Is there a housing inventory ‘silver tsunami?’ Not where it’s needed

Many older Americans say they have no plans to sell their homes. What does this mean for younger generations who are looking to enter the homeownership phase of life? (Image generated by AI in Midjourney)

There are two particular ways for people to interpret the phrase “silver tsunami” in the context of an aging population’s impact on housing.

The first is related to the demographic trends playing out across the U.S., in which older people are on track to overtake children as the largest age group over the next decade. The second is in reference to housing inventory. The theory is that older peoples’ homes — either through death or their choice to downsize and relocate — will be listed for sale and become available to younger buyers.

The first view is less of a theory and more of an inevitability based on demographic trends. The second view has had large amounts of cold water thrown on it in the past few years as older homeowners say they don’t want to sell. Meanwhile, some analysts believe that hoping for a flood of senior-driven inventory to address the nation’s housing shortage is more akin to a pipe dream.

But new data from Zillow appears to suggest that while there may be some semblance of truth to the second theory, places where inventory is reentering the market is not where it needs to be in order to adequately address the U.S. housing shortage.

“Even if we did see a ‘silver tsunami,’ a look at the map tells me it wouldn’t really move the needle in terms of solving our housing affordability crunch,” said Orphe Divounguy, a senior economist at Zillow. “These empty-nest households are concentrated in more affordable markets, where housing is already more accessible — not in the expensive coastal job centers where young workers are moving and where more homes are most desperately needed.”

According to Zillow research, there is an oversupply of 12.8 million “empty nest” homes across the country. But these are primarily located in relatively affordable areas where housing is not in short supply, rather than the urban job centers where supply is most desperately needed.

“A silver tsunami is likely to have a larger impact in regions like Pittsburgh and Cleveland,” Zillow explained. “Younger residents have tended to leave these areas to pursue better job opportunities elsewhere, leaving older generations to make up a larger share of those who remain.

“Young workers choose to live near productive job centers and on the coasts, areas that have much lower populations of older retired individuals holding back housing supply in the first place.”

The largest metros that could be impacted by a silver tsunami are estimated to be Pittsburgh, New Orleans, Detroit, Cleveland and Buffalo, New York. These cities have “the largest gap between the potential housing supply from empty nest households and potential demand from younger residents. But these are already relatively more affordable markets with fewer home buying age workers to begin with.”

More expensive and/or coastal markets are not so fortunate, including areas like Austin, Seattle and Denver.

This means that the affordability impact on a national level from a potential “silver tsunami” is likely to be minimal. But the issue could be compounded by more companies instituting in-office working requirements, or other potential prospects designed to improve the attractiveness of other markets to potential homebuyers.

“[T]he fix for affordability challenges remains a strong supply expansion coming from newly built homes,” Zillow said. “Zillow research shows that housing shortages were the most severe in markets with more land use restrictions. In addition to promoting denser construction, removing barriers to homeownership that aren’t related to income — credit assistance programs, down payment assistance or help with closing costs, for example — would likely improve access to homeownership.”

As for the population-based concept of the silver tsunami, it appears to be alive and thriving. Certain popular retirement destinations — including South Carolina and Florida — are even warning city leaders and infrastructure managers that they need to do more to prepare for the larger numbers of older residents planning to relocate there.