Baby Boomers, the massive generation born between 1946 and 1964, and their elders have an enormous housing market footprint. With the oldest Boomers now in their early 70s, the beginning of a mass homeownership exodus looms on the horizon.
But how can we predict when this wave of departures will begin over the coming decades? A new Housing Insights from the University of Southern California and Fannie Mae’s Economic & Strategic Research Group answers this question by analyzing attrition of past generations of older homeowners and using the findings to project the future cadence of aging-related homeownership exits.
Steady Trends of the Past Provide a Foundation for Predicting the Future
Exhibit 1 shows cohort homeownership retention rates as residents aged through various 10-year periods since 1980. Two features of Exhibit 1 stand out. The number of homeowners in a cohort increases through its mid-50s, is relatively stable as the cohort ages through its late 50s through early 70s, and then begins to drop rapidly as the cohort advances into its late 70s and 80s. For cohorts aging from 65-74 to 75-84 (second-to-last cluster of bars at the right of Exhibit 1), only between two-thirds and three-quarters of homeowners are retained over the course of 10 years, and for cohorts aging from 75+ to 85+ (last cluster of bars at the right of Exhibit 1), merely three-in-ten homeowners remain after 10 years.
Exhibit 1 also reveals that cohort homeownership retention rates were either stable or rising steadily across recent decades for the oldest cohort age transitions.
Aging Baby Boomers Will Trigger a Growing Exodus of Older Homeowners
The stability of recent trends in cohort homeownership retention rates for older adults provides a solid foundation for predicting exits of older homeowners in coming decades. In the first scenario, we assume that retention rates for homeowners aging into the 75-84 and 85+ categories will continue to rise gradually at the same average pace as observed between 1980 and 2010. In the second scenario, we hold retention rates for homeowners aging into the 75-84 and 85+ categories constant at the average value observed across all four historical decades shown in Exhibit 1.
Regardless of the scenario, the projections indicate substantial increases in the number of older adults exiting homeownership over the next two decades (see Exhibit 2). Between 2006 and 2016, the cohorts that reached age 65 or older by the latter year lost 9.2 million homeowners. Between 2016 and 2026, cohorts passing into the same age range are projected to lose 10.5 million to 11.9 million homeowners, depending on the projection scenario. Looking further out to 2026-2036, cohorts aging into the 65+ age range are projected to shrink by between 13.1 million and 14.6 million homeowners, a loss at least 42 percent greater than registered during the most recent decade.