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GOOD TIMES

Aging-in-Place Trend Contributing to Tight Inventories

BY: JANN SWANSON for Mortgage News Daily


In their December Insight report Freddie Mac's economists estimated the country will fall short of its housing needs this year by about 2.5 million units. Yet at the same time, fewer members of the Millennial generation are buying houses than young people did in earlier periods. This month the Insightsreport examines the intersection of these facts, asking who is living in those homes that young people were expected to buy, and how this relates to the shortfall.

Freddie Mac' research finds that today's seniors (persons born after 1931) are staying in their homes longer, and aging in place.  While Millennials have historically low rates of homeownership the rates among seniors are high relative to previous generations.

The company estimates that this trend accounts for about 1.6 million homes that have not been available for sale.  This represents about one year's typical supply of new construction and about half the 2.5 million units need to meet demand.  This gap will increase the relative price of owning versus renting, making renting more attractive to younger generations but it also puts upward pressure on both house prices and rental rates.

The why of this trend can be explained by a few key factors; better health and higher levels of education. The economists say this pattern is likely to increase over time as improvements in health care and technology make aging in place easier.  They cite as an example the ability to Skype with a doctor.

The research compared homeownership rates for seniors aged 67 to 85 in two different periods.  The current crop of seniors, they call them the "Good Times" cohort, were born in some bad times between 1931 and 1941 but with the benefit of relatively good times through their lifetime.  The "previous generations" combines the generation born before 1924 and the "children of the Depression" born between 1924 and 1930.

The economists conclude that the most important fundamental in today's housing market is the lack of houses for sale.  It has been identified as an important barrier to young adults buying their first homes and seniors choosing to age in place are contributing to this shortage.  The amount of homes retained by seniors is likely to grow as both the number of seniors increases and the barriers to staying in place are reduced. This highlights the importance of addressing barriers to the production of new housing supply to accommodate long-term housing demand.


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