The American Dream is changing: we’re having fewer kids, getting married later in life, and many of us are increasingly choosing a condo in the city over a picket-fenced house in the ‘burbs.
The growth in America’s urban population in recent years vis-a-vis the suburbs is one reason offered to explain why home builders are focusing on multifamily homes over the single-family variety.
Some also attribute the rise of apartment construction to demand from Baby Boomers, who are sending their kids off into the world, retiring, and in less need of large, single-family homes than they once were. The financial press has been awash with stories bearing anecdotal evidence of boomers retiring from the suburbs to the city, selling their single-family homes for condos within walking distance of urban amenities.
A recent report from the Federal Reserve Bank of Kansas City argued that the aging Baby Boomers could drive demand for multi-family housing for the next decade or more. It quotes Robert Mayer, a Century 21 real estate agent and development consultant who says, “Independent baby boomers who are not ready for senior living, but don’t want to take care of the yard, are looking at urban multifamily living, where they can stay in the swing of things.”
The problem with this narrative is that, so far at least, boomers have been staying put. According to an analysis of Census data from 2006-2012 by Patrick Simmons of Fannie Mae, “contrary to the downsizing perception, the percent of Baby Boomers residing in single-family detached homes was at least as high in 2012 as at any time since the onset of the housing crisis. Even the oldest members of the Boomer generation, who have largely exited the childrearing stage and begun to retire in large numbers, show no major shift away from single-family residency.”
The chart above shows that few Baby Boomers are ditching their single family homes and calls into question whether home builders should be so eager to break ground on new multi-family units.
So what’s keeping these folks from taking the plunge into urban, condo living? Simmons suggests that older people simply prefer not to move. He cites a 2010 survey by AARP, which found that “nearly 9 in 10 baby boomers prefer to remain in their current residences for as long as possible.”
Also, housing market conditions are far from normal. A huge portion of mortgages remain under water, scenarios in which homeowners owe more on their homes than they are worth, which could prevent them from moving. Indeed, between 2006 and 2012, the share of Boomer households that moved the previous year fell from 10.2% to 7.9%, according to data cited by Simmons.
And finally, it’s possible that, since the Census data Simmons is drawing from doesn’t include 2013 or the first months of this year, that Boomers have in fact begun to downsize and the data just hasn’t picked that up yet. Perhaps the trend is underway and we simply have no real way of measuring it. Another idea to keep in mind is that even if Baby Boomers aren’t going to lead the condo-living revolution, there’s still reason to believe that the younger generation will prefer multi-family living to single-family homes in the next decades. The generation just coming out of college now is facing unprecedented student debt and fewer employment opportunities than their parents, making single family homeownership a distant hope.
But if homebuilders are counting on older Americans to fill the demand for a hefty portion of the multi-family units their building, they are in for a rude awakening.