David Frum

06.22.12

Who Will Buy the Boomer's Homes?

This week the Housing Commission at the Bipartisan Policy Center issued a report suggesting that there is a growing mismatch between where houses are supplied and where future demand will be.

Among members of Generation Y (or the 'Millennials') there will be low demand for housing because of the debt burden that they face, resulting in a surplus of houses in some states. In those states, fewer Millennials will buy the home of the baby boomers. This surplus will mainly occur in the Midwest.

In contrast many Western and Southeastern states will likely need to supply new homes to meet demands because of the migration into those parts of the country.

Simple put, the old patterns of the housing market won't hold:

Despite potential increases in new construction, most of the houses that seniors will release in coming years were built when energy was inexpensive, nuclear families were the rule, incomes were increasing for most Americans, and mortgages were generally predictable and easy to obtain. Most observers expect the next 20 to 30 years to depart from this historic picture, with more expensive energy, growing diversity in race, ethnicity and in household structure, and more intense international economic competition. All of these factors will likely reduce demand for large single-family homes on large lots far away from established centers of employment and entertainment. Meanwhile, increasing uncertainty also applies to mortgage lending. In combination, these trends could limit the ability and desire of younger generations to buy some of the housing seniors will release in the next two decades.