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OK boomer, what’s the “Silver Tsunami?”

No, it’s not an actual wave, it’s a fun name for the real estate impact of baby boomers potentially selling 25% of homes in the US over the next 20 years. While there is demographic validity to the overall idea, the fear of the Silver Tsunami hitting all at once (like a physical wave) is unfounded.

The impact of this real estate tsunami is significant across the country, but how will it impact our real estate market here in Arizona?

It’s not immediate. 

The effects will be spread out over many years, unlike a physical tsunami that crashes all at once. Realistically, it will be more like a slow build over five to 15 years.

We need inventory. 

In the short term, we need more housing inventory in Arizona. The state only has 50% of the necessary homes to satisfy demand

Since Arizona has historically had strong population growth almost every year, I project we will have the demand to continue absorbing more housing for years to come. Specifically surrounding Phoenix, boomer homes in suburban areas should do fine (Tempe, Chandler, Gilbert, Arcadia, Glendale, etc.) as these areas will likely stay in demand with the next generation of home buyers. Taking this into account, I don’t feel Arizona will be impacted as significantly as the ‘rust belt.’

In Arizona, the most impact could be in Mesa and areas with high percentages of age restricted communities. These are areas that have actual age restrictions deeded to the home and HOA rules / CC&Rs  (Covenants, Conditions & Restrictions). For example, Sun City is ages 55+ and Sun Lakes is 40+.

Homeowners in age restricted communities will want to consider selling before the ‘slow’ tsunami comes rolling in. Some of these 55+ communities may actually end up being redeveloped in the long run for different purposes if there isn’t enough demand from buyers. However, this will likely be preceded by some tougher times for such neighborhoods.

Boomers with larger homes (3,500 sq.ft or more) may want to consider downsizing sooner. The demographic trend for the next generation coming into homeownership is smaller homes, not bigger. Downsizing now could prevent boomers from getting stuck. 

Every challenge creates opportunities. 

It’s one of my favorite things about real estate. No matter what difficulties the market brings, there are always new advantages. The Silver Tsunami may bring opportunities for new buyers, home flippers, or redevelopment and new housing trends. When the market is not good for sellers, there’s usually favor as a buyer.

For more information on the national impact of this upcoming real estate event, visit the Wall Street Journal and ABC.  

Know someone interested in real estate market trends? Share this article with them! 

Talk with the Klinkloans Team