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The generation whose kids have flown the nest now owns twice the number of large homes than the generation in the midst of raising families, according to a new report.
The report, published Tuesday by Redfin, found empty-nest baby boomers own 28.2 percent of the large homes in the United States — twice as many as millennials with kids, who own just 14.2 percent of them. Gen Z parents, meanwhile, own virtually no large homes, at just 0.3 percent.
While traditional logic suggests there should be a flood of large houses hitting the market over the coming years, with baby boomers no longer needing large houses now that their children have moved out, market conditions have disincentivized them from selling their homes and being forced into a housing market with low inventory and high costs.
“There’s unlikely to be a flood of large homes hitting the market anytime soon,” said Redfin Senior Economist Sheharyar Bokhari. “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. They typically have low housing costs, and the bulk of boomers are only in their 60s, still young enough that they can take care of themselves and their home without help.”
Most boomers who own their homes have already paid off their mortgage, the report notes, making their housing costs extremely low at an average of just $612 per month for insurance and property taxes, according to Redfin. For boomers who do have a mortgage, nearly all have a mortgage rate significantly lower than the near-7 percent rates seen today.
While baby boomers own an outsized share of the nation’s large homes — which the report defines as homes with three bedrooms or more — it should be noted that there are more millennials than boomers, with millennials making up roughly 28 percent of the United States population, followed by baby boomers at 27 percent.
Many young families are renting three-bedroom plus units across the United States, with millenials with children living in one-quarter of the large rental units in the country, the largest share of any generational category. They are followed by millenials without kids, who rent 11.6 percent of the nation’s large units.
Boomers have taken a larger share of the country’s large homes over the past decade. In 2012, empty nesters from the silent generation (who were between 67 and 84 then) owned 16 percent of three-bedroom plus homes — a smaller share than their children in Generation X who owned 19 percent of those large homes at the time, as they raised their families.
The shift reflects the difficult journey millennials have faced on their road to homeownership, and the difficult journey still ahead for Gen Z. Last year was the least affordable housing year on record as mortgage rates surged and would-be sellers locked in to their lower rates, worsening the shortage of existing housing inventory.
While buyers shouldn’t expect a massive crop of large homes on the market anytime soon, some baby boomers will retire to smaller dwellings over time as the lock-in effect loosens with dropping mortgage rates, the report notes.
“Some boomers are ready to downsize into a condo or move somewhere new for retirement, and the mortgage-rate lock-in effect is starting to ease — so even though there won’t be a flood of inventory, there will be a trickle,” Bokhari said.
