Feel Like There Are Not Enough Homes on the Market? You Are Right!
I am continuing the theme started by Todd in the last blog post. Why does it feel like there are relatively few attractive choices of homes to purchase? Because, well, there are relatively few homes on the market at all. Even though new homes are coming on the market every day (really!), the number of these, compared to the number of buyers looking to purchase, is too small. Add to that the few overpriced properties or those too outdated to fix up on your budget, and you really do have many fewer choices than in the past.
While we have been in a seller’s market for several years now, the combination of people working longer, staying in this area even in retirement, having their debt-laden college grad children or older parents moving in with them, or wanting to move up but not being able to find another home, means many more people are just staying in place a lot longer than they used to.
When I was in my 20s, people would retire in their early 60s, generally, and move to warmer and less expensive climes. Now, in my mid-50s, my retired friends are all going on cruises, volunteering at the Smithsonian, and remodeling their homes. The ones moving to Florida are the exception. And many of my friends in their 60s are still working because we expect, and want, to keep working. Besides, life expectancy is growing and 30-year-long retirements are expensive! Sometimes one spouse is retired but the other is still working. In fact, Forbes predicted in December that 2020 will see the biggest housing shortage in US history, driven mainly by baby-boomers staying in place.
Add to this the strong DC job market and higher education environment, which draw more people into the area every year, far more than leave the area.
This all means that the supply of homes for sale is a LOT smaller than the number of people who are moving to this area, or want to move out of their parents house. And, obeying the laws of supply and demand, this is sending home prices through the roof. A few facts to put this all in perspective:
· Currently, about 55% of owner-occupied homes in the U.S. are owned by people age 55 or older, a higher share than we’ve seen in recent history. Homeowners are now staying in their homes an average of 13 years, which is above the long-term average. (comment: I remember when this average was 5-7 years!)
· Inventory across the country declined by 12% between December 2018 and December 2019. In Virginia, the drop was even sharper, with a 20.9% decrease in the number of active listings at the end of December 2019 compared to a year earlier. In some local markets, inventory levels are less than half what they were five years ago.
· According to data from the U.S. Census Bureau, people age 55 to 74 (the core of the Baby Boomer generation) occupy 42.7% of all owner-occupied homes in Virginia, up from 40.5% in 2013. Between 2013 and 2018 (the latest data available), the total number of homeowners in Virginia increased by 89,422, but the total number of homeowners age 55 to 74 increased by 82,836, accounting for more than 90% of the growth. These are not new homeowners by and large, but rather Baby Boomers.
· Back in 2013, 45.3% of 55 to 74-year-old homeowners had lived in their homes 20 or more years and 73.8% had been in their home 10+ years. In 2018, those shares had increased to 47.1% and 76.8%, respectively.
· While the number of homeowners age 55 to 74 increased by 10.2% between 2013 and 2018, the number of 55 to 74-year-old homeowners who have lived in their homes 20+ years increased by 14.5%. 
In future posts we will look at trends in new construction, policy changes, and other responses to meet these challenges.