One of the most important keys to today's single-family housing market is homeowners who were born before the first-ever episode of Star Trek aired in the 1960s.
Today, more than 50 years later, Baby Boomers and other homeowners over the age of 55 control almost two-thirds of the nation's home equity – about $8 trillion. There are also more than 67 million 55+ homeowners.
Whether they decide to move from their current homes or age in place, the cumulative impact of their decisions on mortgage demand, affordable housing supplies, and the housing options available to Millennials and other aspiring homeowners will be substantial.
To better understand these opportunities and challenges, we launched the Freddie Mac 55+ Survey. Together with GfK, we surveyed nearly 4,900 homeowners born before 1961, including a mix of men, women, Hispanics, African-Americans, Asians and Caucasians. We wanted to know their current housing situations, their plans, and their willingness to help their grown children become homeowners. Here's what we found out:
The American Dream is working. Consistent majorities tell us they are "very satisfied" with their current homes (64 percent), their communities (59 percent) and quality of life (54 percent). Nearly 90 percent of the respondents say people their age should own a home.
Homeownership is part of a comfortable retirement. Seventy-six percent of homeowners are confident they will have a comfortable retirement. These feelings are echoed across racial lines and shared by 55+ homeowners who are still working as well as those who are retired, and the 44 percent of homeowners we surveyed who have a mortgage.
Homeownership makes financial sense. Consistent majorities say homeownership makes financial sense for married people with children (96 percent) and without children (85 percent) as well as single people with children (79 percent) and without children (53 percent). What's more, nearly 25 percent of the respondents say they have given down payment assistance to someone.
63 percent of 55+ers prefer to age in place. This works out to an estimated 42 million homeowners who don't plan to move. About a quarter (23 percent) indicate they would need major renovations to keep their homes accessible and a third (34 percent) would pay for improvements by refinancing their mortgage or taking out a second loan or home equity line of credit.
27 million 55+ers would prefer to move at least one more time. Although movers are in the minority, it's a big minority. According to the survey nearly 40 percent of all homeowners 55+ would like to move at least once more if they had complete control over it. This isn't just about downsizing to a rental or nursing home; 19 million plan to buy a home and nearly 8 million expect to move within the next four years. What's more, half of the 19 million likely movers expect to buy less expensive homes.
These are big numbers with the potential to tighten homebuying competition in the housing market, especially for Millennials and other first-time homebuyers. They also have the potential to generate significant new demand for mortgage credit.
Whether the borrower is financing age-in-place renovations or buying a new house, even a relatively modest increase in lending to 55+ homeowners could add trillions of dollars in new originations in a relatively short time.
One way or another, the Baby Boomers' housing decisions over the next few years will take our market to brand-new places.
Click here for a copy of the Freddie Mac 55+ Survey on homeowners. Freddie Mac plans to release a separate analysis of 55+ renters once it is completed.