How Aging Americans Will Change the Market
Published August 16, 2017
As America as a nation ages, our housings needs will change. How will it impact the housing market?
By 2030, the U.S. Census Bureau estimates one in five Americans will have reached their golden years. That figure could have a tremendous impact on the real estate market. Already, builders in some communities are rethinking planned communities. And, that’s just the tip of the iceberg.
Every day, roughly 10,000 Baby Boomers celebrate their 65th birthday. Many will retire the following year when they qualify for full benefits, or soon after, and although they may continue to lead an active life, they will likely downsize their home, and eventually, most will need some sort of assisted living. This will have a profound effect on the housing market and our society as a whole.
In a sense, the Baby Boomer generation has always been a demographic wave sweeping through our population and necessitating change. When they were children, our nation needed more schools to accommodate their educational needs. Now, we will need to accommodate their changing housing needs, possibly with more rentals and eventually with assisted living centers and nursing homes.
At some point, demand for senior housing will decrease as less populous generations replace Baby Boomers, but that won’t be anytime soon. According to U.S. Census Bureau projections, in 2050, those 65 and older will roughly 84 million, nearly double what it is today.
From owners to renters
A recent study released by the Harvard Joint Center for Housing Studies, “Rental Housing Demand,” indicates that many homeowners become renters later in life in response to a change in income or housing needs. The report found that rental rates increased first with those in their 60s and then more sharply when they reached their 70s.
Why? As people become empty nesters, they begin to start thinking about downsizing. Many ask themselves whether they even want to deal with the upkeep of a house anymore and opt to rent smaller single family residences, condos and apartments, where a landlord takes care of the maintenance issues and repairs.
Renting also gives them the flexibility to travel. If a retiree wants to avoid cold weather, they winter in a temperate climate like Florida for six months and then return north for the remaining six months. Since they’ve signed short-term leases in both locations, they don’t have to worry about a property they don’t own, and they are not committed to returning to the same destination next year. They can winter in Southern California instead.
But, not all seniors will embrace the rental lifestyle. Some will want to hold on to family homes for future generations, even if the house is larger than they need and requires more upkeep. Others will downsize but decide they would rather rent.
Location, location, location
Geography will likely have another impact. Retirees who have had enough of the snow will leave behind colder areas in favor of the Southern half of the country. Not only could this cause a spike in demand for rentals, but it could also increase demand for small single family residences, apartments, and condos.
Expect to see a greater number of people age 65 and up in states such as Florida and Arizona where people traditionally retire, but areas such as southern New Mexico, Texas, and the Gulf Shores could also experience an uptick. Conversely, housing demand in colder climates could decline as people in their golden years decide to sell and move to warmer, more affordable locales.
Seniors may also consider state income taxes when looking for a place to retire. Warmer climate, no-tax states such as Florida, Nevada, and Texas will likely receive an influx of people looking to lower their tax burden on any income they may have. (They will likely have to pay increased sales tax and real estate levies, though, to compensate in these areas, which can be a greater burden for seniors.)
Forbes identified Alabama, Arizona, New Mexico, Nevada, and Utah as the best warmer climate states for seniors from a tax perspective. (For a complete list, read more here.) Watch for demand for senior housing to increase in these states.
The accessibility factor
According to another Harvard report conducted jointly with the AARP Foundation, “Housing America’s Older Adults — Meeting the Needs of An Aging Population,” accessibility is one of the major concerns of an aging population. More than 25 of all Americans age 50 or older have some level of difficulty with vision, hearing, memory, mobility, personal care, or handling the demands of independent living. That rate increases sharply to 54 percent of those 75 and older.
Despite those statistics, many properties can’t adequately accommodate the elderly, and only 1 percent of all housing in the United States has all five elements of universal design: no-step entry; single-floor living; extra-wide doorways and halls; accessible electrical controls and switches; and lever-style door and faucet handles. Just 57 percent of homes have more than one of them.
With an aging population facing accessibility issues, universal design is likely to become more of a buzz word. Some communities, such as Tucson, Ariz.; Atlanta; San Antonio; and Birmingham, Ala. have already begun to adopt universal design standards for new housing developments in some circumstances.
The joint report also implies that an aging population could influence how our future neighborhoods and communities. According to the report, as people age, their neighborhood can increasingly become their world. They will look for areas where they feel safe, ones that allow them to remain active, socially engaged, and independent.
Already, some planned communities have stepped up to meet these needs, offering easy access to public transportation; well-maintained and accessible sidewalks; and nearby amenities, such as parks, churches, grocery stores, and drug stores.
As Baby Boomers age, the housing market faces another shift: subsequent generations don’t necessarily see owning a home as the American dream. Some Gen Xers who lost their homes during the housing market crash are content to remain renters, at least for now, and Millennials, in general, prefer what they consider the freedom of not owning.
Potentially, this means the market could experience dwindling demand for homes in the decades to come. It could also signal more demand for rental properties, condos, and apartments. However, a surge in real estate value, an economic boom or a number of other factors could change these subsequent generations’ minds.