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America’s housing market is hurting and real estate observers of all stripes have different opinions on the root cause. However, there is near-universal agreement on one major stumbling block: the lack of inventory. Prospective homeowners hoping for that crisis to ease just got a gut punch with the release of a survey showing that half of American homeowners aged 56 and older plan to age in place.
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The survey, conducted by Clever Real Estate, could radically change America’s home-buying pattern. For much of the last century, America’s housing market moved to a predictable rhythm. Young homeowners buy starter homes and then move into larger ones as their families grow before finally downsizing as seniors by selling their homes. This cycle and new construction created enough housing supply to keep the market moving.
There is almost no way new home construction can compensate for the resulting inventory shortfall if half of homeowners over 56 age in place. The cost of buying and developing land for new subdivisions has skyrocketed in the past several decades. Additionally, many cities and suburbs have adopted an anti-density, antidevelopment mindset that makes new construction an even greater challenge than in the past.
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That has squeezed inventory and driven home prices on a sharp upward curve in the last 15 years. The only reason buyers didn’t have more complaints at the outset of this price run-up is that the Federal Reserve was holding interest rates down to stabilize the economy after the great financial crisis and COVID.
Once the Fed began raising interest rates to 20-year highs, prospective homebuyers found their buying power severely diminished. That was especially true for young buyers, who competed with much older, much more well-heeled buyers in the housing market. Unfortunately for young buyers, a recent study by the National Association of Realtors (NAR) showed that the average American homebuyer’s age has climbed to 56.
The future implications for housing affordability are frightening to contemplate. The housing crisis could worsen if the average homebuyer is 56 and half and never moves. This wasn’t the 1950s and 60s when new developments were coming up outside America’s major cities almost faster than people could move into them. That large-scale, sustained homebuilding may never happen again in America.
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So, where does that leave young homebuyers or anyone looking for an affordable property? They don’t have any choice except to adapt to the new reality. If a lack of inventory pushes prices higher than everyday salaries, buyers must move to less expensive markets and develop other income streams or both. Although developing a lucrative side hustle is possible, there may be a more effective way to skin this cat.
If you move your target age for your home purchase from your 30s to your 50s, you’ll unlikely work the full 30 years necessary to pay off the mortgage. Developing passive income streams during your 20s and 30s could set you up for early retirement and comfortable home ownership. The sooner you begin building a diversified portfolio of dividend and growth stocks, the more effectively you can adapt to the “new” normal.
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This article Gut Punch For Housing Market–Survey Reveals Half Of Homeowners Over 56 Plan To Age In Place And Never Sell originally appeared on Benzinga.com
As a journalist, Lauri Blackwell has always been interested in writing about the business world. She aims to keep her readers up-to-date on current events and trends in the business world, without sacrificing the journalistic integrity that made her want to be a writer in the first place.
