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July 25, 2024

Boomers Not Budging from Large Homes, Squeezing Out Millennials and Gen Z

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Jan 18, 2024

The baby boomer generation, those born between 1946 and 1964, own a disproportionate share of large, single-family homes compared to younger generations like millennials and Gen Z. This is making affordable housing out of reach for many young families, according to several reports released this week.

Boomers Own Double the Share of Large Homes

A new study from Freddie Mac finds that boomer households own 2.3 times as many large homes (3,200+ square feet) as millennial families with children. Additionally, the average boomer home is 50% larger than the typical millennial home.

This imbalance is contributing to limited housing inventory and high prices that are preventing younger Americans from buying starter homes.

Share of Large Single-Family Homes Owned

Generation    | Percent 
--------------|---------
Boomers       | 43%  
Gen X         | 31%
Millennials   | 19% 
Gen Z         | 7%

Why Boomers Are Staying Put

  • Many boomers today are “empty nesters” whose children have grown up and moved out. However, they prefer to “age in place” rather than downsize.

  • Low mortgage rates have allowed boomers to refinance, making their large homes still affordable.

  • Strong home price appreciation over the past decade means boomers have substantial home equity. This disincentivizes them from selling.

  • Limited senior housing options are also causing some boomers to just stay put.

Falling Homeownership for Younger Generations

With boomers occupying a large share of available single-family housing, homeownership rates for millennials and Gen Z have flatlined recently according to real estate brokerage Redfin:

Homeownership Rate by Age Group  

Generation | 2023 Rate | 2022 Rate
-----------|-----------|----------
Gen Z      | 31%       | 31%  
Millennials| 49%      | 48%    
Gen X      | 66%       | 65%
Boomers    | 80%       | 79%  

With boomers still occupying prime real estate, limited inventory has led to fierce bidding wars and all-cash offers that first-time buyers can’t compete with.

Trends Preventing Home Buying Among Youth

  • High home prices and mortgage rates
  • Record levels of student loan debt
  • Wage/income stagnation
  • Strict mortgage approval criteria

However, Redfin economist Taylor Marrs believes pent-up demand for homebuying still exists. He predicts a surge of first-time buyers entering the market once conditions improve.

What Will Happen to Boomers’ Homes?

As more boomers eventually die or enter long-term care facilities over the next 10-20 years, what will happen to their homes? According to housing experts, several scenarios could unfold:

Downsizing Wave

While today’s boomers aren’t downsizing yet, 70-80% say they still plan to do so at some point. This could eventually free up larger homes for families. However, downsizing to smaller homes or condos is contingent on those options existing. Currently, not enough senior-friendly housing is being built to facilitate this volume of downsizing.

Inheritance Windfalls

Trillions of dollars in home equity wealth transfer will occur as boomers pass their homes to heirs – mainly older Gen Xers and younger boomers. This could give an ownership boost to these generations if they choose to move into inherited homes. However, not all inheritances are equal – wealthier boomer households have accrued significantly more housing equity over their lifetime.

Investor Land Rush

In hot real estate markets like Los Angeles and New York City, 60-70% of listings already go to investors and iBuyers. Some analysts warn that large private equity firms may try to accumulate scores of boomer homes as investments, further shrinking inventory for traditional homebuyers. New policies limiting investor purchases may be needed to prevent this scenario.

Senior Housing Shortage

Rising rates of dementia and mobility issues among the 75+ population over the next decade could lead to a severely undersupplied senior housing market. As more aging boomers seek assisted living facilities or nursing homes, long wait lists and staffing shortages may become commonplace if more senior communities aren’t built soon.

Policy Solutions to Aid Housing Affordability

With boomers firmly planted in their homes for the foreseeable future, policymakers are exploring solutions to help young Americans better compete in the housing market:

Upzoning

Reforming zoning laws to allow for more dense, multifamily housing could better accommodate downsizing boomers while also creating affordable starter home options. However, such proposals often face pushback from existing homeowners.

First-Generation Down Payment Assistance

Some states and cities are launching mortgage subsidy programs to help first-time buyers cover their down payment and closing costs. Expanding assistance to future cohorts of new buyers could help millennial and Gen Z homeownership rates recover.

Middle Housing

“Missing middle” housing types like duplexes and townhomes are needed, especially near jobs centers. These provide affordable options between high-rise apartments and single-family homes that young professionals often seek. Cities can incentivize these to be built through zoning bonuses and streamlined permitting.

While boomers staying in their homes longer does cause some market distortions, most housing experts say it’s a manageable issue if the right policies are enacted. The generational housing handoff that will occur over the next 20 years also presents opportunities to reshape our housing stock into something more sustainable and equitable.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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