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Age, Demographics, and the Demand for Housing, Revisited

Richard K. Green and Hyojung Lee
The United States is aging, and many baby boomers are reaching or will soon reach the retirement 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 structure will affect housing and labor markets. To address these concerns, we revisit Green and Hendershott (1996) and analyze the links between the willingness to pay for a constant-quality house and demographics using the Census 2000 and 2005-2011 American Community Survey 1-Year Public Use Microdata Sample data. The results generally reconfirm what Green and Hendershott (1996) found: The massive demographic shift will not result in another housing crisis. This is because the educational and income levels of the current and future seniors are relatively higher than before, leading them to consume more than previous generations. Also, the size of the Millennial generation will drive the growth of aggregate housing demand, although the growth of per household housing demand may be relatively modest.