Can Boomer’s Children Save Housing?

It is a nifty, logical, and overly optimistic theory. Housing demand will rise as the children of the baby boomers hit their late twenties and thirties and need homes where they can raise their offspring. According to Reuters, “The generation is entering the peak home buying and renting ages of 25 to 44 and numbers over five million people.”

But, are they as careless in their belief that a home is a good investment as their parents were?

People who are now in their sixties assumed that the rapid appreciation of their real estate, particularly in the first six years of this decade, would fund everything from the purchase of cars to retirement. They have been disabused of that belief as housing prices have dropped 20% to 30% in many markets. A home is no longer a de facto savings and checking account. It has become a building that is expensive to maintain and hard to sell. A large number of people nearing retirement age may find themselves working for another five or ten years because the value of their investments, including their homes, have dropped so much.

The children of boomers are likely to learn from their parents’ mistakes and will be much more likely to rent in large apartment complexes or comparatively inexpensive homes. The tax benefits of holding a mortgage will be offset by the fear that home prices may continue to erode further and may not begin a recovery for another decade.

The generation entering its golden years may find itself living in houses that they have occupied for decades and may have re-mortgaged more than once to let them live better than their incomes would permit and to put their children through college. Those children are not suckers.

Douglas A. McIntyre