A financial analyst once dubbed the “oracle of Wall Street” by Bloomberg says that high living costs will soon force Baby Boomers to downsize into smaller homes, potentially aiding a boost in housing supply.

Meredith Whitney, who has been credited as an analyst who predicted the 2007-2008 housing crisis, told the Daily Mail that baby Boomers will soon need to bow to the realities of high inflation and living costs that come with larger homes.

“People who have not sold their house in the past decade will ultimately either need to move or want to reduce their overhead expenses and want a smaller home,” she said. “That’s typically 51 percent of people over 50, which is roughly 30 million units.”

The change will not happen overnight, she explained. It will happen gradually, and could assist younger generations who have had issues breaking into the homeownership market while baby boomers themselves will seek out smaller homes in response.

“Where we have a demand and supply challenge today where there is more demand and less supply, that will invert to have more supply – and hopefully more demand,” she said.

But prices remain elevated, and that continues to keep younger buyers out of the market. To shift this dynamic, prices will need to change.

Some regions may be more prone to these shifts than others. Whitney said that while states like Pennsylvania, Connecticut, New Jersey and Illinois could see falling prices due to observable migration patterns, states like Texas may not see prices fluctuate due to a recent influx of residents from other parts of the country.

In a recent appearance on CNBC, Whitney added that the homes baby boomers may sell could still remain out of reach for younger potential buyers because of costs. This could lead some boomers to sell their homes at a lower price, which could harm certain real estate investments.

But more baby boomers — who typically have less outstanding mortgage debt — are also choosing to extract some of their home’s equity after prices rose so much during the COVID-19 pandemic.

As for where the reverse mortgage industry could fit into the overall equation, downsizing could be financed with a Home Equity Conversion Mortgage (HECM) for Purchase (H4P). The product remains widely underutilized in comparison with a traditional HECM, however, though some lenders have signaled a greater interest in expanding H4P capabilities in recent months.

In October, the Federal Housing Administration (FHA) also introduced a proposed seller credit for the H4P program. When news of this proposal reached attendees during a panel discussion at a recent industry event, audible cheers from the assembled professionals broke out.

But industry professionals also tend to see H4P as a bit of a hard sell for borrowers and, critically, real estate agent referral partners.

The post Why one analyst Predicts Baby Boomers will move to sell their homes appeared first on Reverse Mortgage Daily.