Boomers won’t give up their homes, and that’s a problem for young families
Purchasing a family-sized home with three or more bedrooms was easy for young people with children. but with House prices rise Faster than wages, mortgage rates remain close to Highest levels in 23 years And a Home shortage nationwide, many millennials with children cannot afford it. And Generation Z adults with kids? Even harder.
Meanwhile, baby boomers are staying in their larger homes longer, preferring to age in place and stay active in a familiar neighborhood. Even if they sell, where will they go? there Shortage of tiny houses In those neighborhoods.
As a result, empty-nester baby boomers own 28% of large homes — and millennials with children own just 14%, according to a Redfin analysis released Tuesday. Gen Z families own only 0.3% of homes with three or more bedrooms.
“Boomers love their homes. Even if they want to sell, it’s now becoming too expensive for many millennials,” Shehariyar Bukhari, chief economist at Redfin, who conducted the analysis, told CNN. “These are larger homes to live in.” “Only one or two people, and they usually bought it a while ago, so it has value.”
This is a change from the historical norm, according to the research. Ten years ago, young families were as likely to own large homes as empty-nesters.
The report identifies the age groups in the 2022 Census data as follows: Generation Z adults ranged in age from 19 to 25, Millennials ranged in age from 26 to 41, Gen 76 years old.
Although Millennials with children own half as many large homes as empty-nesters, Millennials make up nearly 28% of the nation’s adult population, the largest share of any generation.
With many young people already delaying having children as they seek stability in their families and careers, the well-established milestone of purchasing a family home is becoming increasingly elusive.
The lock-in effect, due to prices, is only half of it
Few homeowners of any age want to sell now. This is crushing the inventory of homes for sale and keeping prices high.
Although current homeowners have high levels of equity in their homes, there is little incentive to sell.
More than 90% of current homeowners with mortgages have interest rates of 6% or less, according to ICE Mortgage Technology, a mortgage data company. With the current average rate for a 30-year fixed loan hovering around 6.6%Almost all homeowners, except for newer homeowners, will receive a higher mortgage rate than their current rate if they buy and sell another home.
While this is certainly keeping some baby boomers indoors, it is only part of the reason, Bukhari said.
“Half of these boomers own their homes outright, so the price restriction doesn’t even apply to them,” he told CNN. “They’re not downsizing. Even if it’s just one or two people, or a couple. They like their big house.”
For those who own their home outright, the average monthly cost of homeownership, which includes insurance and property taxes, among other costs, is just $612, according to the report.
“Logistically, empty nesters are the group most likely to sell large homes and downsize,” Bukhari said. “They no longer have children living at home and don’t need as much space. The problem for younger families who want their parents’ generation to list their big homes: Boomers don’t have a lot of motivation to sell, financially or otherwise.
Boomers have always loved their homes
Older Americans today own a much larger share of large homes than they did a decade ago, and younger families own a smaller share.
But who owns it has changed.
Ten years ago, in 2012, empty nesters from the Silent Generation, who ranged in age from 67 to 84 at the time, occupied 16% of homes that were three bedrooms or larger. That’s a smaller share than Gen
But even then the empty nest of baby boomers owned the most homes. In 2012, empty nest boomers, ages 48 to 66, owned and occupied 26.4% of homes with three or more bedrooms in the United States, which is comparable to today’s share.
Millennials own the largest homes
Younger families account for the smallest share of large homes in coastal areas like California and Florida, where larger homes tend to be more expensive. Instead, the Midwest is where Millennials own the largest share of larger homes. But in no city where more than 18% of millennials with children own large homes.
Empty nesters own at least 20% of large homes everywhere in the country. But they occupy the smallest share of three-bedroom and over homes in popular immigration destinations as well as California cities like Riverside, California, at 21.9%; Salt Lake City, 22%; and Austin, Texas, by 22.2%.
What is the future
Bukhari said there are some small positives in the coming year: affordability is expected to improve somewhat in 2024.
Mortgage rates are trending down and are expected to fall further as we go through 2024. This should result in a lower cost of homeownership for young families.
As mortgage rates decline, more homeowners will see the gap narrow between their current mortgage rate and the current rates on another home, making selling more palatable.
But potential homebuyers waiting for the so-called “silver tsunami” of older homeowners selling their homes en masse shouldn’t hold their breath, Bukhari said.
“Some boomers are ready to downsize or move to a new place for retirement, and the impact of mortgage rate stabilization is beginning to ease,” he said.
But “there will not be a flood of inventory,” he added. “There will be a trickle.”
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