Attention Conservation Notice: Housing is only one way in which land holds value; occupiers are only one option for asset ownership.

So among the narratives circulating around the world of urbanism is the “your house will be worth nothing in 20 years as Baby Boomers die and Millennial refuse to drive and want to live in cities.” Like much of what urbanists promulgate, this narrative is suffused with many values and assumptions. Urbanists love cities and hate suburbs, and scratch the surface on many an urbanist, and you find somebody who thinks that urban residents are thrifty, environmentally aware, fit, wise, and cosmopolitan and suburban residents are turgid, selfish, and racist.

Thus there is a lovely, Puritanical schaudenfruede that accompanies the idea that the latter a) will be or b) have been left penniless and destitute because of their sinful, unrepentant single-family-homebuying ways despite the Right Way of Smart Growth/Sustainable/New Urbanist living that they have urged towards. I see much of this in the commentary surrounding Emily Badger’s reporting on Chris Nelson’s recent research found in What Will Happen to Grandma’s House When Nobody Will Want to Buy It:

By Nelson’s calculation, 20.1 million senior households will be trying to sell their homes between 2015 and 2030. As many as 7.4 million of them won’t find a willing buyer – a number, as we outline in the magazine’s Chartist feature, that could send us towards the next housing crash.

Badger goes to on to say that it’s hard to know how the market will respond and suggests that banks might step in and buy at a discount which seniors won’t like. It’s hard to say what the market will do when one has no conception of how housing or land markets work, and it’s pretty clear that most people don’t. I can’t imagine why banks would step in a buy anything that nobody else wants. They aren’t known for charitable behavior. She then suggests that McMansions might be subdivided or the places might be converted to transit-oriented developments.

Nobody wants to a buy a house because of its suburban location but a developer is going to come in and do TOD and subdividing? Those things happen in places where land values are *high* because people have to pool their money to afford location, not in places where land is, basically, free. How many TODs have sprung up on the urban fringe of Buffalo and Detroit so far?

If the last selloff should have taught us anything, it’s that there are cash buyers out there for distressed property in select regions, while not in others, and many of them have no interest in occupying the house at all. They want to rent to vacationers, students, etc. It’s important not to conflate housing and demographics–even though demographics are very important to housing demand (and overall demand.) Indigenous owner-occupiers are only ONE possibility.

In fairness, these like any markets are complex, and forecasting future conditions means you’d better be comfortable with being wrong because you are probably going to be. The goal is to derive forecasts that improve our chances of good decision-making even though the information is imperfect.

Personal story: the first house I remember as a child is gone now. It stood in the middle of what is now a corporate-owned field. My grandma’s house? Well, one grandma’s house suffered a similar fate. Did we sell that land for peanuts and eat gruel? Nobody wanted those houses. No; there was a higher-dollar use for the land than housing, and so it sold for farm land (at a decent price; contrary to what my beloved Richard Green thinks, land in Iowa is not free.)** Just as farmland on the urban fringe converts to housing as cities grow (as housing prices exceed values for other uses), the reverse can be true. So I could see 7 million houses in rural and small town areas in the US easily disappearing as that land becomes more of the “space in-between” major, urbanized population centers.

Richard Green counters in his wonderful talk that home ownership is not going to fall appreciably, nor do we have any reason to believe that prices are gong to be that volatile in either direction. It’s possible that both Nelson’s and Green’s predictions can happen: Green is discussing the aggregate, Nelson is discussing regional changes, and in the aggregate, if aggregate demands shifts to particular markets, gains in value there could easily offset value losses in other places.

It’s not like the US is the only country whose population growth is going to slow. Are they giving away houses in the Paris suburbs yet? (If so, let me know.)

** Just as we didn’t wind up just eating gruel, we also didn’t retire off the proceeds to our private island in Fiji. It would be really nice if people could understand returns to housing assets in something more moderate than destitution versus the lottery.