Boomers Mess Up Housing Market

Those hoping for a quick rebound are likely to be disappointed.  Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012.  Even when they stop falling, prices may scrape along the bottom of the rut for years.

What's more, no one can assess the outlook for housing without considering the effects of 78 million aging Baby Boomers. "A lot of people have theories about the Baby Boomers," says William Frey, a demographer and senior fellow at the Brookings Institution, a think tank in Washington, D.C., "but boomers always have tended to confound expectations."

Dowell Myers, a professor of urban planning and demography at the University of Southern California, warns that the retirement of boomers over the next two decades is likely to depress house prices in many areas.  As boomers relocate to retirement homes and cemeteries, there will be a lot more sellers than buyers in parts of the country, he says.

"It's going to really mess up the housing market," says  Mr. Myers.  He predicts that this "generational correction" will be larger and longer-lasting than the current slump.  To get a sense of the effects of aging boomers, Mr. Myers looks at the number of Americans 65 and over per 1,000 working-age people.  He sees that number soaring to 318 in the year 2020 and 411 in 2030 from 238 in 2000.

Many people over 65 buy homes, of course, but as they get older they become more likely to sell than buy.  People aged 75 to 79 are more than three times as likely to be sellers than buyers, Mr. Myers says.

Source: The Wall Street Journal, December 2, 2008