In 2019, the United States will fall short of meeting its housing needs by roughly 2.5 million units, while simultaneously members of the millennial generation are buying fewer homes at this point in their lives compared with previous generations at similar periods. While aging in place is touted as the preferred solution for many older households, it could be to blame for a major housing shortage ahead, according to a new report from Freddie Mac.
As seniors continue to prefer aging in place as the optimal way to live out their remaining years, housing inventory has tightened nationally. A trend of aging in place is connected to tightening inventory by the data: for people between the ages of 67 and 87, homeownership rates dropped by 11.6 percent for previous generations but only 3.6 percent for the current generation of seniors, identified as having been born between 1931 and 1941.
While in prior generations it was typical for younger Americans to buy homes newly-vacated by seniors, meeting the needs of older Americans in their homes has been made much easier by advances in information technology.
Accessibility to better healthcare and education is credited by the report as “boosting and extending” housing demand among seniors, with the result being that the current senior generation has become much slower in transitioning out of homeownership than prior generations.
“Eventually as the Boomers age out of the housing market and young adults are replaced by the smaller Generation Z, the growth in households will moderate somewhat,” the report reads. “Though the date for that moderation is well into the next decade.”
According to data from the U.S. Census Bureau, lost units will need to be replenished at a rate of 350,000 homes per year in order to bring the market to a “well-functioning” status. In order for the housing market to be considered “well-functioning,” the rate of vacant properties should be generally higher.
“Vacant homes increase liquidity in the market, enable prospective buyers to find a match, and give prospective sellers confidence to list their home for sale,” the Freddie Mac report states. “Vacancy rates are an important indicator of housing market vitality. Too high of a vacancy rate reflects a moribund market, while too low of a rate reduces the efficiency of the marketplace.”
Data cited in the report indicates that vacancy rates have declined sharply since 2010, which is largely attributed to a lack of inventory.
Read the full Freddie Mac December Insights report for full data and substantiation.