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Millions of homes could flood the US housing market thanks to boomers
Business Insider
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2 years ago
Baby boomers dominate America's housing market. But as they age out, millions of homes will be up for grabs, and Gen Z is poised to benefit.
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00:00
Baby boomers dominate America's housing market.
00:03
They own $19 trillion worth of real estate.
00:07
It's $5 trillion more than Gen Xers own,
00:10
and it's double the amount that millennials own.
00:13
I'm Leila Maiden, and I cover all things money and investing.
00:17
In the 1960s and '70s,
00:19
we had a home builder boom,
00:20
and so it created a lot of supply on the market.
00:23
By the age of 30,
00:25
many baby boomers or half of them owned their own home.
00:28
But a lot has changed since then.
00:30
The gap between income and the price of a home
00:33
has only widened over time.
00:35
It means that housing is less affordable.
00:38
Now, on the flip side of that equation,
00:40
millennials came into the economy at a tough time.
00:43
They graduated, many of them in 2008,
00:46
right at the height of the financial crisis.
00:48
They were coming out with student debt,
00:50
jobs were really difficult,
00:51
and things just weren't the same as they were before.
00:54
So the consequence of that is millennials had to delay
00:57
a lot of big milestones that baby boomers could get to,
01:01
for example, buying your first home.
01:03
To put things into perspective,
01:05
at the age of 40, 69% of boomers already owned their home.
01:09
In contrast, only 62% of 40-year-old millennials
01:13
owned their home.
01:14
Obviously, Gen Z is not 40 yet,
01:16
but data shows they're already in a better position,
01:19
with 30% of 25-year-olds owning their home.
01:23
But things could be changing soon,
01:25
and it could be a big shift,
01:27
because baby boomers are aging.
01:29
And as they move on to nursing homes or granny flats,
01:32
or eventually pass away,
01:34
there's gonna be a lot of real estate
01:35
that's gonna be up for grabs.
01:37
And this is what real estate experts
01:39
call the silver tsunami.
01:42
In 2019, Zillow estimated that 25% of owner-occupied homes
01:47
could hit the market in the next 20 years.
01:50
That's 20 million homes.
01:51
We can expect boomers to begin aging out of their homes
01:54
around 2030, after they reach 80 years old.
01:58
So who's expected to benefit from this surplus of supply?
02:02
Well, it's probably gonna be Gen Z-ers.
02:05
So by the time we get to 2030,
02:07
Gen Z-ers will be in their early 30s,
02:09
which is the prime age for buying your first home.
02:13
Millennials, on the other hand,
02:14
well, the older ones, they'll be 49 years old.
02:17
And buying a home that late in life
02:18
means you could end up with a mortgage
02:20
in your retirement years.
02:22
But it's not that black and white,
02:24
because the real estate market is wildly unpredictable.
02:27
But the excess of homes doesn't mean
02:30
that home prices are going to drop.
02:32
Not necessarily.
02:33
There are other factors
02:35
that we also need to take into consideration.
02:37
The first of which is that, well,
02:39
the aging process for a generation is slow and gradual,
02:42
and it might give demand time to catch up
02:44
and meet that excess supply.
02:46
Another possibility is that boomers
02:48
may pass some of these homes on to their kids.
02:51
And let's think when home prices are down too low.
02:54
You might not want to put your house for sale, right?
02:57
Instead, you could maybe keep it
02:59
and rent it out for that extra cash flow.
03:01
And then where are these homes?
03:03
Are they located in areas
03:05
where the younger generations will want to live?
03:07
And what are the conditions of these homes?
03:09
Many of them may need to be renovated,
03:11
and that in itself is going to be costly.
03:14
And then I spoke to a housing economist
03:16
who brought up a point that I hadn't even thought about.
03:19
There's an increasing amount of investors
03:21
that are competing for homes.
03:23
That means that demand can catch up with supply
03:25
and even outpace the supply.
03:27
Boomers have really shaped the real estate market
03:30
as we know it, and they may shape it one last time,
03:34
except this time, it could be Gen Zs
03:37
that will be the beneficiaries of that.
03:39
(upbeat music)
03:41
(upbeat music)
03:44
(upbeat music)
03:47
(upbeat music)
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