Not your average housing bubble

Normally when analysts and economists talk about housing bubbles, they're talking about price points: steep increases followed by steep declines.

A recent article published by the Journal of American Planning Association (hat tip to WSJ's Development Blog) examines what it calls a "generational housing bubble" that the authors say could wreak havoc on the housing stock when baby boomers shift out of home buying mode and mainly into home selling mode.

Any time baby boomers are examined it begins to feel like a vast exaggeration for the sake of dramatizing an argument. But the numbers here are pretty staggering. Boomers are often credited as a major driver in housing markets over the last three decades. We all hear the stories about how more boomers are buying second and third homes.

The study -- authored by Dowell Myers, a professor of urban planning and demography for USC, and SungHo Ryu, an associate planner with the Southern California Association of Governments -- examines demographic projections for the transition when the ratio of folks aged 65 and older (typically out of traditional home buying age) to the number of people who are within the typical home buying age range tips the scales.

"One key question is whether the growing numbers of seniors will generate more home sales than the housing market is able to absorb. Specifically, we aim to identify the point at which boomers will begin to offer more homes for sale than they buy, with potentially serious consequences for the housing market."

Being planners, the authors look at possible fixes within urban planning strategies, and suggest that planners will need to look ahead and prepare for the vast demographic transition that's coming. What's needed, they say, are plans for retaining elderly residents, attracting younger buyers and immigrants, regulating overall housing supply and recognizing new housing and locational preferences.

"Whereas the major housing problem was once affordability, it could now be homeowners' dashed expectations after lifelong investment in home equity. The new challenge may be how to encourage buyers in distressed environments and how to sustain municipal services in the face of declining property values."

We're seeing hints of this in San Francisco, where a recent local news report noted almost 18 percent of the city's population is over age 60. Over the next 25 years, the statewide population over age 65 for California is expected to double. A ton of money is already going into constructing senior housing and services in San Francisco.

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