I think it is hard to say, but I have to forecast because it’s my job. I would watch for the point in time when the peak first-time homebuyer age of the millennials passes. It depends on what numbers people use, but it looks to us like it’s maybe three years from now.
There have been famous papers by well-known economists that have predicted the collapse of the housing market, to their detriment, because it never happened, so I’m not going to predict a collapse. People thought 10 years ago that millennials would not want to own homes because they saw the damage from foreclosures during the Great Recession. But when we surveyed in June of 2010, 90% of them eventually wanted to own a home. This is in my view, a long-standing permanent impulse of people in the United States. So I don’t foresee any collapse of the housing market.
But demographics do suggest a change in the balance between supply and demand, which would slow the pace of price appreciation. Also there are periodic price declines on a regional basis. Right now you’re seeing some big declines on the West Coast in some of what were previously the hottest markets, but on average across the country prices have risen. Migration has definitely shifted from the West Coast to the Southeast as people have been moving.
So I would say it’s more likely to be a rebalancing of supply and demand that would kind of flatten the market out or return it to a more normal pace of appreciation.
Supply also is a case of the baby boomers aging. While their aspiration is to age in place, at some point infirmity sets in, and some of them have to start exiting their existing homes. So the question is, does the supply on the market become greater as a result of that?
We have surveyed people 60 years of age and older that own homes, to ask them what is your life gameplan. People are always talking about reverse mortgages, but they hate reverse mortgages.
