When will Baby Boomers Downsize

The baby boomer generation, those born between 1946 and 1964, are now between 77 and 59 years old. Most have now retired or are entering their retirement years, and many are beginning to consider downsizing their homes. But when can we expect to see the majority of baby boomers downsizing? Here, we will explore some factors that will influence the timing of downsizing for baby boomers.

1. Financial Considerations

One of the most significant factors that will influence when baby boomers downsize their homes is their financial situation. Many baby boomers have substantial home equity, which can provide a significant source of retirement income. However, any cash savings they have has earned very little interest in the past decade. Also, the stock markets have dropped over the past 12 months.

The cost of maintaining a larger home, including property taxes, insurance, and maintenance, can be a significant burden on retirees living on a fixed income. In the current inflationary environment with high mortgage rates, those costs have risen significantly in the past year.

As a result, we may see more baby boomers downsizing their homes as they look to reduce their monthly expenses and free up cash for other retirement goals. However, the timing of this downsizing may depend on a range of factors, including the state of the housing market, interest rates, and the baby boomer's personal financial situation.

Most baby boomers will not want to sell in the current year because demand is low, however, this is the year when boomers will feel the highest pressure to sell. Even if they don’t get peak pricing, most have so much equity in their home that they will still earn significant profits from a sale.

2. Health and Mobility

Another important consideration for baby boomers when deciding to downsize their home is their health and mobility. As we age, we may find that our ability to maintain a larger home and navigate stairs and other obstacles becomes more challenging. In these cases, downsizing to a more accessible home, such as a single-story home or one with fewer stairs, can be a sensible choice.

Data shows that most retirees begin to experience mobility issues between 59 and 67 years old. This is when retirees begin to find it more difficult to tend to gardens, clean the eaves, and climb stairs.

Some baby boomers may choose to downsize earlier in life, while they are still healthy and able to manage the move and any renovations needed to make their new home more accessible. Others may wait until their health and mobility decline before making the move.

3. Lifestyle and Hobbies

For many baby boomers, downsizing their home is not just about financial considerations or health and mobility. It can also be a chance to live a more relaxed lifestyle, enjoy hobbies, and engage in new activities. Downsizing to a smaller home can provide more time and resources to pursue interests such as travel, volunteering, exploring the outdoors, or spending time with family and friends.

However, the timing of this downsizing may depend on the baby boomer's personal interests and hobbies. Some baby boomers may choose to downsize earlier in life to free up more time and resources for these activities. In contrast, avid gardeners may wait as long as possible to downsize.

4. Housing Market Conditions

Another critical factor that will influence when most baby boomers will downsize their homes is the state of the housing market. Many baby boomers may have postponed downsizing due to the housing market boom, which increased the value of their homes. As a result, many baby boomers were hesitant to sell their homes and miss out on the potential appreciation.

However, the housing market is highly unpredictable, and it is challenging to predict when the best time to sell. In some cases, baby boomers may choose to downsize when the market is strong, and they can get the best price for their home. In other cases, they may wait until the market stabilizes or recovers, depending on their financial situation.

In truth, most boomers should not feel too much pressure to sell at the market peak because current prices are much higher than when they originally bought their home. As well, since they are downsizing, if they sold their house at the peak then they would also pay peak pricing for an apartment. Finally, the last peak was June 2022, so the next one could be a few years away.

5. Family and Social Connections

Another crucial factor that will influence when baby boomers downsize their homes is their family and social connections. Many baby boomers have lived in their homes for decades and have established strong roots in their communities. Moving to a new home can mean leaving behind friends, family, and familiar surroundings.

This challenge is made worse by exclusionary zoning that prevents building apartments in neighbourhoods with houses. As a result, it is more challenging for retirees to find a right-sized home in the same neighbourhood.

In some cases, baby boomers may choose to right-size to an area closer to their children and their families who can provide support.

Conclusion

Many baby boomers might choose to sell in 2023. Here are five key drivers of boomers’ decision to downsize and potentially add a lot of housing supply to the market.

If boomers don’t right-size their living arrangements in 2023, then it is likely that they will do in sometime between today and 2040 when most boomers will have reached 80 years of age. In other words, the largest demographic cohort will be selling expensive homes over the next 17 years and buying apartments or moving into assisted living.

This has the potential to depress the market and also compress the gap between house values and apartment values.