Age, demographics, and the demand for housing, revisited

Abstract

The United States is aging, and many baby boomers are reaching or will soon reach the retirement age of sixty-five. At the same time, Millennials—the largest generation in U.S. history—have faced problems of high rents relative to incomes, and volatility in housing markets. These shifts are reigniting debates about how changes in age structure will affect housing and labor markets.To address some of these concerns, we revisit Green and Hendershott (1996) and analyze the links between the willingness to pay for a constant-quality house and demographics using microdata from the 1990 and 2000 Censuses and from the 2006, 2010, and 2014 American Community Surveys. The results generally reconfirm what Green and Hendershott (1996) found; The massive demographic shift will not result in another housing crisis on its own. This is because the education and income levels of current and future seniors are still relatively high, leading them to consume more than previous generations. Also, the size of the Millennial generation will drive the growth of aggregate housing demand, although the growth of per household housing demand may be relatively modest.