Thursday, March 7, 2013

Demographic changes shift housing demand

Baby boomers built large homes on big lots (article):

...80 percent of new homes built in that era were detached single-family homes. A third of them were larger than 2,500 square feet. And most startling – "I checked my numbers over and over again,” a bemused Nelson says – 40 percent were built on lots of half an acre to 10 acres in size. 

But a much bigger chunk of today's new buyers want condos and urban town houses.  So do the aging baby boomers, now empty-nesters, wanting to downsize.  So what will the effect of this shifting demand be?
“Between changing preferences and declining median household income, ...that means we can predict the next housing crash, and that’ll be in about 2020.”

...“My suspicion,” Nelson says, “is that many hundreds of thousands, maybe millions of those households in the 2020s to 2030 and beyond will simply give up the house and walk away.”


  1. There will be an impact on the demand for bigger houses. The 18000 baby boomers per day that reach qualifying retirement age are driving the supply of properties for sale. However, the lack of buyer appetite is one cause driving oversupply. Also, there are less buyers who are qualified to buy as well as an increasing number of baby boomers who are trying to sell properties with reverse mortgages on them.

  2. Is there a possibility that the land value these owners of larger homes have could compensate for the declining demand for their houses? If you have a 2 acre lot in parts of Nashville, just selling your lot so that someone else can develop townhouses or condos could still be a profitable decision that creates buyer and consumer surplus. Without massive population growth for an area, this might not be sustainable, but it's difficult for me to believe a market like Nashville, with people moving to it in droves, wouldn't be able to compensate.

  3. If only everybody lived in the Nashville bubble. I'm sure that our location will be buffered slightly in the areas closer to the urban center, and those surrounding valued communities. But splitting lots and selling multiple units on them is only possible if there is demand for the lot in the first place. The decision to do so is made when you will make MORE money splitting and rezoning then you would selling the single home property as is. If the demand for homes in the area is low, selling to bulldoze the house and then pay to build two or more units in hopes of selling them all is a dismal idea. Although I'm basing this on the assumption that new generations are buyer more town homes and condos because they value central locations more than increased lot size and square footage. I feel it's a safe assumption though. Condo and town homes in areas that are not near a desirable center (city or community) are only desirable if you can not afford the single family home on a big lot right next door.

  4. Many people might not feel this could make much of difference to how they work, but I believe these things can be so much beneficial if we’re able to understand well. I love following this blog and as a Forex trading; I am getting so much lessons that has helped me with performance. It’s easier for me already given that I am working with OctaFX broker where too they have brilliant daily market news and analysis service which makes trading too easy for me!