According to recent national forecasts, 2020 may be the year of the biggest housing inventory shortage in U.S. history. A key driver of the inventory shortage nationally is the growing number of Baby Boomers aging in place, remaining in their homes instead of “freeing them up” for move-up and first-time buyers. Currently, about 55% of owner-occupied homes in the U.S. are owned by people age 55 or older, a higher share than we’ve seen in recent history. Homeowners are now staying in their homes an average of 13 years, which is above the long-term average.
Are the trends we’re seeing nationally true in Virginia?
Inventory across the country declined by 12% between December 2018 and December 2019. In Virginia, the drop was even sharper, with a 20.9% decrease in the number of active listings at the end of December 2019 compared to a year earlier. In some local markets, inventory levels are less than half what they were five years ago.
While Virginia’s inventory shortage is tighter than in many other states, demographic factors leading to lower inventories are playing out across the Commonwealth just as they are across the country.
A lot of homes in Virginia are owned by Baby Boomers
According to data from the U.S. Census Bureau, people age 55 to 74 (the core of the Baby Boomer generation) occupy 42.7% of all owner-occupied homes in Virginia, up from 40.5% in 2013. Between 2013 and 2018 (the latest data available), the total number of homeowners in Virginia increased by 89,422, but the total number of homeowners age 55 to 74 increased by 82,836, accounting for more than 90% of the growth. These are not new homeowners by and large, but rather Baby Boomers.
Because the Baby Boomer generation is such a large cohort, decisions they make about if and when to move have an outsized impact on the housing market. This cohort will remain a significant share of homeowners in Virginia, at least through 2030.
These Boomer homeowners are staying in their homes longer
Just like in much of the rest of the country, homeowners are staying in their homes longer. Back in 2013, 45.3% of 55 to 74-year-old homeowners had lived in their homes 20 or more years and 73.8% had been in their home 10+ years. In 2018, those shares had increased to 47.1% and 76.8%, respectively.
While the number of homeowners age 55 to 74 increased by 10.2% between 2013 and 2018, the number of 55 to 74-year-old homeowners who have lived in their homes 20+ years increased by 14.5%.
In the near-term, these demographic factors will continue to drive low and declining inventories. Potential homebuyers will face limited choices in many markets, and prices will continue to be driven upward by a lack of supply.
Interested in knowing more about where inventory in Virginia may be headed? Stay tuned! Future blogs will examine why homeowners might be staying in their homes longer and what needs to happen to expand housing choices.