Baby Boomers keep getting older, and that has consequences for the economy. The huge number heading toward — or already in — retirement has already left a lasting impact on the job market. Now come questions about what will happen as they sell their homes, due to downsizing or death.
This won’t be a blip. Boomers own 32 million homes across the country, about 40 percent of the total. And a new Zillow study estimates close to 20 million homes owned by older Americans will hit the market in the next two decades.
Ground zero for the trend: Tampa Bay.
By 2037, one out of every three homes in our metro area will have sold because an owner aged 60 or older died, downsized or left some other way, Zillow found. That placed us tops among 59 large cities in the study. Tucson, Ariz., ranked second. Miami and Orlando filled out the top four. Jacksonville placed 23rd.
Parts of the country with stagnant populations could struggle to fill the flood of inventory. Cleveland, Buffalo and Dayton, Ohio, are cities that have a large share of older residents who will leave their homes in the coming years, but fewer younger people to replace them.
In contrast, the Tampa Bay area keeps attracting more residents, a trend predicted to last for at least the next two decades.
“Tampa Bay is an example of a metro area that could take advantage of this inventory coming on the market,” said Karl Kuykendall, principal economist at IHS Markit. “It is a large, economically diverse area with population growth well above the U.S. average.”
For several years, our area has wrestled with a tight inventory of homes for sale. That has helped drive up prices and prevented some renters from becoming homeowners.
As for new homes, builders have been constrained by higher land prices, a lack of workers in some construction jobs and less access to capital than before the Great Recession. In 2005, for instance, builders broke ground on more than 21,000 new homes in the Tampa Bay area. Last year, the number was closer to 12,000.
A growing inventory of Baby Boomer homes should help loosen up the market. Not to get too morbid, but when owners die and their homes sell, it increases the housing supply. That creates more options for buyers, which can also hold down prices. Home prices in the Tampa Bay area have increased far faster than average salaries in the past decade.
“A curb on prices is good news for affordability,” Kuykendall said.
The additional inventory should also help feed the growing demand to live closer to city centers. Baby Boomers, who have owned their homes for longer than younger generations, tend to live closer to downtown areas. They weren’t as likely to get pushed into faraway suburbs due to high prices or lack of inventory.
New home construction often focuses on the periphery of big cities, where land is less expensive. The Baby Boomer trend should provide builders with opportunities closer to city centers, including freeing up lots in some areas to build duplexes, triplexes and small apartments.
“What seems most likely amid all the uncertainty is that, in the coming two decades, the construction industry will need to place a greater emphasis than before on updating existing properties, in addition to building new ones," the Zillow report stated.
Two things to keep in mind: This trend has already begun, and it’s going to play out over a couple of decades. The housing market won’t be deluged overnight. Baby Boomers are between 55 and 75 years old and many of them will choose to “age in place” — remain in their homes for years. Think of the trend as a steady flow that will quicken as more Boomers move deeper into their 70s and 80s.
Zillow’s numbers tell the story. From 2007 to 2017, owners aged 60 or older released roughly 730,000 U.S. homes into the market each year. From 2017 to 2027, the number will increase to 920,000. From 2027 to 2037, it will reach 1.17 million a year.
Any place that caters to retirees, including stand-alone developments or pockets within metro areas, could end up with a surplus of homes unless it attracts younger residents. The Villages, the sprawling retirement community in central Florida, has grown rapidly in the past 20 years. Once the bulk of Baby Boomers reach their 70s, the pace will likely slow, Kuykendall said.
“Places that depend largely or entirely on retirees will find it harder. They might stop growing or not grow as fast," he said. “But for metro areas that have enough demand, it’s a manageable trend.”
A wave of homes for sale
The percentage of all the homes in a market that people 60 years and older will sell in the next two decades.
City* By 2027 By 2037
1. Tampa Bay 15.2% 33.2%
2. Tucson, Ariz. 14.8% 32.6%
3. Miami 15.2% 31.9%
4. Orlando 14.4% 31.9%
5. Dayton, Ohio 14.3% 31.3%
6. Knoxville, Tenn 13.5% 30.8%
7. Pittsburgh, Penn. 13.6% 30.2%
8. Cleveland, Ohio 13.2% 29.9%
9. Albuquerque, N.M. 12.7% 29.6%
10. Greensboro, N.C. 13.3% 29.5%
* Metro or combined statistical areas. In this case, the Tampa Bay area refers to Pinellas, Pasco, Hillsborough and Hernando counties.
Sources: American Community Survey; Zillow analysis