Fannie Mae predicts a “coming exodus of older homeowners” as Boomers die, downsize or enter retirement homes, which will dump a ton of housing stock on the market and crash prices, finally making homes affordable for millenials.
But British millennials don’t fare as well, because old Britons don’t want to downsize, meaning they have to wait for death and/or infirmity to drive a sell-off.
One missing factor here is the potential cascade effect driven by declining property prices: as we saw in 2008, when a substantial part of the market is occupied by speculators — who don’t value homes as a place to live, but rather as an asset — who are counting on prices continuing to rise, they can be stampeded into a spiral of sell-offs by declines in the market. The most skittish/exposed get out first, increasing the inventory and depressing prices, and these declining prices scare a new group of investors into selling, which pushes prices down further. Lather, rinse, repeat!
All this means that it may be only when baby-boomers start to check out in a more permanent way that lots of houses begin to change hands. The most common year of birth for the baby-boomer generation is 1947. Since their most common lifespan is around 87 years, Peak Death could occur in 2034, when Britain will see around 15% more fatalities than in 2018. It will be very sad. But for house-hunters it will be a help. By that time baby-boomer deaths will be pushing down on house prices by around 0.7% a year.Yet just as the housing crisis affects different generations unequally, the impact of the great baby-boomer sell-off will have an unequal effect on different groups of youngsters. The boomers will leave record amounts of wealth to their descendants. Data are poor but according to our calculations, roughly £100bn are left behind each year. Over the next 20 years the total value of bequests is expected to more than double, peaking in 2035, according to a paper by Laura Gardiner of the Resolution Foundation, a think-tank. Most of this unearned wealth will not be taxed, on current plans. By 2020 a couple will be able to pass on a house worth £1m tax-free.
Cheer up, millennials! It will become easier to buy a house [The Economist]
(via Naked Capitalism)
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