The U.S. real estate market has been an obstacle course for many young people seeking to buy homes, particularly those with enough room for children. The combination of low home supply, rising prices and high mortgage rates poses persistent challenges for Millennials and Gen Zers beginning to start families and enter the housing market.
The flipside of this landscape is a decade-long real estate boon for the nation’s existing homeowners, especially Baby Boomers. Many of them either own their homes outright or have high levels of equity in their properties. Having purchased their homes years ago, when home values were lower, they tend to have more manageable mortgage payments and have seen their property values increase.
The data on the U.S. housing market shows a stark generational divide between those coming out on top and those looking to attain the wealth in real estate enjoyed by older generations.
U.S. Census Bureau data shows that in the last decade, the total value of owner-occupied, mortgaged homes ballooned from $13 trillion to $24 trillion in 2023. Most of this growth occurred over the last few years, Fortune reported.
As of June 2023, a Redfin analysis of that data shows Baby Boomers (those between 58-76 years old) held $18 trillion of the home value pie in the U.S. Millennials accounted for about $5 trillion in home value.
Part of the reason for this discrepancy in value is that Baby Boomers — specifically empty nesters — own twice as many “large homes” in the U.S. as Millennial parents. Redfin defines a large home as a property with three or more bedrooms.
As of 2022, empty nest Baby Boomers owned about 28% of the nation’s large owner-occupied homes. That’s compared to just 14% of Millennial parents and 11% of Gen X parents owned. Another 7.5% of large homes are owned by Baby Boomers with households of three or more adults — primarily their adult children who live with them.
This imbalance in ownership of high value homes is not likely to change in the near future, since many Baby Boomers are still relatively young in their 60s and can enjoy their spaces without needing a lot of help.
“There’s unlikely to be a flood of large homes hitting the market anytime soon,” Redfin senior economist Sheharyar Bokhari said. “Logically, empty nesters are the most likely group to sell big homes and downsize: They no longer have children living at home and don’t need as much space. The problem for younger families who wish their parents’ generation would list their big homes: Boomers don’t have much motivation to sell, financially or otherwise.”
Millennials with young children have increasingly turned to renting large homes, accounting for nearly 25% of the rental market for properties with three or more bedrooms. Millennials without kids make up 11.6% of this market, followed by empty nest Baby Boomers at 11.4%.
The generational divide in ownership of large homes has widened over the last decade, too. Empty nesters in the older Silent Generation owned 16% of large homes in 2012, when they were between 67-84 years old. Empty nest baby boomers owned 26.4% of large homes and Gen Xers owned 19% of large homes.
One of the challenges facing younger generations today is that many Baby Boomers are enjoying the best of all worlds. They’re either holding on to appreciating homes or downsizing by using their financial resources to compete with younger buyers for starter homes.
The result is a housing market with too few large homes on the market and intense competition for smaller homes, whose prices have risen relative to their historical value to buyers.
“This massive shortfall is especially severe in the critical entry-level price range, keeping large swaths of people from entering the market entirely,” Julia Wasserman, chief operations officer of equity investment platform Home Construction Collective, told Fortune.
Despite the unfavorable market conditions, Millennials have purchased 60% of the U.S. homes sold during the pandemic years. They are the nation’s largest generation and the biggest cohort out in search of homes, yet their comparative share of U.S. homeownership and wealth remains dwarfed by older generations — with few signs of change immediately on the horizon.
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