facing greying populations. Consumption patterns will shift from luxuries to medicine, hospital care etc.
4. Mini echo boom generation is likely to end in around 2015, as most of the Echo Boomers approach at least 35 years old. Demand for large homes in the suburbs may taper off.
5. We could see demand for retirement villages rise, and a shift in preference to apartment living, or smaller homes with downsized gardens. Some Baby Boomers may shift closer to their children and grand children, hence the demand for properties around good schools may rise.
Is the age of the suburb over? 4 key demographic trends
Some experts say shifts in the desires of several groups mean that America’s great reurbanization lies ahead.
more on USNews.com
Demographic shifts and changing values will increase demand for pedestrian-friendly, mixed-use communities in both urban and suburban settings, according to John McIlwain of the Urban Land Institute.“The age of suburbanization and growing homeownership is over,” McIlwain said in a recent report, “Housing in America: The Next Decade.” “The coming decades will be the time of the great reurbanization as 24/7 central cities grow and suburbs around the country are redeveloped with new or revived walkable suburban town centers.” This transition will be fueled by the growth of two-person households, an end to baby boomers’ suburban infatuation, and public policies designed to stimulate compact development. In his report, McIlwain points to four key demographic trends to watch:
1. Older baby boomers (ages 55 to 64): McIlwain divides the traditional baby boom generation into two subgroups, with the older group comprising roughly 26 million Americans. Today, many older baby boomers are stuck in their suburban properties because of the real-estate bust, which has put them underwater — owing more on their mortgage than the property is worth. But McIlwain says older baby boomers who can sell their homes aren’t necessarily following the road maps of previous generations. “Those that can move are no longer flocking to the Sun Belt, choosing instead to move closer to their children and, more importantly, their grandchildren,” McIlwain says.
Noting that they are healthier than their parents’ generation, McIlwain predicts that older baby boomers will likely defer transitioning into retirement communities for at least a decade, thereby limiting demand for such facilities. They will instead prefer to purchase condominiums in the “mixed-age and mixed-use communities” of more urbanized settings. “Walkable, urbanized suburban town centers will see an influx of aging boomers,” McIlwain says. He points to town centers in Bethesda, Md., and Reston, Va., as examples. “Once the boomers can sell their homes and buy condos, these centers will thrive during the decade ahead.”
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3. Generation Y (late teens to early 30s): The real-estate bust has had a significant impact on how Generation Y’s 83 million Americans view homeownership. As they watch millions of Americans lose their homes to foreclosure, the allure of buying real estate has become less powerful, McIlwain said. “They will be renters by necessity and by choice rather than homeowners for years ahead,” he says. “They have lost the confidence of prior generations that homeownership is a way to develop wealth.” At the same time, many members of Generation Y prefer urban settings to the suburbs they were raised in. “They want to be close to each other, to services, to places to meet and to work, and they would rather walk than drive,” McIlwain says. “They say they are willing to live in a smaller space in order to be able to afford this lifestyle.”4. Immigrants: There are roughly 40 million foreign-born people living legally or illegally in the United States today, and this demographic is expected to grow swiftly in the coming years. McIlwain notes that immigrant populations tend to cluster together. “These clusters have moved from the central cities where they tended to gather in the past to the inner suburbs over the last two decades,” he says. Housing demand from immigrants may one day flow to the larger suburban homes that are expected to face downward pricing pressure in the coming years. “The reduced prices of these homes and their larger size … make them an attractive option for larger immigrant families, though prices will have to drop considerably for this to happen,” McIlwain says.
The Baby Boomer Housing Bust
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Depending on whom you ask, there are between 8,000 and 10,000 Baby Boomers reaching age 65 every day in America. It’s around that 65th birthday (and for the ten or twenty years that follow it), that Baby Boomers will feel especially motivated to sell their house and move on out. Woohoo, right? Yesterday’s Baby Boomer housing appetites got us stuck; it’s time to get out or settle in for the long haul.
Many Boomer families will simply downsize. Other soon-to-be retirees will go straight to some flavor of retirement living. A coming shift in how we all think about housing, though, is less about where this consumer cohort is headed. Because it’s the buildings Baby Boomers are trying to leave behind that will shape the face of American life.
Many Boomers bought their homes in the 80s and 90s, and a sustained real estate boom rewarded them time and again. Members of the first post-WWII generation parlayed the economic lucre of housing equity into bigger and bigger homes. According to Census data, house sizes increased decade after decade, before topping out at a whopping 2,521 average square feet in 2007. Our we’re-in-the-money, bigger-is-better mantra gave birth to, among other oversized things, the McMansions that now dot the suburbs.
Boomers had an unreal real estate run for decades. But it’s about to come to a hard stop. Social shifts and demographic forces (more than the ups or downs of any local housing markets) are poised to change Baby Boomers’ futures.
Demographics Grind Away
We all know how the economic landscape changed in 2008.
In large measure, leading up to that shift, Boomers didn’t save enough for retirement. For most of them, their home is their biggest asset. But many will need to sell their homes to finance their imminent post-work years. Most Boomers will want to, or need to, sell the big family homes they purchased years ago. And here’s the rub: There aren’t enough buyers to soak up the kind of housing inventory that downsizing Boomers will leave in their wake.
A Bipartisan Policy Center study took a gauge of housing demand in March 2012. Their findings? “Among and within metropolitan areas, dwellings released by an aging population are not likely to align with future demand. While most states and metropolitan areas have significant numbers of Baby Boomers, the distribution of young adults is more uneven.”
Not Buying It
If you’re a Boomer reading this, you might be thinking, Oh, maybe some Gen Xers will move on up and buy my house? Probably not. Most Gen Xers are already settled, many of the cohort (loosely defined as those born between 1961 and 1981) are plateauing in their careers, have been hardest hit by the economic downturn, and now have the financial stress of growing kids. Fellow Forbes contributor, Erik Carter, cited “a recent census report found that people between 35 and 44 saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.” That means little home equity, limited assets to put toward move-up down payments and a (grudging) stay-put attitude.
Millennials, though? They could buy? Maybe! They’re saddled with record debt, though–$1 trillion student load tab according to the Wall Street Journal and Experian–and they’re stuck in a flat job market. For 18-29 year-old wannabe workers, the effective unemployment rate is 15.9 percent.
Millennials also have a shifting set of attitudes around big-ticket purchases, as well as an evolving attitude toward ownership in general. Homeownership among 25- to 34-year-olds dropped more than any other age groups from 2006 through 2011. Millennials are the drivers of the $26 billion Sharing Economy. So to them, what does “owning” even mean anymore?
Finally, bigger houses aren’t even what younger buyers want. (Average home sizes are now, after decades of growth, shrinking.) For Boomers, waiting to sell is disappearing as an option. They need to get out of their houses now, or they need to start thinking differently.
Family Living’s Shifting Shapes and Shrinking Sizes
This big housing migration coincides with another shift in how we live. Today’s American family is self-defined and more flexible than it used to be. Boomers are right there, too, with single-sex parents, families of choice, and multi-gen homes.
Across generations, the flex is happening – but look at the numbers alone for a second. The number of single-person households in 1950 was around 22% of Americans, according to the U.S. Census. Singles now make up 27% of U.S. households. That makes McMansions a mismatch for a big swath of the population, no matter your age group.
Urban Pull
The pressures of urbanization will also affect how we live, bringing, no doubt, a change in housing structures, acceptable house sizes, and necessary amenities. Leigh Gallagher’s book, “The End of the Suburbs,” details a migration back to the city.
Already, the popularity of micro-homes, sharing, and close-to-the-action location choices are scratching an environmental and anti-consumerism itch. So who’s going to want those big Boomer homes? Dowell Myers, a demographer and urban planner at the University of Southern California told Reuters that of those “who do move, many will downsize—and it’s a big demographic group.” Myers added, that “an age-driven wave of sellers could put significant downward pressure on home prices, especially in suburban markets far from city centers that are less attractive to younger buyers.” At the very least, a horde of Baby Boomers itchy to sell will keep housing markets across the country from simmering once again.
Radical Renovations
But the housing market is starting to look good again, right? In general, yes. But the economic realities (the job market’s grinding climb), demographic forces (retirement-age families with different sets of needs than they had 20 years ago) and social shifts (like shrinking family sizes) that we’ve outlined show how many current Boomer homeowners are poised to get squeezed.
It’s time for Boomers themselves to further flex with creative housing solutions like condo conversions, boarding house conversions, co-housing, shared purchase of an apartment buildings. If they can’t get out of their current homes, Boomers need to consider radical renovations — to their houses and to their ways of life — that will allow them to age in place, bring new people into their homes, and generally start to live a little differently.
Many Boomer families will simply downsize. Other soon-to-be retirees will go straight to some flavor of retirement living. A coming shift in how we all think about housing, though, is less about where this consumer cohort is headed. Because it’s the buildings Baby Boomers are trying to leave behind that will shape the face of American life.
Many Boomers bought their homes in the 80s and 90s, and a sustained real estate boom rewarded them time and again. Members of the first post-WWII generation parlayed the economic lucre of housing equity into bigger and bigger homes. According to Census data, house sizes increased decade after decade, before topping out at a whopping 2,521 average square feet in 2007. Our we’re-in-the-money, bigger-is-better mantra gave birth to, among other oversized things, the McMansions that now dot the suburbs.
Boomers had an unreal real estate run for decades. But it’s about to come to a hard stop. Social shifts and demographic forces (more than the ups or downs of any local housing markets) are poised to change Baby Boomers’ futures.
Demographics Grind Away
We all know how the economic landscape changed in 2008.
In large measure, leading up to that shift, Boomers didn’t save enough for retirement. For most of them, their home is their biggest asset. But many will need to sell their homes to finance their imminent post-work years. Most Boomers will want to, or need to, sell the big family homes they purchased years ago. And here’s the rub: There aren’t enough buyers to soak up the kind of housing inventory that downsizing Boomers will leave in their wake.
A Bipartisan Policy Center study took a gauge of housing demand in March 2012. Their findings? “Among and within metropolitan areas, dwellings released by an aging population are not likely to align with future demand. While most states and metropolitan areas have significant numbers of Baby Boomers, the distribution of young adults is more uneven.”
Not Buying It
If you’re a Boomer reading this, you might be thinking, Oh, maybe some Gen Xers will move on up and buy my house? Probably not. Most Gen Xers are already settled, many of the cohort (loosely defined as those born between 1961 and 1981) are plateauing in their careers, have been hardest hit by the economic downturn, and now have the financial stress of growing kids. Fellow Forbes contributor, Erik Carter, cited “a recent census report found that people between 35 and 44 saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.” That means little home equity, limited assets to put toward move-up down payments and a (grudging) stay-put attitude.
Millennials, though? They could buy? Maybe! They’re saddled with record debt, though–$1 trillion student load tab according to the Wall Street Journal and Experian–and they’re stuck in a flat job market. For 18-29 year-old wannabe workers, the effective unemployment rate is 15.9 percent.
Millennials also have a shifting set of attitudes around big-ticket purchases, as well as an evolving attitude toward ownership in general. Homeownership among 25- to 34-year-olds dropped more than any other age groups from 2006 through 2011. Millennials are the drivers of the $26 billion Sharing Economy. So to them, what does “owning” even mean anymore?
Finally, bigger houses aren’t even what younger buyers want. (Average home sizes are now, after decades of growth, shrinking.) For Boomers, waiting to sell is disappearing as an option. They need to get out of their houses now, or they need to start thinking differently.
Family Living’s Shifting Shapes and Shrinking Sizes
This big housing migration coincides with another shift in how we live. Today’s American family is self-defined and more flexible than it used to be. Boomers are right there, too, with single-sex parents, families of choice, and multi-gen homes.
Across generations, the flex is happening – but look at the numbers alone for a second. The number of single-person households in 1950 was around 22% of Americans, according to the U.S. Census. Singles now make up 27% of U.S. households. That makes McMansions a mismatch for a big swath of the population, no matter your age group.
Urban Pull
The pressures of urbanization will also affect how we live, bringing, no doubt, a change in housing structures, acceptable house sizes, and necessary amenities. Leigh Gallagher’s book, “The End of the Suburbs,” details a migration back to the city.
Already, the popularity of micro-homes, sharing, and close-to-the-action location choices are scratching an environmental and anti-consumerism itch. So who’s going to want those big Boomer homes? Dowell Myers, a demographer and urban planner at the University of Southern California told Reuters that of those “who do move, many will downsize—and it’s a big demographic group.” Myers added, that “an age-driven wave of sellers could put significant downward pressure on home prices, especially in suburban markets far from city centers that are less attractive to younger buyers.” At the very least, a horde of Baby Boomers itchy to sell will keep housing markets across the country from simmering once again.
Radical Renovations
But the housing market is starting to look good again, right? In general, yes. But the economic realities (the job market’s grinding climb), demographic forces (retirement-age families with different sets of needs than they had 20 years ago) and social shifts (like shrinking family sizes) that we’ve outlined show how many current Boomer homeowners are poised to get squeezed.
It’s time for Boomers themselves to further flex with creative housing solutions like condo conversions, boarding house conversions, co-housing, shared purchase of an apartment buildings. If they can’t get out of their current homes, Boomers need to consider radical renovations — to their houses and to their ways of life — that will allow them to age in place, bring new people into their homes, and generally start to live a little differently.
