Housing prices will fall in 2024 due to a “silver tsunami” of baby boomers who will downsize in the coming years, according to Meredith Whitney, who predicted the 2008 financial crisis and became known as “the Oracle of Wall Street”.
Whitney says that over 51% of individuals aged 50 and above are projected to move into smaller residences. This older segment owns more than 70 percent of US homes. The downsizing trend may result in over 30 million units of housing coming on the market, Whitney maintains.
(Baby boomers’ eagerness to downsize is a principal reason why Beth Davis and I are researching investments in tiny-home – and smaller-home – communities.)
Home supply-and-demand dynamics will shift as the supply of homes for sale increases, forcing home prices to decline. This decline will fuel a multi-decade cycle that will start in late 2024 and continue into 2025, Whitney believes. Gary Keller, head of Keller Williams, reminds us that homes, over time, will show continued appreciation at 4 percent annually, despite highs and lows.
In the next few years, older Americans are unlikely to be swayed from downsizing decisions, despite their holding all-time-low mortgage rates that they obtained by refinancing several years ago. Older Americans will be willing to relinquish their low-rate mortgages to downsize for these principal reasons:
- Their next lifestyle homes will likely carry a lower price tag than the homes they are selling.
- They can use the equity in their existing homes to carry much smaller mortgages, albeit at a higher rate, or pay cash for their next properties.
Whitney cautioned that enough younger buyers might not exist to sustain the housing market. Sellers may be compelled to sell at lower prices.
Stay tuned.
