Age, Demographics, and the Demand for Housing, Revisited

Abstract

The United States is aging, and many baby boomers are reaching or will soon reach theretirement age of sixty-five. On the other hand, the Millennials, the largest generation in the U.S.history, has faced the problems of high rents relative to incomes and volatility in housing market.Given the shifts, we are again seeing growing debates about how these changes in age structurewill affect housing and labor markets.To address these concerns, we revisit Green and Hendershott (1996) and analyze the linksbetween the willingness to pay for a constant-quality house and demographics using the Census2000 and 2005-2011 American Community Survey 1-Year Public Use Microdata Sample data.The results generally reconfirm what Green and Hendershott (1996) found: The massivedemographic shift will not result in another housing crisis. This is because the educational andincome levels of the current and future seniors are relatively higher than before, leading them toconsume more than previous generations. Also, the size of the Millennial generation will drivethe growth of aggregate housing demand, although the growth of per household housing demandmay be relatively modest.