Baby Boomers Are Holding on to Their Houses

Baby boomers, individuals born between 1946 and 1964, hold a substantial portion of the United States’ real estate wealth, approximately 42%. Recent trends indicate that many are choosing to retain and enjoy their assets during their lifetimes rather than passing them on to their children. Various factors influence this decision and carry significant implications for the housing market.

Factors Influencing Retention of Real Estate Wealth

1. Financial Security and Rising Costs: Many boomers view their homes as pivotal to their financial stability. A survey highlighted that 76% of boomer homeowners consider homeownership the primary reason for their financial security. There are a number of underlying economic reasons for this:

• The transition from pensions to 401(k)s has made retirement less predictable, pushing baby boomers to hold onto real estate as a financial safety net rather than passing it down. Unlike pensions that provide guaranteed lifetime income, 401(k)s require self-management and are vulnerable to market downturns, which many boomers experienced in 2008, making them more protective of their assets.
• Longer life expectancy and rising healthcare costs (expected to be $315,000 per couple in retirement) have made housing a key buffer against financial uncertainty, with many boomers choosing to age in place rather than sell.
• Inflation concerns: Homeownership acts as a hedge against inflation, providing a tangible, appreciating asset that can be tapped through reverse mortgages, rentals, or sales if needed.
• Property Tax Exemptions & Caps: Many states offer tax relief programs for long-term homeowners, such as California’s Proposition 13, which caps property tax increases. This means seniors who have owned their homes for decades pay far lower property taxes than they would on a newly purchased home. 

2. Desire to Age in Place: A significant number of boomers prefer to remain in their current residences as they age. According to a Redfin survey, 78% of older American homeowners plan to stay in their homes indefinitely, valuing the familiarity and community ties their homes offer. A 2011 paper from the Journal of Aging Research shows that more and more adults have decided to age in place since 1980. 

Potential Impact on the Housing Market

1. Limited Housing Inventory: Boomers’ reluctance to sell is further constraining housing supply. As they occupy a significant portion of single-family homes, especially larger ones, fewer properties become available for younger buyers, driving up prices.
2. Delayed Wealth Transfer: The decision to retain assets means that the anticipated “Great Wealth Transfer” may occur later than expected. This delay can affect younger generations’ ability to purchase homes, as they might have been counting on inheritance to fund such investments.
3. Shift in Housing Demand: As boomers age, there may be an increased demand for accessible housing features or single-story homes: While most baby boomers want to age in place, medical necessity can force people to change their living arrangements. This may counterbalance the trend of aging in place to some extent. 

So, is this a good or bad thing? For the most part, it is somewhat inefficient for people to retire in place—the cost of living is generally higher, which is not good for the retiree, and working-age people find themselves unable to buy homes near the places they work. However, as long as real estate continues to appreciate the way it has in these constrained markets, we can’t expect people to sell. While there are many reasons to retire in place, housing policy should work to remove any perverse incentives that might be making the housing shortage worse. 

Baby boomers’ decisions to retain their real estate assets are shaped by a combination of financial prudence, personal preferences, and economic considerations. While this trend offers them security and continuity, it also presents challenges and shifts within the housing market that warrant attention from policymakers, developers, and prospective homeowners.

Franklin Carroll

Franklin Carroll is Kukun's VP of Modelling and Analytics; After finishing his studies at the University of Chicago, he worked at Fannie Mae where he helped build Collateral Underwriter, roll out the Value Verify initiative, and specialized in collateral related and credit related policy.

Published February 18, 2025