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Housing Battle Update: Boomers Gain Lead Over Millennials

• David (Viacheslav) Davidenko

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A seismic shift has occurred in the American housing market. Baby boomers have surged past millennials to become the dominant home-buying force, now commanding an impressive 42% of all purchases according to the National Association of Realtors' latest generational trends report.

This surprising reversal ends millennials' decade-long reign as the top home-buying demographic. Their market share has tumbled dramatically from 38% to 29% in just one year, while first-time buyers have plummeted to a historic low of merely 24% of the market. What's driving this fundamental transformation? The answer lies in financial capacity and purchasing power.

The boomer advantage becomes crystal clear when examining how they buy: a remarkable 51% of older boomers (ages 71-79) purchase homes entirely with cash, while 39% of younger boomers (ages 61-70) do the same. This cash-buying power, built through decades of equity accumulation and wealth building, provides a decisive edge in competitive bidding situations. Meanwhile, over 90% of millennials and Gen Z buyers require mortgage financing in a high-rate environment with historically challenging affordability metrics.

Yet the housing landscape is more complex than simply "boomers buying, millennials struggling." Many boomers continue choosing to age in place, incentivized by fully-paid mortgages, historically low fixed interest rates secured years ago, emotional attachments to their communities, and potential tax implications. Simultaneously, financial innovations like Home Equity Conversion Mortgages for Purchase (H4P loans) are emerging to help those boomers who do want to relocate.

These intersecting trends – boomer financial advantages, millennial affordability challenges, and the growth of multi-generational households – are fundamentally reshaping housing in America. What will these shifts mean for communities, wealth transfer between generations, and the very concept of starter homes? Listen as we explore the profound implications of this generational housing market transformation and what it means for the future of homeownership.

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Speaker 1:

Welcome back. Today we're looking at something pretty interesting happening in the US housing market. You know, for years it felt like millennials were the story, the main group buying homes.

Speaker 2:

That's right, but there's been a well, a really significant shift, according to some new data.

Speaker 1:

OK, so let's dig into that. We're talking about the National Association of Realtors' latest generational trends report right, the one covering mid-2023 to mid-2024.

Speaker 2:

Exactly the NAR report and the headline finding really flips the recent narrative on its head.

Speaker 1:

Flips it how? What's the big surprise?

Speaker 2:

The big news is that baby boomers we're talking ages 61 to 79, here they've actually become the largest share of homebuyers.

Speaker 1:

Really the largest share? What percentage are we talking?

Speaker 2:

They now make up 42% of the market 42%.

Speaker 1:

Wow, 42%, that's huge. I mean it feels like just yesterday we were saying millennials were finally hitting their stride. So what happened to their share?

Speaker 2:

Well, that's where you really see the change. Millennials, so ages 27 to 45, their share actually dropped quite a bit, actually, down to 29% 29?

Speaker 1:

From what? What were they before?

Speaker 2:

They were at 38% just the year before. So yeah, a 9 percentage point drop.

Speaker 1:

That's a serious decline. What about the other generations? Gen X, gen, z, gen.

Speaker 2:

X, that's ages 46 to 60. They're holding pretty steady actually Around 24%, Still a solid chunk.

Speaker 1:

Okay, stable. And the youngest buyers Gen Z, Gen.

Speaker 2:

Z, ages 14 to 25. Well, they're still a smaller part of the market, as you'd expect about 3%. But the real story, like you said, is that boomer surge and the millennial dip.

Speaker 1:

Especially since didn't millennials lead for quite a while?

Speaker 2:

Oh yeah, they'd been the top buying group since 2013. So this isn't just a blip, it's a notable reversal.

Speaker 1:

Okay. So why are millennials slowing down? It can't be that they suddenly don't want to buy homes anymore right?

Speaker 2:

Not at all. The desire is likely still there.

Speaker 1:

Yeah.

Speaker 2:

But the NAR report points to some, let's say, significant hurdles they're facing.

Speaker 1:

Like what Affordability?

Speaker 2:

Exactly. Sky-high home prices are a major factor. Plus, there's still limited inventory not enough houses for sale, basically.

Speaker 1:

Right the supply issue.

Speaker 2:

And then there's the challenge of just saving up enough for that down payment. It's tough.

Speaker 1:

Yeah, you hear that a lot. We just maybe not keeping pace with those housing costs.

Speaker 2:

Precisely, yeah, especially in desirable areas. So that down payment hurdle it's just much higher than it was for, say, boomers at the same life stage.

Speaker 1:

That really does paint a clearer picture of the difficulties. What about first-time buyers specifically? How are they faring in all this? That group is usually younger, right.

Speaker 2:

It's tough for them, Really tough. Their share of the market it plummeted down to a historic low, actually just 24% 24%.

Speaker 1:

Wow, what was it before?

Speaker 2:

It was 32% the previous year 24 percent. Wow, what was it before it was?

Speaker 1:

32 percent the previous year. And, yes, first time buyers are typically younger generations, mostly millennials, maybe some Gen Z starting to come in. So this really highlights that affordability crunch. Yeah, it underlines the whole issue. Ok, so if millennials are facing these big obstacles, what's driving the boomers? What's giving them the edge right now? What's driving the boomers? What's?

Speaker 2:

giving them the edge right now? Well, a huge factor seems to be their financial position. The NAR report highlights that boomers, generally speaking, just have more financial capacity.

Speaker 1:

Meaning more savings, more equity built up.

Speaker 2:

Exactly, and that translates into how they buy. A really significant number of boomers are making all cash offers.

Speaker 1:

All cash. Ok, that avoids the whole mortgage hurdle.

Speaker 2:

Right, and it often comes from you know decades of owning a home, building equity, maybe downsizing from a bigger place they've owned for years. That gives them a massive advantage younger buyers just don't have.

Speaker 1:

So what percentage are we talking for cash buyers among boomers? Is it a lot?

Speaker 2:

It's pretty striking For the older boomers. So 71 to 79 years old, 51% over half are buying with cash 51%. And even for the younger boomers 61 to 70, it's still very high at 39%.

Speaker 1:

Wow, almost 40% for the younger group too. That's a lot of cash power. How does that compare to millennials or Gen Z?

Speaker 2:

Oh, the difference is huge For millennials and Gen Z buyers. Over 90% need financing. They rely on getting a mortgage.

Speaker 1:

Go over 90% Okay.

Speaker 2:

So you can imagine, in a market where houses get multiple offers, a cash offer just looks much more attractive to a seller.

Speaker 1:

Absolutely Less risk. Faster closing probably Makes perfect sense. Removes a lot of uncertainty. Okay, so boomers are buying more often with cash, but we also hear constantly about boomers wanting to age in place.

Speaker 2:

How do those two things fit together? Are they all actually moving? That's a really important counterpoint. And yes, while their buying activity has clearly increased, the desire to stay put to age in place is still very strong for many boomers.

Speaker 1:

So why are some buying and many staying?

Speaker 2:

Well, think about the ones staying. Many have paid off their mortgages entirely, or maybe they refinanced years ago and locked in incredibly low fixed rates like 3% or even less.

Speaker 1:

Right Rates. We probably won't see again for a while.

Speaker 2:

Exactly so. With current mortgage rates being significantly higher, there's just less financial incentive for them to sell that paid off house and buy something else with a new, more expensive mortgage.

Speaker 1:

Why move if you don't have to and your current situation is cheap, got it.

Speaker 2:

Precisely. And then there are the emotional factors, too right Strong ties to their home, their neighborhood, their community, familiarity, friends.

Speaker 1:

Sure, that makes sense. Leaving a longtime home is a big deal.

Speaker 2:

And the NAR report also mentions things like potential tax implications, like maybe avoiding capital gains taxes on the sale of their main home. That can be another reason to stay.

Speaker 1:

Okay. So it's complex Increased buying from some boomers likely those downsizing or relocating but also a very strong pull for others to stay right where they are. Exactly it's not a monolithic group. Are there any new financial tools maybe emerging that cater to this demographic? Anything helping boomers buy?

Speaker 2:

Yeah, the report does mention something interesting A potential rise in things like home equity conversion mortgages for purchase, H4P loans they're sometimes called.

Speaker 1:

H4P. How do those work?

Speaker 2:

Well, basically they let older buyers, typically 62 and up, use the equity they have in their current home to help buy their next home, often without having the usual monthly mortgage payments. It's a type of reverse mortgage, but specifically for buying a new primary residence.

Speaker 1:

Interesting, so use your old home's equity for the new one, potentially without monthly payments.

Speaker 2:

Kind of. It could be appealing for boomers who are maybe downsizing but want to preserve their cash savings for retirement and improve their cash flow. Adoption's been kind of slow historically, but it's a tool that might gain traction.

Speaker 1:

Okay, something to watch. So, pulling it all together, then we have this picture of boomers having more financial clout, driving a larger share of purchases, sometimes with cash.

Speaker 2:

Right. But at the same time many other boomers are quite happy staying put, often for very sound financial and personal reasons.

Speaker 1:

While the younger generations, particularly millennials and first time buyers, are really feeling the squeeze from high prices and limited inventory.

Speaker 2:

Absolutely, and don't forget. The NAR report also flags another growing trend multi-generational living, More families living together under one roof, which adds another layer to housing demand.

Speaker 1:

Right, that's another piece of the puzzle.

Speaker 2:

So, yeah, it's this complex interplay boomer buying power versus aging in place, affordability challenges for the young, plus this rise in multi-generational homes. It's all intersecting.

Speaker 1:

It really paints a picture of a housing market in flux, driven by these shifting generational dynamics. So the big takeaway is definitely this maybe unexpected return of boomers to the top spot in home buying.

Speaker 2:

That's the headline, yes, but it's happening against this really complicated backdrop.

Speaker 1:

We've discussed and it certainly leaves you with some things to think about, doesn't it? You know what does this reshuffling mean long term for our communities, for the market itself, for how individuals plan their finances?

Speaker 2:

Definitely it raises big questions about the future.

Speaker 1:

And maybe a final thought for you to ponder Given everything we've talked about, how might our very idea of a starter home, or even what retirement living looks like, need to change or evolve in the years ahead?

Speaker 2:

That's a great question. The traditional pathways seem to be shifting, that's for sure. The market's definitely not static.

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David (Viacheslav) Davidenko

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