Sorry, millennials, Gen Zers are coming for boomers’ houses

Real Estate

By Mary K. Jacob

In the US housing market, one generation looms large: the baby boomers.

With a staggering $19 trillion worth of real estate under its belt, claiming 41.6% of the real-estate wealth in the country, boomers have shaped the landscape, creating a housing shortage and driving home prices to unprecedented heights.

However, as this generation ages, a pivotal question emerges: What happens when boomers pass away?

According to projections from the Census Bureau, by 2040, the population of 80-plus-year-olds is expected to more than double.

And as boomers leave their homes due to various reasons, a potential “silver tsunami” of available homes could flood the market.

Some economists predict that this influx might lower prices, creating opportunities for younger generations, particularly Gen Z.

Gen Z, poised to enter their prime homebuying years around 2030, could reap the benefits of this changing tide. With many boomers downsizing in later life, the surplus inventory might include starter homes that are in high demand, but scarce in today’s market.

While millennials may experience some benefits, they are likely to be well past the typical age for first-time homebuyers. Economic challenges and the need for substantial updates to aging boomer houses could hinder their prospects.

Despite efforts to forecast the real estate market’s moves, the one certainty lies in demographic patterns.

Historical data indicates that boomers will start aging out of their homes around 2030.

Zillow estimated that more than 20 million homes would hit the market over the following two decades as a result.

These homes will “boost the supply of housing on a magnitude comparable to the fluctuations that new home construction experienced in the 2000s boom-bust cycle,” the report, written by Issi Romem, said.

But the predicted “silver tsunami” may not be as tumultuous as some anticipate, with experts suggesting a gradual and manageable shift in the market.

Gary Engelhardt, a professor of economics at Syracuse University, suggests that the boomer sell-off will contribute to an excess supply of about 250,000 homes annually until 2032.

However, this figure is relatively small compared to the total sales of existing homes.

“In the next 15 years, this stuff’s really going to start happening,” Engelhardt told Insider.

In this changing landscape, Gen Z emerges as the generation in the driver’s seat.

Unlike millennials, who faced economic challenges and intense competition from boomers, Gen Zers stand to benefit from a more favorable market. Their reduced competition from boomers and a smaller cohort size could ease the pressure on the housing market.

As of 2022, a staggering 79% of baby boomers owned the homes they lived in, compared with 52% of millennials and more than 26% of adult Gen Zers, according to a Redfin analysis.

“I don’t know that millennials will be that generation who benefits” from boomers’ departure, Jessica Lautz, the deputy chief economist and vice president of research at the National Association of Realtors, told Insider.

Thirty percent of 25-year-olds owned their home in 2022, compared with a 27% rate for Gen Xers at the same point in their lives, according to Redfin.

Millennials, meanwhile, were still struggling to catch up with their parents.

Redfin found that 62% of 40-year-olds owned their home in 2022, down from a 69% rate for boomers at the same age.

The oldest Gen Zers will be in their 30s in 2030, within the prime years for first-time buyers, Odeta Kushi, the deputy chief economist for the title company First American, told the outlet.

While some speculate that the homes left behind by boomers may need updates to appeal to younger buyers, the potential benefits for Gen Z in terms of supply and demand dynamics are evident.

As the torch is passed to the younger generations, demographic projections hint at a brighter future for Gen Z and, eventually, Gen Alpha.

The housing market’s transformation may not be a silver bullet for the broader housing crisis, but it presents a unique opportunity for the fortunate and savvy younger siblings of the millennial generation.

Sorry, millennials.