For a couple of years now, I've been bugging my older son who lives in Chicago to buy a house already. After all, mortgage rates are at rock bottom (about 3 percent for a 30-year fixed), and house prices haven't completely rebounded from depths they reached a few years ago.
But there may be a good reason for him to bide his time: something called "the great senior sell-off."
The theory comes from Arthur C. Nelson, director of the Metropolitan Research Program at the University of Utah, whose ideas were written up in a recent Atlantic Cities story, and it goes like this:
Baby boomers, the generation born between 1946 and 1964, some 78 million strong, have by their numbers reshaped practically everything in American life. Demographers call them "the pig in the python" because they create a huge bulge as they pass through life's phases. When they were children, there was a classroom shortage; to get into college, they had to compete with each other like pit bulls.
In their family forming, big-spending years, they bid up the cost of housing to unprecedented levels. (Of course, loose lending practices that allowed almost anyone who could breathe to get a mortgage also ramped up prices.) Nelson estimates that boomers drove 77 percent of new housing construction in the United Stater from 1990 to 2010, mostly single-family homes on large suburban lots.
The oldest boomers are now 67. And, even though many surveys show that seniors say they want to age in place, Nelson predicts that as they travel through the old age portion of the python, they will want to sell their three- and four-bedroom homesteads and move to a condo. Or, when they get older, to assisted living facilities. Ergo, the great senior sell-off.
The big question is: Will there be enough buyers? Or, will there be enough buyers who can pay what the departing seniors will be asking? The generations coming along after them are smaller in number; and given the lousy economy, it's unclear whether they will be earning enough to pay the freight.
Nelson predicts that all of this will hit the fan around 2020. At that point, he says, seniors will be trying to offload 200,000 more houses than there will be families coming into the market to buy them. A lot of people won't be aging in place but stuck in place. And, presumably, prices would drop, enabling younger folks with less change in their pockets to get into a house.
How might this play out in the Twin Cities?
Tom Melchior, director of market research for CliftonLarsonAllen, a business accounting and consulting firm, who has a specialty in senior housing, believes that prices will depend to a great extent on location.
"Most of the action now is in Minneapolis and St. Paul's downtowns and Uptown,” he says. “Also in the inner ring suburbs."
That's where people seem to want to be these days, he says, and he doesn't expect prices in those areas to fall precipitously. But people out in Chanhassen or other far-flung suburbs could find selling difficult.
Anyway, I'm letting you know now. You have seven years to plan.