Why is the baby boomers housing market so strong?

As unbelievable as it seems, the baby boomers housing market is getting strong enough to edge out the millennials. The older folks are buying more houses than the younger crowd these days.

According to the Home Buyers Generational Trends report from the National Association of Realtors, based on the research conducted by Jessica Lautz, the deputy chief economist, the graying generation is outpacing the millennials in home purchases. It turns out that millennials are having a tough time affording homes because of rising prices and a shortage of houses. 

Meanwhile, the older generation of Americans, the baby boomers, are in a better position because they’ve saved up money and have plenty of value in the homes they already own, making it easier for them to buy more houses.

As a result, they are the ones buying and selling all the houses in the hot U.S. housing market. 

Who is part of the baby boomer community?

A baby boomer is someone born between the period just after World War II and the mid-1960s. Due to their substantial population and economic prosperity during their working years, baby boomers collectively hold significant economic and political influence over the U.S. milieu. Today, the baby boomers have the highest household net worth of any of the generations in the U.S.

Where do most baby boomers prefer to live?

After the pandemic, a widespread trend has emerged, drawing people, including baby boomers, towards cities in the Sun Belt. Cities such as Las Vegas, Phoenix, Tampa, Orlando, and Austin are among the most popular destinations for this generation.

Are the baby boomers the largest generation of homebuyers?

In the realm of home buyers, baby boomers have taken the lead. They have surpassed millennials to become the largest generation of homebuyers, as revealed by the recent study by the National Association of Realtors.

According to the latest data, the median age of a repeat buyer is now 58. It marks a significant increase from the age of 36 in 1981, the inaugural year of the association’s data collection.

Today, the typical age of a first-time homebuyer is 35.

What do the findings on the baby boomers housing market say?

Jessica Lautz highlighted the challenging environment in the housing market for first-time homebuyers. Even with slightly reduced competition, entering the market remains tough. In competitive scenarios, older individuals, rather than millennials, with significant equity or all-cash buyers are more likely to succeed. And, the baby boomers housing market may stay hot for a while.

• The National Association of Realtors’ recent report indicates a marginal increase in the share of first-time homebuyers this year. While it rose to 32 percent from 26 percent in 2022, it still falls below the average of 38 percent.
• First-time buyers cautiously reentered the market in 2023, benefiting from decreased competition and fewer multiple-offer situations.
• In 2023, the typical age for both first-time and repeat homebuyers experienced a slight decline, with first-time buyers decreasing from 36 to 35 years and repeat buyers from 59 to 58 years.
• There has been a 22 percent increase in the annual household income of homebuyers over the past year, surging from $88,000 in 2022 to $107,000 in 2023. This spike is attributed to the impact of higher home prices and mortgage rates on housing affordability.

Why are the baby boomers muscling out the millennials?

Contrary to expectations of a decline in real estate prices due to the rising mortgage rates, house prices and housing demand have remained robust. This has been perplexing for the real estate experts and many first-time homebuyers.

While conventional wisdom might suggest that an aging population would require fewer homes, the reality is quite different. 

Baby boomers are in fact establishing more households, exerting pressure on housing demand, and sustaining elevated prices. This is despite the highest mortgage rates in over two decades. 

The youngest boomers, at 59 years old, still have a significant presence in the workforce. And, there has been a noteworthy rise in households within the 65-74 and 75+ age groups.

Read more: Leads for real estate

Will home prices come down in the U.S. market?

It’s essential to acknowledge that experts point to additional factors influencing the real estate market, including a shortage of housing inventory. The surge in mortgage rates this year has led to fewer homeowners listing their properties, fearing the prospect of purchasing a new home at rates exceeding 7% – more than double the typical rate during the pandemic. 

With limited housing options available, buyers find themselves competing for a restricted pool of properties, resulting in high home prices.

The median sales price for existing homes increased by 1.9% in July, reaching $406,700 – a 57% surge since January 2020. Demographics, particularly aging boomers, are expected to sustain housing demand. Although new construction may ease supply issues, prices are projected to decelerate slowly. However, the much anticipated 2024 rate cut by the Federal Reserve might trigger increased buying, as the prospect of more affordable financing could incentivize a greater number of individuals to enter the real estate market. We might finally see an end to the housing affordability crisis.

Read more: Will the housing market crash?

Written by Ramona Sinha. December 7, 2023

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.