Berkshire Hathaway HomeServices has predicted that the anticipated selling of homes by retiring Baby Boomers could exacerbate the housing affordability crisis for younger generations.
First-time homebuyers have faced significant hurdles in the housing market over recent years, as affordability issues have mounted and the supply of available homes has decreased. This situation has predominantly affected younger buyers, with many in Generation Z and Millennials being unable to reach the key financial milestone of homeownership.
In contrast, Baby Boomers have experienced a more stable and buyer-friendly market throughout their lives, with the exception of the 2008 subprime mortgage crisis. As many Boomers now approach retirement and consider selling their homes to relocate, industry experts suggest this shift could upend the housing market.
While high mortgage rates and stagnant housing activity have impacted older generations, it is the younger generations who have borne the brunt of the increasingly expensive housing market. According to Berkshire Hathaway HomeServices, retiree homeowners looking to downsize may soon find themselves competing with first-time homebuyers for smaller, more affordable properties.
Affordability has long been the primary obstacle preventing younger buyers from purchasing homes. Many young buyers believe that if the mortgage rates were to drop below 6%, it would improve conditions enough for them to enter the housing market. Although housing inventory levels are beginning to improve, many people remain hesitant to list their homes for sale until rates decrease further, which has kept the market in a state of limbo.
A Berkshire Hathaway HomeServices blog points out that “they [Baby Boomers] accumulated significant equity from staying in their homes and paying down their mortgages and benefiting from escalating home prices over the course of 13 to 16 years.” It notes that nationwide home prices have increased by 47% over just the past five years, but many Boomers who remain in their homes have little financial motivation to sell amid high interest rates.
Experts anticipate that when Baby Boomers do choose to relocate for retirement and sell their homes in large numbers, it could exacerbate the housing affordability crisis for younger generations. As Boomers sell their homes and purchase smaller homes with cash, they inadvertently make it more difficult for first-time and lower-income homebuyers to compete.
Younger generations, particularly Millennials and Gen Z, will need to compete with senior Boomers, Gen Xers approaching retirement, and institutional investors. Companies like Blackstone, which has a portfolio of approximately 60,000 residential single-family homes, as well as institutional and foreign investors who intend to buy and rent or hold homes, contribute to higher home prices by reducing the inventory of smaller, newer, and more affordable homes.
Berkshire Hathaway HomeServices expects a significant number of unoccupied homes to be left behind by aging Baby Boomers. As demand among older and younger buyers shifts towards smaller, affordable homes, these vacated properties could significantly impact the already fragile housing market.
As the Baby Boomers enter their later years, they are unlikely to sustain upkeep on large and expensive homes. “What boomers will leave behind as they vacate their homes, whether for alternative lifestyles such as assisted living, long-term care homes, and multigenerational living, or through loss of life, is a growing inventory of unoccupied homes and homes for sale,” continues the Berkshire Hathaway HomeServices blog. If expensive homes remain unsold, housing experts worry the resulting widespread surplus could lead to market pricing collapses.
Between 2026 and 2036, it is predicted that between 13.1 and 14.6 million Boomers will transition away from homeownership, which raises concerns among housing industry experts about a potential price collapse due to the influx of available homes.
According to The Street, these shifts suggest significant disruptions in the housing market as Baby Boomers exit the scene, bringing both challenges and opportunities to younger prospective homeowners.