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Housing Glut Could Be on Horizon

Analysis finds record number of boomers will give up homes, but demand from millennials may be lower

Large home with for sale sign in yard

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Boomers will be relinquishing their homes at record rates soon, and there may not be enough demand from millennials to pick up the slack, the government-sponsored mortgage backer Fannie Mae warns in a new report.

“With the oldest boomers now advancing into their 70s,” Fannie Mae states, “the beginning of a mass exodus looms on the horizon, fueling fears of a ‘generational housing bubble.’ ” Such a scenario “would reverberate through the housing market and economy.” 

For the decade beginning in 2016, Fannie Mae reports, the number of homeowners who reach age 65 by the year 2026 will drop by 10.5 million to 11.9 million, more than the loss of 9.2 million in that age bracket from 2006 to 2016.

Although some recent trends may bode well for future home sales, like homeowner vacancy rates that are at their “lowest level in decades,” according to Fannie Mae, “the exit of boomer homeowners will occur on such a massive scale that it could alter the long-term demand-supply balance in ways that are negative for the home sales market and home prices.”

Because of the threatened disruption in the housing market, the Fannie Mae analysis calls for serious consideration of business and public policies that would “facilitate an orderly handoff of boomer housing assets.” Among proposals that might deserve a boost: home improvement financing options that allow more aging in place, community-based services, and technological advances like self-driving cars and robotic home-care aides.

On the demand side, Fannie Mae notes that lower down-payment requirements and “more flexible debt-to-income ratios” could improve millennials’ home-buying status.

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