There have been too many occasions where I've personally witnessed older home sellers reveal that their home is probably their largest and best investment....and their 'retirement fund'. This may be in part why we are seeing a large group of people migrating south to warmer climates, some with lower taxes and daily living costs.....and cheaper home options.
Imagine this scenario: A homeowner 70 years old owns a $2m home in Manhattan. They sell their home and move to a southern state with lower overall costs, and buy a new home for $500,000. After capital gains taxes, they may be left with over $1 million in a "retirement fund". At today's interest rates of around 4% assuming inflation goes back to around 2%, this could generate about $100,000 per year in 'spending' money if they intend to use up all those funds during 10 years of retirement, on top of social security and other income they might receive.
10,000 US Baby boomers reach retirement age every day. In this group, many who own their (probably too large) homes will not only down-size, but also Down-Price. In addition to lower housing costs, they will seek lower spending costs, including taxation policies. This may be one of the largest additional pressures on the supply (and pricing) of more affordable home options. It also may be one of the best retirement funding opportunities.
The biggest challenge may be the urgent spending needs of growing in-migration areas to upgrade their infrastructures and housing for workers (think healthcare workers as more people opt to age at home). The biggest challenge will be to keep these places affordable. Already that is proving to be extremely difficult. Those renting in areas with no rent hike controls are most at risk of inflation making their down-pricing less attractive. Better to own for most!