Baby boomer mismatch
By: J. David Chapman/November 15, 2018
As an academic, I look at demographic data and information as a strong indicator in tracking trends in the real estate markets. As an example, experts have watched and tracked the spending habits and housing patterns of the baby boomers, who are 58 to 72 years of age, to try to predict their next stage of desired housing and other purchases. They have not disappointed researchers as they have reshaped the U.S. economy, and the impact shows no signs of slowing down as they enter their golden years.
The number of Americans over 80 years of age will double, from 6 million to 12 million, in the next two decades, according to the Harvard Joint Center for Housing Studies, and, by 2035, one out of three U.S. households will be headed by someone over 65 – which will be a population of 79 million.
Many institutional real estate investors rationally thought that the baby boomers would require more care as they aged, so they built and invested in senior-care facilities. Seems that developers believed that if they built the facilities, the aging baby boomers would come. There are a couple of problems with our predictions. That population demographic will change as we predicted; however, researchers and developers may have misunderstood the impact.
First, baby boomers have been significantly slower to need or want the senior-care facilities that have been built. It is currently their parents who are the customers. Second, there is an affordability issue with the model. The vast majority of the people living in so-called senior housing are over the age of 80 and part of the Silent Generation, which suffered through the Great Depression and World War II. Many remain frugal and independent, and resist moving into group housing.
This situation has created a bit of a “missing middle” or supply-and-demand mismatch in regard to the two generations and their housing preferences. First, the desire for a walkable environment and availability of public transportation options is critical. Second, homes must allow this generation to age in place. Jack Werner, A-to-Z Inspection Services, was recently named the Certified-Aging-in-Place-Specialist Instructor of the Year by the National Association of Home Builders. He stresses better lighting, wider hallways, roll-in showers, and level entry into the home, stating that one-third of our population has disabilities or issues requiring these amenities. Build this product and they will come.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).