Calculated Risk vs Mish: Demographics Good for Housing?

Are demographic trends good for housing? Here are two views.

In Largest 5-year cohorts, and Ten most Common Ages in 2017 Calculated Risk noted "The younger baby boom generation dominated in 2010. By 2017 the millennials have taken over. And by 2020, the boomers are off the list."

He concluded "My view is this is positive for both housing and the economy, especially in the 2020s."

Color Coding

To judge that assessment, I took Calculated Risk's table and color coded it.

  • Red: Not Buying
  • Yellow: Likely Cannot Afford to Buy
  • Green: Potential First Time Buyers

2030 is too far away to make an assessment. Too many things can happen. Instead, let's discuss the next five years or so, using the middle column as our guide.


  • There is a favorable shift from cohorts 4-5 to chorts 2-3.
  • The first "not buying" cohort jumps from cohort 7 to cohort 4.
  • There were three "not buying" groups in 2017 but there are four in 2020.
  • There was a favorable shift from "cannot afford" from 2017 to 2020.

On the surface, the demographic trends may appear neutral or slightly favorable. However, I was pretty lenient with the green, potential first-time buyers.

Given housing price trends, most 25-29 cannot afford a house now and unless there is a price crash, those conditions will not change in the next five years.

Also, attitudes towards family formation and mobility have changed.

Finally, as boomers die off, millennials will inherit their parents homes. This will put a supply of homes up for sale, at a clear impact to prices.

For now, and the next five years, attitudes and affordability are the key issues. They far outweigh any potential demographic benefit, if any.

Home Buyer's Dilemma

The only way that changes in the next five years is is housing crashes. And if that happens, what happens to jobs and wages?

Mike "Mish" Shedlock

"My view is this is positive for both housing and the economy, especially in the 2020s." Yes, younger people becoming over indebted to purchase wood on dirt on which they will be taxed yearly will be good for the economy – if your interests are aligned with bankers. Otherwise the truer statement is that if every millennial decided housing was another scam perpetrated by the older generation (like healthcare and education) and rather decided to spend their meager discretionary savings on exercise equipment and/or other low budget fortifying activities (perhaps developing another skill set through an online class), THAT would be better for the economy!

This "Go into debt to get rich" asset-based "economy" is on its last legs and what comes next is not going to be pretty for the vast, vast majority.

“Finally, as boomers die off, millennials will inherit their parents homes.”

Inherit my ass! These homes will be reverse mortgaged away to provide cash flow to tapped out Boomers who have no savings.

Well, he did include the word “potential” when alluding to them as first time buyers.

Besides, I’m figuring the new, 70 year home mortgages should be fully ramped up by 2030.

Most of the USA is actually pretty affordable. People just focus in the "cool" cities (Denver, Seattle, Portland, Boston, NYC, DC, Cali Coast which are SUPER inflated in price). Affordable: Omaha, Kansas City, Oklahoma City, ALL the Ohio cities, ALL Michigan cities, Most of Wisconsin, Iowa, Missouri, Chicago, majority of the southern US cities.states. Phoenix and Vegas are still not that bad.

Look to Australia , they have not had a recession nor housing crash there in 25 years, rent there is 1000, and its by the week, for a dump

Looking at real estate from the point of view of the average Joe, a house is often the best investment that Joe ever makes (though I admit, I am generalizing). This assumes that the average Joe buys a house, lives in it a long time, and slowly pays down the mortgage debt till it is paid off (a fairly common occurrence). The benefits to Joe are 1. Forced savings (as the average Joe has difficulty saving money and not spending it) 2. Capital appreciation (over the long run, housing values typically meet or exceed inflation) 3. Simplicity (it's easier for Joe to understand a house vs the vast array of investment alternatives)

As to timing the housing market: good luck. I know people who never got in because they were always waiting for the big pull back. Then, if the market did drop (which it did a few times over the last 5 decades), they were too afraid to get in.

@Realist: “This assumes that the average Joe pays down the debt till it is paid off”. If that were the case, then housing would be a great long term investment. The problem is, the past 10-15 years people haven’t been buying houses with the intention of ever paying it off, but rather they plan to sell it after their kids grow up, move away, and there is no need to live in the neighborhood with the vaunted school system. I think the millennials are seeing this trap and are enjoying the flexibility of being able to relocate to a better income/land cost ratio area. Why jump in at peak pricing! No thanks trendy urban areas, you must compete for my talent!

The bulk of interest on a 30 yr mortgage is paid in the first 7-10 years or so. Real equity is acquired in years 20-30. Joe Sixpack stays on average about what, 8 years before moving again? This is a savings program? It rivals overpaying your income taxes on your W-2 and then filing your Form 1040 to get a refund from the IRS.

The Calculated Risk blog has always talked a good and deserved game of housing bubble fraud, but then continues to use the same sources of criminal banks for stats, ratings and opinions. Not quite credible.

I agree with snow dog and runner Dan. If you plan on moving frequently, a house is not a good investment. On the other hand, I know many people who have lived in the same house for 40+ years. My favourite is an uncle who paid $1500 for his house in the 1950s. Today it is worth close to a million. Plus, of course, he got to live in it all those years.

I don't know if I understand the chart. Is it the total number of US citizens within a certain age group? If so, how can 45-49 be #1 in 2010 and 55-59 be #5 ten years later? I get some people die, but not that many people die in their 40's and 50's to explain it. Is it because of immigration?

Calculated Risk used to be a good site, and to his credit, Bill McBride was one of the few circa 2006-07 that was warning about the housing market, but by then prices were already dropping in central California for about 6 months-1 year. But since then he has been a uber Bull, definitely a shill for the stock & housing markets, despite the former being at historically nosebleed levels. He also disbanded comments right after the election as he is a strong liberal and didn't want people disagreeing with his views.

Very true. Pretty much every city in the Southeast for example (except Miami) is still quite affordable.

Moreover, if you use constant dollars to plot out the housing price rises since the housing crisis you’d see that while prices have most definitely risen a lot, they are not even close to what they were in 2006 in real terms.


@Markab Don't mix political bias with economic data, can be hazardous to your investing health. I don't like that CR supports more LIB policies, as I am not a LIB. But I have to say of every blog I know of, CR has been the most right of all of them. Most of the blogs who called the crash back in 2006, made the mistake of becoming permabears post 2009, and missed this entire 9 year UP cycle. CR called the bottom of the apartment market in 2010 (a fortune has been made in apartments since). And unlike many bearish blogs who have called for a recessions nearly every year since 2009, CR has not called for a recession ONCE. I think his blog is actually very data driven and less bias driven. I try to not let my political biases get in the way of investing and financial forecasting. But it is tough!

Not sure I'd be so negative about housing. Immigration, especially of the rich/ upper middle class people, will also help keep prices up. For all of Trump's bluster re: immigration, it is tough to see the USA not having some system in place for highly skilled migrants/ rich people to come in.
If the US millennials cannot buy houses, surely we can find some rich foreigners to sell them to... Of course those foreigners became rich because we outsourced our work to them enabling them to become rich. Very definition of a globalized world!

I agree with the premise that despite very high housing prices on the coasts, most of "flyover" country is quite affordable. I was in Nairobi, Kenya last month and was shocked how expensive safe & Western neighborhoods were there...something like $500-600k USD for starter homes. It makes most of the USA look very sane. Even with relatively low wages, millennials will get their parents' housing and stocks and since they've run up so much, many of them will be multi-millionaires without having worked for it or by having very low wages.

I absolutely agree with MntGoat - I don't agree with CR politically, but he has been very rational, presenting data clearly, and has been consistently accurate with his predictions, compared with a majority of others.