Effects of aging population on housing market

Discussion in 'Economics' started by Chagi, Mar 4, 2006.

  1. Chagi


    Any thoughts on what sorts of things will likely happen as the population ages? I can't quote specific stats, but my understanding is that populations in both Canada and the US are starting to have higher proportions of older individuals than. The effects of this will probably take about 5-15 years to begin to really kick in.

    The reason I bring this up is that I suspect that we could end up with a surplus of housing, rather than the current "shortfall" (cough, cough) that we are experiencing. Older individuals will likely look to move into condos, retirement complexes, nursing homes, etc. over time. Many people will likely be looking to sell their homes for financial reasons, will die off of old age/illness, etc.

    So yes, I'm a bit tired as I write this, but I'm hoping to start some discussion on this particular demographic issue and what sort of impacts it could have on the housing market.
  2. toc


    I beg to differ, last year msn reported that a 30 year construction boom is going to hit the east coast from ny to n. carolina. This is not real estate boom but ripping apart old houses and replacing them with new. Good news for builders and those who are sitting on big pieces of land.
  3. Hey:

    I am very familiar with this phenomena.

    As the population ages, people will be looking for smaller houses that are easier to keep up.

    Aging baby boomers will be looking for one story ranch style homes (no stairs please) with enough room for a care giver when they need one. There will also be demand for specialty items such as kitchens and baths that are designed for disabled access, ramps, and computer controlled monitoring systems that can notify relatives or emergency personel when someone falls.

    Finally, aging folks will want to find homes offered with extra facilities for like minded folks. Here in the US we see home builders like Pulte Homes (and others) who build theme communities offering golf, tennis, swimming, and other activities in large community centers. These home builders will generally look to acquire land in open spaces not yet developed and build homes in the low 300,000 to $500,000 range. They will be bought by folks who want to retire in them or as vacation homes.

    As long as interest rates continue an orderly adjustment and inflation remains under control, this move towards affordable community housing should continue in states where open land is still available and weather is warm.

    Hope this helps.
  4. Well, I hesitate to say this but

    "Your missing the whole point"

    As people age, they will need to sell one house, but they will need to buy another. The house that they buy will be distinctly different from the one they now own. This is happening now.

    It is one of the reasons that the housing market is holding up so well even though interest rates are moderating up

    There may not be a collapse of the housing market as in past years. But instead a continuation of the present, as people exchange one house for another type of house.

    In addition, this will mean that groups of people will migrate to specific areas of the country (the "Sun Belt" for instance) looking for pleasant weather and services such as medical care (hospitals, clinics, etc) and entertainment.

    Naturally this could change if interest rates spike, if inflation goes wild, or if some event changes our economic lives. So far, nothing is on the horizon to indicate that.

    I hope this makes sense. Traders who have tried to short the housing sector are finding our just how much "sense" that makes.

  5. You need to consider the question: Will the retirement home be more expensive or less expensive than the current home?
    Years ago I was looking at below 20k condos in Florida but was told it's only for retirees. If many boomers live in those cheap condos, that will create a negative impact on the housing market. It's likely to happen because they haven't saved enough for retirement.
  6. Leading edge baby boomers are actually doing quite well. They (we) bought homes 20-30 yrs ago that have appreciated quite nicely...have been the beneficiaries of a strong and healthy economy in the 80's and 90's....have (for the most part) both defined benefit such pensions AND 401K's. Retirement may be in the current home as well as a NICE condo or 2nd home. While they may downsize they won't give up luxury. Its the "tail end" baby boomers and Gen X ers that have more struggle to deal with (paying for high real estate, having to give up pensions etc)....but then all they have to do is knock off the parents :D
  7. Chagi


    This is a good point, and something that I've thought about a bit. I suppose my point is that some of these people may not necessarily be selling and then buying again, they may just be selling and then using the funds to pay for living/healthcare expenses.

    It's also going to be interesting to see if the market supply of old-age related services is going to be large enough to meet the demands of an aging population, else I could see costs rising dramatically.