Is this mortgage’s “must-watch” sector?

Seniors are looming large in the mercurial market, with their collective tactics contributing to a delayed normalization of the housing market by some observers. First American Financial Corp.’s chief economist, Mark Fleming, cited a Freddie Mac study that touched on the role of seniors in the soft housing market. Bottom line: Seniors hunkering down is (albeit inadvertently) part of the problem.

“Seniors choosing to age in place, rather than downsize or move to another home, further limits housing supply,” Fleming explained. He cited a 2019 study from Freddie Mac positing that if an adult born between 1931 and 1959 behaved like earlier generations, they would have released nearly 1.6 million additional housing units to the market by 2018. “As seniors continue to choose to age in place, there will be fewer existing homes available for sale,” the economist noted. “And, with many of these senior homeowners also locked into historically low mortgage rates and historically high levels of equity, it’s more likely they will renovate the home they currently own than list their home for sale and move.”

In a study in word economy, Freddie Mac succinctly summarized the senior situation in a hypothetical scenario rooted in reality: “Eighty (80)-somethings Al and Rose have no desire to leave their home of decades. Meanwhile, 30-somethings Alex and Rita can’t wait to buy their first home. But they may have to wait longer–and pay more–than they’d like, as long-time homeowners stay in their homes and keep them off the market.”

The Freddie Mac report goes on to explore reasons why so many seniors are remaining in their homes – and now drawing equity at record-setting levels as they hunker down. The pattern, according to the report, is explained by a few key factors – including better health and higher levels of education in more recent cohorts. “This pattern is likely to increase over time as improvements in healthcare and technology make aging in place easier (for example, the ability to Skype with a doctor),” analysts wrote.