Where’s the home inventory?

Available home supply remains down about 41.8% from the typical amount pre-pandemic.?

Boomers, Big Houses, and No Place to Go: How Demographics are Squeezing Housing Inventory

The American housing market is facing a complex challenge: a shortage of inventory and high prices, impacting individuals at every stage of the life cycle. While various factors contribute to this situation, demographics, particularly the aging baby boomer generation, play a significant role.

Nearly 40% of baby boomers, born between 1946 and 1964, have lived in their current homes for at least 20 years. This has a ripple effect, contributing to the lack of available properties for younger generations seeking to buy. A recent Redfin analysis paints a clear picture: empty nesters, or baby boomer households with no children at home, own 28% of the nation's large homes (three or more bedrooms). In contrast, millennial households with children own just 14%.

Several factors drive this phenomenon. Boomers benefited from an era of lower housing prices and higher inventory, allowing them to purchase larger homes earlier in life. Additionally, their longer careers and higher savings put them in a stronger financial position to afford these properties. Now, many are reluctant to move due to several reasons:

• Locked-in mortgages: Many boomers enjoy low-interest rates on their existing mortgages, making it financially less attractive to sell and purchase a new home with higher rates.
• Downsizing challenges: Finding smaller homes that meet their needs and budget within a preferred location can be difficult.
• Desire to age in place: Many boomers prefer to remain in their familiar homes as they age, taking advantage of accessibility features or making modifications.

This creates a logjam in the market. Larger homes suitable for families remain occupied by individuals or couples who no longer need the space. Meanwhile, younger generations, particularly millennials entering their prime homeownership years, face stiff competition and limited options.

The problem extends beyond individual transactions. With a significant portion of wealth tied to real estate, boomers own roughly $19 trillion worth of US real estate, more than double the amount held by millennials. This imbalance further concentrates wealth and limits financial mobility for younger generations.

While there are no easy solutions, addressing this complex issue requires a multifaceted approach. Encouraging new construction, particularly of smaller, more affordable units, and exploring ways to incentivize boomers to downsize could free up some inventory. Additionally, policies aimed at increasing wealth-building opportunities for younger generations are crucial for future market stability.

The housing market stands at a crossroads. Understanding the demographic factors at play, particularly the role of baby boomers, is essential for finding solutions that benefit all generations and ensure a healthy, accessible housing ecosystem for the future.