Double bind: Will soaring rent burdens shrink baby boomer nest eggs / inheritance?

Referencing the pain some homeowners suffered after the housing bubble, Boston.com’s real estate blog asked Do renters have it tougher?  Baby boomers, before you begin family conversations over the Holidays about downsizing or transitioning aging parents, do the math:

“More than half of all renters across the country now shell out more than 30 percent of their income to their landlords, thrusting them into the land of the so-called ‘rent burdened.’ That’s up from a still alarming, but significantly lower, 38 percent back at the start of the 2000s.”

DO THE MATH

If rent-burdened population increased 13%+ between 2000 and 2013, or by 1% per year, approximately 6 out of 10 renter households will be rent burdened by 2020.  That’s the year some industry observers, including the National Association of Realtors, are concerned that the Great Senior Sell-Off will begin:

http://bit.ly/SrSellOff (please share this short link with your social networks)

If only 4 in 10 households can afford their rent, how will many accumulate enough savings to afford a downpayment or the reinflated housing prices of 2013?

DEMOGRAPHIC TRAIN WRECK?

Will the resulting decline in demand and plunge in purchasing power turn today’s rent burden into a deadlocked resale market or the next wave of short sales as aging babyboomers try to extract their shrinking home equity and / or share their inheritance in 2020 and beyond?

Here’s what one expert says from link above:

“By 2020, there were will be around 35 million over-65 households in the U.S. That year, Nelson calculates, seniors who would like to become renters will be trying to sell about 200,000 more owner-occupied homes than there will be new households entering the market to buy them. By 2030, that figure could rise to half a million housing units a year. “Between changing preferences and declining median household income … “that means we can predict the next housing crash, and that’ll be in about 2020.”

NEXT STEPS:

No one can predict where housing prices are headed in the future, but new tools will enable individuals and families to develop and plan for different scenarios.  In coming days and weeks, the Real Estate Cafe will be making two new tools available to the public to experiment with a variety of their own “what if” scenarios.  If the Fed stress test banks for worst case scenarios, shouldn’t you “stress test” your real estate decisions, too?

Whether you’re participating in intergenerational family conversations about selling the family homestead in 2014, or trying to figure our how transportation and other costs (which are outside the rent burden calculations above) impact your purchasing power, and decisions about where and what to buy, we’d like to invite you to test these new apps.  Please contact us to learn more.