Why is aging in place important? Seniors are staying in their homes longer than prior generations and it’s contributing to the national housing shortage.
Today’s seniors have better health and higher levels of education than prior generations and that means they’re living longer and working longer. Seniors born after 1931 are staying in their homes longer than previous generations (a/k/
That means, they aren’t selling at the same age previous generations sold their homes and secondary market leader Freddie Mac has identified the resulting shortage of available homes as a big reason why young adults aren’t buying their first homes. (Rising home prices due to lack of available housing stock means these homes are unaffordable to Millennials, especially those who have student loans to pay off.)
Why is Aging in Place Important?
Seniors prefer to age in place because they’re happy with their homes, their communities and their quality of life. Seniors stay happy with their homes by renovating to meet needs for aging in place, expanding their kitchens and bathrooms to make them more accessible and well lit.
Freddie Mac predicts continued improvements in healthcare and technology (for example, the ability to Skype with a doctor) will make aging in place easier. This trend is just beginning as the number of seniors will increase and barriers to aging in place will be resolved.
“We estimate that approximately 1.6 million more senior households are staying in place than would have been the case if they had behaved like previous generations of homeowners,” said Sam Khater, Chief Economist at Freddie Mac. “For scale, 1.6 million units is roughly the same as the number of new single-family and multifamily housing units built each year, and it represents more than half of the current shortfall of 2.5 million housing units that we estimated in our December Insight.”
Housing Shortage Will Increase with More Seniors Aging in Place
“We believe the additional demand for homeownership from seniors aging in place will increase the relative price of owning versus renting, making renting more attractive to younger generations,” added Khater. “This further highlights the importance of addressing barriers to the production of new housing supply to help accommodate long-term housing demand.”
(While renting might turn out to be less expensive than owning a home in the short run, over the long haul, homeownership remains the primary way Americans build their net worth. Each mortgage payment contributes to the equity a homeowner builds up which, when combined with even a modest home value appreciation, can yield a substantial amount of forced savings, which a renter might not have the discipline to accumulate.)
Young Adults Are Also Aging in Place
But it isn’t just seniors (and even those fifty-somethings) who are aging in place. The Urban Institute found the share of young adults (ages 25-34) living with their parents jumped from 12 to 22 percent between 2000 and 2017. That means there are 5.6 million more young adults living in their parent’s homes today. And, they seem to be staying. Millennials live with their parents as they grow older for a number of reasons, like delaying marriage, unemployment, student debt, low or no credit and high housing costs.
But just because you’re living with your parents longer doesn’t mean you’re are saving money. In fact, the Urban Institute found quite the opposite to be true. They found no evidence that those who lived with their parents were able to buy more expensive homes or put more down. Instead, living with parents for a long time could have a negative long-term impact on their wealth because homeownership is a critical source of future wealth.
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