Aging at Home Puts Strain on Housing Market for Buyers, Silver Lining for Remodelers
Home sales in 2020 reached their highest levels since 2006. Of course, that represented the peak of a rather large housing bubble. Now, it seems, homebuilders can’t make enough homes to satisfy demand. At least part of the blame for this housing shortage could be attributable to our older generation. They seem to be choosing to age at home instead of moving into more elderly-friendly homes and communities. That means we could see remodeling opportunities rise.
- 1.6 million fewer homes are on the market due to the elderly staying in their family homes
- Freddie Mac chief economist estimates an additional 2.5 million homes are needed to meet demand
- Low inventory and high demand increase housing prices, making rentals more attractive
- Remodelers that can make homes elderly-friendly have an excellent business opportunity
- Younger families may not have the option of moving, opening up more remodeling business
Staying Instead of Selling
There are plenty of reasons elderly people move later in life. The house they raised their families in are too large and require more maintenance than they can handle. Stairs, bathtubs, and hard-to-reach areas can create fall hazards. We expect to see remodeling opportunities rise as homes need to adjust to accommodate their aging occupants.
Regardless of the reasons, our elderly typically move into a different home or community as they age. But that’s not the current trend. Great communities, freedom, and control are all reasons to stay. Aside from that, many elderly people own their homes outright with no debt on them.
Trade that for a retirement home? No thanks.
The prospect of moving with today’s housing prices, particularly in areas that are attractive for retirement, might not make sense financially.
Putting Pressure on Millenials
As Millenials enter the housing market later than expected, they’re finding homes for higher prices thanks to the laws of supply and demand. There’s always the danger of first-time homebuyers getting into more payment than they can afford. This can happen even with post-recession regulations in place and downpayment assistance.
With competition so tight, renting would normally become a more attractive option. I mean, at least you’re not looking at a $3,000 mortgage payment on a $5,000 monthly salary. Except that we’re seeing two things that fly in the face of that:
- Rent prices have kept in step with home values and are really high
- Interest rates remain ridiculously low, making homeownership very affordable
As always, the housing market continues to ebb and flow. Our recommendation continues to lean towards renting while saving up a solid downpayment. Pay down your debts and ready yourself to enter the housing market prepared. As you become more stable in your career you can build up more savings. You’ll also have less debt, so you become more attractive to lenders and qualify for those better interest rates.
Builders Building Overtime
Currently, the housing market needs millions more houses built (around 4 million according to Inman). The labor shortage, coupled with supply issues for both lumber and steel, is hampering those efforts. That will keep prices soaring until something new triggers a correction or adjustment.
That adjustment could come in several ways. It could mean supply frees up and more houses can be built. Economics could also affect both the labor shortage and housing prices simultaneously. Of course, when that happens, the rise in remodeling opportunities could shrink in favor of new home purchases.
When it comes to predicting the future, well, we don’t hold much stock in getting it any more right than anyone else.
Still, that brings us back to remodeling opportunities.
Remodeling Opportunities Rise as a Silver Lining for Contractors
Remodelers have a golden opportunity for the current trend by making changes to homes so they’re more friendly to aging homeowners. Remodeling bathrooms and kitchens can be a huge help along with widening entryways. For high net worth clients, you can even install an elevator in multiple story homes.
The idea is simply to look at the ways you can eliminate the reasons an elderly person would have to leave instead of going by choice.
Create relationships with service providers along the way. Recommending lawn maintenance Pros and house cleaners you trust adds a bit more value and helps your client visualize being able to stay in the home they love.
For your clients who are at the peak of their careers, start having some of these conversations early. While they’re in their top-earning years, they’re in a better position to make some of those upgrades years before they need them and before it’s a bigger financial strain. Start brainstorming with them and see if they’re committed to staying in their home through the aging process.
What About Younger Homeowners?
The elderly aren’t the only ones staying put. All homeowners have to decide whether to renovate or move as their house no longer meets their needs. With the elderly not putting their family-friendly homes on the market, younger people with growing families don’t have as many existing home opportunities.
As we mentioned above, the market clearly wants the constriction of new homes. But for many, renovating their current space is a more affordable option and might be more attractive if they’re in a good neighborhood with good schools.
Regardless, it’s shaping up to be a solid season in the housing market as remodeling opportunities rise across the entire spectrum of homeowner ages.