In a current published article, Trulia Chief Economist Jed Kolko argues that “Baby Boomers” may not provide expected demand for downsize housing, because the trend over past decades indicates that downsizing is getting rarer and happening later in life. He cites a June release by Fannie Mae on boomer downsizing stating that the share of baby boomers in detached homes has been approximately stable from 2006 to 2012; and he cites population survey data from 1979 to 2013 showing a steady decline in the percentage of age 70+ households living in multi-unit buildings from 32% in 1979 to under 25% in 2013, despite the slight increase in age 50-69 households in similar buildings from 20 to 22%. Based on this historic data, he suggests that aging baby boomers will adopt similar traits over the next decade and a declining share is likely to downsize into multi-unit buildings before age 80.
Using these same data, I believe that a different conclusion can be reached. First, there is no compelling reason that aging households should follow the same trends as past households. In fact, baby-boomers have a history of change at every age level they have encountered. For example, the boom in second-home resort communities such as Hilton Head, South Carolina was generated by increasingly affluent baby boomers in the 1960s and 70s. The up-tick in multi-building occupancy in the past two years by these age groups, as noted by Dr. Kolko, could be the beginning of a new baby-boomer trend. Second, he confines his data on downsizing to multi-unit buildings whereas a high proportion of retirees have selected and continue to select modest-size detached dwellings that are excluded from his analysis; numbers that are included in many analyses of retiree housing. Third, all housing data over the past five years has been impacted by the 2008-09 Great Recession which has limited financing for all except the most affluent housing purchasers, and skewed the trend data on multi-unit construction as consumers of all age groups opted for rental apartments.
Of perhaps greatest significance, in examining Dr. Kolko’s analysis, is the transition from relative to absolute data. The enormous size of the baby-boomer generation, varying from 75-85 million persons depending on precise definition (see my 2014 June Blog), places much higher absolute numbers on percentage change. Economists have estimated that only about 5% of retirees seek new dwellings in another state—a substantially higher absolute demand of baby boomers than prior generations. However, the greater affluence and sophistication of baby-boomers is, in this analyst’s opinion, likely to increase absolute demand for retiree move-down housing—both in-state and out-of-state—over the next fifteen years.
Dr. David F. Parker