Throughout the recession and recovery, Millennials have hogged the attention: they suffered a particularly bad recession, which delayed their launch into the housing market, slowed overall household formation, and lowered first-time homeownership. But they’re hardly the only demographic that matters for housing. Baby Boomers will help determine the demand for different types of housing and the supply of homes for sale when – and if – they downsize.
This morning, Fannie Mae released a note on boomer downsizing, showing that the share of baby boomers in single-family detached homes has been roughly stable from 2006-2012 (rising slightly on a per-capita basis and falling slightly in the most recent years on a per-household basis). The big question is what happens longer term: are we about to hit a wave of baby boomers selling their single-family homes and moving into apartments and condos? It’s unlikely, for two reasons: baby boomers are still years away from the age of downsizing, and the long-term trend shows that older households today are less likely to downsize than older adults in the past.
Let’s start by looking at the age when older households move from single-family homes to multi-unit buildings. Based on the 2013 Current Population Survey’s Annual Social and Economic Supplement (CPS ASEC) – the most recent detailed demographic data available – baby boomers (born between 1946 and 1964, which means 50-68 years old in 2014) are less likely than almost any other age group to live in multi-unit buildings as opposed to single-family homes. The only age group less likely to live in multi-unit buildings is 70-74 year-olds, which is the age group that baby boomers will start to enter in the coming years.
In later years, the share of households in multi-unit buildings rises, but by less than you might guess. Just 25% of households headed by 80-84 year-olds live in multi-unit buildings – which is a lower share than 40-44 year-olds. Even among households headed by adults aged 85 and older, only one-third live in multi-unit buildings – and that’s only counting those who head their own household are not living with adult children or in institutions.
Therefore, as today’s baby boomers age, they’ll grow into age groups first with a lower likelihood of living in multi-unit buildings (70-74 year-olds). Multi-unit living starts rising slightly at age 75-79, and rises more notably only when heads of household reach their 80s.
But will baby boomers, who are in their 50s and 60s today, look like today’s 60- and 70-somethings ten years from now – or will they make different housing decision as they age? One clue is to look at the longer-term trend in multi-unit living among older age groups using CPS ASEC data back to 1979 (no data are available for 1988). The share of households headed by 50-69 year-olds – roughly the age of baby boomers today – living in multi-unit buildings rose to 21.3% in 2012 and 21.6% in 2013, after holding steady in the 19-21% range for decades. Therefore, baby boomers today are a bit more likely than their parents to live in multi-unit buildings instead of single-family homes. It’s too soon to tell whether that increase is a temporary effect of the recession or the beginning of a longer-term trend.
The clearer long-term trend, though, is the decline in multi-unit living at the ages that baby boomers are approaching. The share of age-70-plus households living in multi-unit buildings has been dropping for decades, from over 30% in 1980 to under 25% in recent years. That means that even if the recent uptick in multi-unit living among 50-69 year-olds persists, baby boomers are entering an age group that is less likely to live in multi-unit buildings than their own parents did two or three decades earlier. While the cyclical effect of the recession might hasten downsizing for some boomers, the long-term secular trend means boomers are reaching older adulthood in an era when downsizing is less common and comes later in life than it used to.
Note: the CPS ASEC data were downloaded from IPUMS, which requests to be cited as: Miriam King, Steven Ruggles, J. Trent Alexander, Sarah Flood, Katie Genadek, Matthew B. Schroeder, Brandon Trampe, and Rebecca Vick. Integrated Public Use Microdata Series, Current Population Survey: Version 3.0. [Machine-readable database]. Minneapolis: University of Minnesota, 2010.