Special to Valley News
With the aging of America comes word about a recent phenomenon in the housing market on which it’s worth shedding light. The same generation that oversaw the largest residential real estate expansion in history, the baby boomers, have become the baby “blockers.”
They’re not letting millennials in to their homes, that is.
It’s not new news that there is a shortage of housing stock for first-time homeowners, especially millennials. As the largest demographic group in America seeks to put down roots, they are finding a shortage of affordable properties that hasn’t been seen in generations. The millennial generation is a full one-third larger than their baby boomer parents at 90 million strong. Also, millennials have put off housing, marriage and a host of other responsibilities and cultural norms until recently entering their thirties. Post-crisis highs in starter home availability have given way to extreme shortages, causing millennials seriously seeking homes to entertain spending more to get the home they choose or finding themselves in bidding wars for stock.
Previous generations – the greatest generation, baby boomers and even Generation X – entered the housing market much earlier, traditionally in their mid-20s and in greater numbers than millennials today.
With this, the baby boomers born between 1945 and 1964 are now in their retirement years. The move to retirement communities in warm-weather states has slowed a bit. Perhaps a realization has struck that their homes have value to them right where they are? Regardless, boomers are choosing to stay in their homes.
Typically, remaining mortgages for boomers are fairly low, proportionately and they have equity enough, perhaps, to live and draw down, often to compensate for underfunding their retirement years. Americans are living longer as well.
And so, in many American cities, boomers are holding on to their homes. They own 50 percent of all housing in America, which is up from 43 percent only a decade ago, and they are contributing to the squeezing out of their own children from owning homes.
Yet, there is a glimmer of hope in the rising numbers of housing starts in some areas that falls under the thought that “if you build it, they most certainly will come.”
According to a new report from Trulia, the online residential real estate website breaks down the nation’s homebuilding numbers. It has found that three cities alone in the U.S. are on pace to build nearly 130,000 new homes in 2017. The permits for the three cities make up nearly as much as 50 other large U.S. metros combined. Dallas, Houston and Austin, all in Texas, are on pace to make up more than 10 percent of all permits in the U.S. That’s a lot of new homes.
Ralph McLaughlin, Trulia’s chief economist, explained what the growth means for the cities.
“We think the building boom in Austin and Dallas is healthy and welcomed, given the meteoric rise in prices and decrease in affordability we’ve seen over the past year,” McLaughlin said.
It is welcomed news for the state since, like much of the country, it has been struggling with a lack of housing inventory.
Dallas is the No. 1 homebuilding market in the country, with nearly 49,000 projected permits. Houston is a close second at nearly 48,000 permits.
Texas, of course, isn’t alone in trying to improve the dearth of available inventory in the country.
New York rounded out the top three, with a projection of just over 40,000.
So, the numbers speak volumes. To truly see the creation of the numbers of housing millennials will need in the next 20 years may require nothing short of a renaissance, and that will take some work.
Economic policy contributes to housing shortages.
Ask many older Americans, and they will give a plethora of answers as to why they are holding on to their homes. They are comfortable in their homes, they find them relatively affordable and they see the equity in them as “their retirement.” They receive property tax exemptions for the elderly in many communities. Zoning rules continue to make it difficult for developers – if they could entice seniors to sell – to build affordable apartments and housing that seniors would find attractive enough to move.
The problem begs another view of the dilemma that from the perspective of renewal of urban development. Most urban centers still have stocks of decaying wartime housing – single and multifamily homes built just after World War II to house returning soldiers and their families. They were built in neighborhoods, along with schools, cluster housing and other amenities that today have become rundown, graffiti-ridden, undesirable “former” neighborhoods.
Some communities, such as Portland and Seattle, have seen public and private support for renewal projects that have turned older neighborhoods into new meccas for younger people and families putting down roots. In many of the communities, gardens and even livestock are replacing asphalt backyards and parking lots to meet the “green,” healthy lifestyle demands millennials are desire. On these properties, they are able to grow their own vegetables, milk their own goats and live an organic lifestyle.
So, the problem is not asking boomers and seniors to move on, as much as it is that public policy and private industry need to draw up some plans, offer incentives to revitalize the old neighborhoods and fix-up the old housing stock. Mortgage companies have a role here as well. Give millennials and other first-time homeowners new “smart” mortgages; ones where low down payments can be required, perhaps where student loans and even U.S. Department of Agriculture or existing 203K regulated funds for fixer-uppers can be combined in a mortgage that makes sense to offer a viable option to these generations actively trying to enter the market.
In doing so, I think the country will see a housing boom that could be unprecedented in American history. Perhaps millions of jobs will open up in a revitalized construction and remodeling industry, which has long been America’s primary economic engine.
The country certainly needs the housing. It needs the construction and remodeling industry, and it needs civic help in paving the way for tomorrow’s housing. A revitalized housing sector will provide an economic engine here at home that has long been missing – a drag on an economy already struggling to find itself in the post-modern world.
Envision American-made materials, smart technologies and energy-efficient homes. Picture neighborhoods once again filled with growing families, parks, life and growth. It’s not hard, if it’s done together, all of us – communities, builders, mortgage lenders, generations, taxpayers and municipalities – all of us.
Michael Macari is chief communications officer for San Diego and Stamford, Connecticut-based National Asset Direct and its iServe Residential Lending companies. He is an award-winning writer producer and lives in Stamford, Connecticut, with Sally, his wife of thirty-eight years, their five children and two grandchildren.