Baby Boomers' Influence on the Housing Market

When young people observe today's housing market, all they will see is their options dwindle over time. The cause of this phenomenon is baby boomers. Baby boomers, a generation of individuals born between 1946 and 1964, are preparing to sell one-quarter of America's homes over the next two decades. However, there has been word going around that the boomers are negatively affecting the housing market. Today's homebuyers can agree that there are two problems occurring in the real estate market. Those two problems are low affordability and a lack of homes up for sale.

Baby Boomers Versus Millenials

Back in the 1990s, baby boomers owned close to one-third of American real estate. In their twenties, boomers thrived in an age in which 45% were able to purchase their first home. In addition, it is known that before 2012, homes were sold with large discounts sometimes up to 50%. However, in comparison to millennials, they owned only 4% by 2019. This is despite the fact in 2007 and 2017, 730,000 homes were up for sale to be purchased by millennials.

Baby Boomers Effect On Millenials

Millennials are a generation born between 1981 to 1997. In today's age, they suffer from issues that baby boomers never had to face. In today's time, millennials face a vast amount of debt caused by student loans. For someone younger than 35, the average debt is $39,000. There are also a large number of parents who are paying for their adult children's student loans. It is predicted that only 37% of millennials will be able to purchase their first homes in their twenties or early thirties.

The Great Recession caused many boomers to choose to stay in their jobs until 65. The Great Recession was a period that displayed the general decline of economic activity. Large quantities of mortgage back securities and derivatives lost value. Many had to start from scratch to rebuild their retirement savings. This caused a ripple effect in which the reduced retirements lead millennials to struggle to find jobs. Thus, they ended up struggling to find affordable housing.

As time had passed, baby boomers have spent up to $35 million in housing renovations. This would include doorways for a slab door, new kitchen countertops, and freshly painted walls. As great as that sounds, it only results in the younger generation not being able to afford those homes. An example is homes located in Scottsdale, Arizona. In this area, homes sit at nearly $3 million by February 1st. Another reason why millennials may not wish to purchase a home is that it is too large and out of date.

Today, fifty percent of millennials live in suburban areas. Millennials grew up in a lifestyle where they prefer areas that emphasize a sense of community. Therefore, most don't find the lifestyle of owning a single-family home to be appealing. The younger buyers are prioritizing quality over quantity.

Today, more than one-third of millennials still live in their parents' house. When the youth are ready to move out, they are likely to start as renters because they are dealing with either a job history of two years and dealing with over $1 trillion in debt. Prior to the COVID-19 pandemic, 47% of young adults lived with their parents. Now, this has increased to 52%, which is more than during the Great Depression.

Additional Reasons Why Baby Boomers Keep Their Homes

New statistics indicate that 77% of baby boomers that are over fifty years old choose to stay in their homes. This is a process called "aging in place." When boomers make this decision, they limit supplies and slow home sales. It is also to be considered that a number of baby boomers may have mortgage debt. The Center for Retirement Research at Boston College gathered an analysis that states Americans over the age of 60 are more than three times as likely to carry mortgage debt in 2015.

This causes the dilemma of a lack of affordable homes for baby boomers to choose from. By August 2018, the 30-year mortgage rate hit a record of 4.52%. Ultimately, as the next two decades unfold, one thing is clear. In the housing market, baby boomers are either looking to stay in their large homes, taking care of their children, or can't find anyone to purchase their homes. Over the next few decades, baby boomers will inevitably evolve in order to accommodate the needs of future generations.