BAM Key Details:

  • Two respected analysts, Ivy Zelman and Meredith Whitney, spoke recently on the aging homeowner population and its impact on the larger U.S. housing market. 
  • Whitney described that impact as a “silver tsunami,” in line with Zelman’s argument that the aging population will likely slow household growth, possibly resulting in an inventory surplus and improved housing affordability. 
  • Zelman pointed out that a recession could impact her projections if unemployment undermines consumers’ ability to afford a home purchase. 

Yesterday’s Hot Sheet reviewed some newsworthy projections made by two respected analysts: 

Both Zelman and Whitney spoke on the aging U.S. population and its likely impact on household growth as well as on housing supply, home sales, and affordability. 

Whitney used the term “silver tsunami” to describe the impact she expects will begin in the latter half of 2024 and continue for several years. Both she and Zelman backed up their projections with data that points to an eventual glut in housing supply that could drive down home prices and improve affordability for buyers. 

Fortunately for the boomers who will be downsizing or selling their homes, most have accumulated enough equity over the years that, even with a drop in home prices, they’ll still come away from the sale of their homes with far more than they spent on them. 

(Of course, that assumes the home being sold is move-in ready or, at the very least, not in need of expensive repairs and updates.)

Read on for the highlights from each. 

Meredith Whitney’s housing predictions

Meredith Whitney gained recognition as an analyst by predicting the Great Financial Crisis of 2008. Speaking with Brad Smith of Yahoo! Finance, Whitney shared two demographic trends likely to impact the U.S. housing market over the next couple of years: 

  1. The population migration to areas with greater economic opportunity and economic growth (Texas, Florida, Utah, South Carolina…)
  2. The “silver tsunami” of boomers downsizing or exiting the housing market, starting in the second half of 2024 and continuing for the next several years. 

To expand on that second point, Whitney expects the downsizing trend among boomers, combined with the higher age-related death rate among homeowners, will reshape the U.S. housing market as they progress. 

With 10,000 people turning 65 every day, by the year 2030, the entire generation of baby boomers will be over 65 and account for 21% of the total U.S. population. 

As Whitney pointed out, there’ll be more people over 65 than under 18. And that will last several years. 

According to AARP estimates, over half (51%) of people over 50 downsized their homes. And people over 50 represent 74% of all U.S. homeowners. Take just half of those, and you’re looking at 30 million homes that should go on the market. 

For context, existing home sales peaked at around 7 million in 2005. But an influx of 30 million, as seniors sell their homes, could lead to a drop in home prices nationwide, improving affordability for buyers. 

So you’ve got a big sort of pig through the python that will start I think later part of ’24 and go on for the next several years. That, I think, is what’s going to be reshaping housing in America. And I think that’s what will put regional pressure in terms of more and less on home prices.

Meredith Whitney

Founder & CEO of Meredith Whitney Advisory Group, LLC

If home prices do decline, as Whitney is predicting, there may be less demand for traditional reverse mortgages through government programs like the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM). 

On the other hand, a lesser-used variant of that program, the HECM for Purchase (H4P), may become a more popular option for older Americans wanting to buy new homes using a reverse mortgage. And the FHA’s introduction of a proposed seller credit for the H4P program could help it overcome the challenges it’s faced in gaining traction in the reverse mortgage market. 

Overall impact and advice

The potential (significant) increase in housing supply and shifts in housing demand due to the aging population could reshape the U.S. housing market and impact home prices nationwide, especially in markets where housing demand is already lower relative to housing supply. 

Whitney’s advice to Americans poised to engage with the housing market is two-fold: 

  • To millennials, she recommends waiting for home prices to drop
  • To boomers, she recommends selling now to take advantage of higher home values

Ivy Zelman’s predictions for 2024–2025

Ivy Zelman, notable for her skepticism regarding the U.S. housing market bubble in 2006, shared her 2024 housing market predictions in an interview with Business Insider

Starting with an overview of the 2023 housing market, she attributed the rise in home prices, despite initial expectations of a downturn, to the resilience of the U.S. economy. Now, more than a year ago, a soft landing seems the most likely scenario. 

As for what we can expect in 2024 and 2025, Zelman expressed optimism about key market indicators: 

  • Home values will rise further but “at a more modest level” 
  • Home prices will increase by 1.5% in 2024 and an additional 2% in 2025.
  • Home sales will increase by 5% in 2024 and by 8% in 2025.
  • Mortgage rates will decline, with the 30-year fixed falling to 6.4% in 2024 and to 6.1% in 2025. 

Byron Lazine spoke on these projections in yesterday’s Hot Sheet

Zelman’s projections for home price growth is in line with my personal projections of flat to up a couple percent….She has home price acceleration but not some unhealthy take-off… Much as I love Ivy Zelman, I hope she’s wrong about [mortgage rates]. I hope we get under 6% for long extended periods during this year. Because if we do…home sales growth is going to accelerate well past 5% and 8% in the next couple years.

Byron Lazine

Speaking of housing inventory, Zelman warned of a potential oversupply after a severe and prolonged shortage. Builders have increased construction to meet buyer demand, but they’re building at the fastest pace since 2007, which brings the risk of surpassing demand

When builders and the industry and the NAR and everybody talks that we have a housing shortage, the question is, what demand number are they using? And historically, 1.5 million units of demand would be needed, and therefore, you need to build 1.5 million single-family homes to match the incremental households.

The problem with that is that the 1.5 million households is the wrong number now. So we would dispute the shortage, based on the household growth deceleration that’s coming from the deceleration of population growth.

Ivy Zelman

Founder & CEO of Zelman & Associates

The risk of oversupply becomes greater when we bring the aging demographic into the equation. 

Demographic Shifts and Housing Market Impact

Zelman also spoke of the global trend of aging boomers, leading to slower population growth and a decline in household formation. 

Older Americans move less frequently, which means fewer home sale transactions. And if, as Whitney pointed out, fewer millennials are getting married and forming households of their own, we could be looking at a less active housing market, even with a significant boost in inventory. 

The accelerating mortality rate will almost certainly contribute to an increase in homes on the market. Zelman’s firm projects 2.2 million homes per year by the end of this decade. 

I’m not looking for home prices to plummet because deaths are rising—the numbers just aren’t that big per annum, they add 50,000 to 100,000 per year—but it’s going to be a headwind.

Ivy Zelman

Founder & CEO of Zelman & Associates

Zelman’s caveat

Zelman did acknowledge that a recession could alter her projections, especially if it results in significant job loss, which would impact people’s ability to buy homes. 

She also suggested that while she doesn’t anticipate a significant housing market meltdown, she’s keeping a close watch on the potential oversupply dynamic in the U.S. housing market.