Sunday, May 20, 2018

"Do People Really Downsize?"

by Bill McBride on 5/20/2018 08:31:00 AM

Some interesting analysis from economist Josh Lehner, at the Oregon Office of Economic Analysis on whether people actually downsize in retirement. This is important since so many baby boomers are reaching retirement age. Will they downsize or will they age in place?

A few excerpts: Do People Really Downsize?

The question, or the assumption that older households downsize as they age is one that I’ve really struggled with trying to answer. Obviously it makes theoretical sense. As one’s children grow up, you no longer need as much space, and the love/hate relationship with the yard may become more physically taxing. I hear comments along these lines quite frequently. And many urbanists rightfully point out that one of the benefits of the missing middle housing — duplexes, quads, townhomes, etc — is it better allows aging in place. That is it would provide additional housing options within existing neighborhoods so if a household does sell/downsize, they do not have to leave their longtime friends and social networks. They can remain in the same area. An added benefit in this scenario would then be a larger, single family home coming back onto the market for another family to move into. We could adjust, or tailor our housing situation with our actual housing needs. Again, all of that makes sense. But do we actually see households downsize overall, let alone stay in the neighborhood? Turning to the data shows that it it kinda, sorta does happen on a small scale. …
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Bottom Line: Moving rates and downsizing among households in their early retirement years is not very common. In fact it is less common today than in decades past. However, among those that do move in their 60s and 70s, they downsize. Given the large Baby Boomer generation continues to age into their retirement years, the absolute number of such moves is expected to rise, even if it remains a relatively small share of the housing market overall.