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Aging Boomers Will Help Demand for Homes, Study Says

March 21, 1993|From Times Wire Services

WASHINGTON — The aging of the baby-boom generation will have a positive impact on housing demand through the turn of the century, according to research done by two USC professors and sponsored by the National Assn. of Realtors.

The report, "The Effects of Demographics on Future House Prices" by Dr. Dowell Myers and John R. Pitkin, found that as the baby-boom population grows older, people in that age group will continue to buy homes, resulting in steady sales and stable home values throughout the next decade.

The study rebuts reports that predicted that home purchases by baby boomers will taper off as the generation grows older, thus forcing real home prices to decline.

The report contends that shifts in population composition, not just population growth, often drive change in housing demand. "Rapid population change may alter both the consumption preferences and the effective demand of the total population," the study says.

The report evaluates the housing consumption of cohorts--people who are born in certain time periods and then move through age groups as they grow older. The study notes that measures of life-cycle changes in housing demand, derived by tracking generations of Americans over a 30-year time span, provide a sound basis for forecasting future activity.

The study tracked the home buying patterns of the same group over different periods of time, and found that, regardless of age, home expenditures increased at the end of each time period. "At least since 1960, per capita housing consumption has, on average, increased for all cohorts in the United States as they have aged beyond 45 to at least age 70," Myers said.

Based on the performance of their predecessors, cohorts in the baby-boom generation will continue to create activity in housing markets for years to come. "The importance of this finding is its implication for the future impact on the housing market of the large baby-boom generation," the report said. "This group has matured from the young ages when they newly entered the housing market (aged 16 to 34 in 1980), and is proceeding to a mature housing market status (reaching age 44 in 1990, age 54 in 2000, and age 64 in 2010)," the report says.

The study projects that per capita housing consumption for the oldest members of the baby boom generation will not even start to fall off until after 2015 (when they reach 70).

According to NAR's chief economist John A. Tuccillo, the research counters "doomsday" reports claiming home values will drop due to the smaller size of the generation following the baby-boom group. Such dire predictions are too simplistic, and fail to consider the continuing impact the baby boom generation will have, Tuccillo said.

"As the leading edge of the baby boom moves through its peak earning years, demand will pick up for second homes and retirement homes," Tuccillo said. Additionally, some baby boomers previously unable to purchase homes will be buying, he noted.

The report concludes that the long-lasting impact of baby boom home buyers will offset any drop in young households entering the housing market. "The baby boom generation will have a continued positive effect on future house values," it says.

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