The root cause of both crises, the existing starter housing shortage and the future surplus of age restricted housing, is demographics. Let me illustrate in rough numbers the problem by sharing the approximate size of the various generations currently active in the housing market:
- Boomers – Originally 80M in size, today the Boomer generation is approximately 75M (life is a fatal experience). The Boomers used to be the largest generation of Americans ever, until their children’s generation (Generation Y) arrived on the scene.
- Generation X – This generation is about 60M. They are 25% smaller than the Boomers. When Boomers try to sell their age restricted housing into a generation pool of buyers that is 25% smaller, the housing crisis from a surplus of age restricted housing will become visible.
- Generation Y – The children of the Boomers. Generation Y is about 87M. This means they are almost 10% larger than the Boomers, and almost 50% larger than Gen X.
- Generation Z – sometimes called iGen, is estimated to be somewhere around 84M, slightly smaller than Generation Y. This generation is 1 to 18 years old. They are not in the housing market yet except living under the roof of someone else, their parents or guardians.
Demographics drive the future.