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Blame it on the Boomers? Expert sees demographics, not foreclosures, behind housing mess

Posted by Scott Van Voorhis January 5, 2011 05:58 AM

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Welcome to the "Fix-Up, Remodel, Expand and Condominium Era."

That's the spiffy name William Lucy, a professor and housing expert at the University of Virginia, has given to our new decade, the 2010s.

But what's even more interesting is Lucy's take on what really ails the real estate market right now.

The good professor contends the real problem is not foreclosures or a flood of new homes but a grand, demographic quandary.

Basically, we have mismatch, with an epic number of Baby Boomers, numerically the largest generation in history, heading into retirement and looking to sell their homes.

But there is a dearth of 30-to 45-year-old buyers available or even interested in moving on up into these big Boomer suburban palaces.

The numbers, as Lucy lays them out, are startling.

There are now five homeowners 55 and older for each potential first-time buyer between 30 and 44.

That's a 5-to-1 ratio today, compared to 3.5-to-1 in 2000 and 3-to-1 in 1990.

Here are the raw numbers: 35 million potential sellers 55 and up, compared to just 6.5 million potential buyers between 30 and 44 years old. (Including me, except I bought my Natick fixer-upper from a WWII generation guy back in 2002 and can't afford to buy again and bail out a retiring boomer.)

These numbers should be doubly alarming here in Massachusetts, one of the grayest states in the country and getting older by the day as younger buyers flee to less expensive states.

However, after crunching the numbers, Lucy comes to some unexpected conclusions.

Given the imbalance between homes for sale and buyers we should be looking at an era of falling prices, right?

Not so he contends.

Aging Boomer homeowners hold the trump card here - they don't necessarily have to sell and won't unless they get a price they like.

Instead, Lucy sees a future where the housing market is far less fluid than it has been in years past.

Hence his prediction we were entering the "Fix-Up, Remodel, Expand and Condominium Era."

Instead of settling for long commutes to bigger homes in the outer suburbs, the up-and-coming generation of buyers in their 30s and 40s is more likely to prefer the convenience of the inner suburbs, even if that means fixing up an older home or buying a condo.

I have reservations about the professor's grand theories - the housing bubble and bust were pretty complex and single shooter theories seem overly simplistic.

Yet the role of demographics in the current housing mess definitely deserves more attention. And the implications are certainly sweeping - we may be locked into a longer-term shift that defies the typical boom bust pattern.

If nothing else, some Boomers may want to start rethinking their retirement plans.


This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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