Baby boomers are competing for the same homes as millennials, and are catching the attention of the younger generation. MoMo Productions – Getty Images
The pandemic, which always presented the short end of the stick, has been a double-edged sword for millennials. While some have moved into their homes, many have been able to save and get out of COVID-19 twice as rich as they were before. This coincided with the arrival of the peak generation of home-buying age, and the second year of the epidemic witnessed the beginning of the baby boom, as nearly half of the generation contracted the fever of old American ambition to move to the suburbs. But millennials might also turn to the sad Charlie Brown music and wallow away when they look at the current state of the housing market. Huge student loans, the Great Recession, and a cost of living that outpace their paychecks all make this generation unable to build wealth like their parents and grandparents. To top it all off, one of the nation’s leading housing-focused economists, herself a millennial, crunched the numbers and found the ugly truth: The parents of millennials, who seemed to have all the economic breaks in the past 50 years, are stealing all the starter homes and making them homes for the elderly instead.
Ali Wolf has covered housing for at least 10 years and has risen steadily to the position of chief economist at Zonda, a distributor of housing market data and advice. Wolf, a millennial herself, has personal experience of what her generation faces, living in Southern California, a state that epitomizes America’s housing shortage and generational conflict.
With baby boomers shrinking and millennials finally entering the housing market, Wolf says, they’re in direct competition for homes of similar price and size.
“In today’s housing market,” says Wolf. luck, “There is significant overlap between select baby boomers and select millennials.” I used the archetype of the Boomer Nester-free couple and the millennial couple without children or young children. Basically, the first group is looking for their retirement home and the latter is looking for their home where they started, and they have to submit something. “The main difference here is that baby boomers will likely be able to cash in on equity by selling their existing home, allowing them to perhaps make a more compelling offer on the home than millennials, especially if the latter group is still renting.”
Two things are going on with baby boomers, Wolf explains: Data from AARP shows that most boomers are looking to stay where they are now, but the National Association of Realtors shows that boomers are the best buyers and sellers of the moment. And many boomers are looking forward to retiring soon. The high cost of childcare has baby boomers looking to help their millennials by selling and approaching to offer additional help raising pandemic kids, but ironically, their kids (and their kids’ friends) are out of the market. Wolf said Zonda has begun tracking this dynamic with what she calls the Baby Chaser Index, which tracks cities where baby boomers follow their children faithfully (they end up fueling larger immigration patterns in previously affordable cities like Charlotte, North Carolina). According to Wolf, Zonda data shows that 25% of baby boomers are moving on to get close to their grandchildren. Recently, Zonda has found that these baby chasers often move to the Southeast, a market that has become a hot spot because of its relative affordability for homebuyers of all ages.
It all leads to an awkward greeting for Mom when she outsmarts you at the open house. Boomers have an advantage, as they’re looking for the same smaller home as someone craving a starter home, and they’re often able to take advantage of an all-cash offer, Wolf explains.
By their very nature being younger and simply unlucky when it comes to building wealth, millennials have the disadvantage when it comes to home acquiring, as boomers often come into the market “stock richer” and are less price/price sensitive. Wolf says luck This is an important point that should not be ignored: some boomers and millennials are looking for the same house and boomers are often in a position to offer more competitive offers. So “younger people looking to get up the homeownership ladder” are very challenged in this “overlap with their parents’ generation.”
At a certain point, the battle of millennials vs. boomers is the war between millennials getting help from boomers and the boomers themselves. Many parents have had it easier on their hands than their kids, reporting making financial sacrifices to give their kids a leg up and help them in today’s volatile economic landscape. Millennials may be able to expect a bigger windfall and generosity when their parents pass away, like economist Noah Smith says. Tweets That the generations will see their course change when they reach their fifties and their parents leave them this golden and fraught with real estate. However, even if millennials catch up later in life, “it’s also not a great way to regulate the distribution of wealth in society.”
Even the wealthiest millennials rent their homes, and buy-to-rent ones are fighting a different battle, as homeowner millennials have a bit of an easier time when it comes to going up against their baby boomer friends. “The real challenge today is because prices are high, mortgage rates are high, and the overall housing supply is low,” adds Wolf. A larger portion of baby boomers are homeowners, with Wolf notes that 43% of the group own their homes without a mortgage. She points out that the group also has an advantage due to its high investment in the stock market. The two combined allowed “many baby boomers to be in a healthy place in terms of total wealth.”
On the other side of the coin, many millennials have simply given up owning a home, shunning the American Dream as something that has only been around for so long. A Harris poll found that most (56%) of the generation think their dream of owning a home is dead. Recently, a bit less pessimistic, Ameriprise Financial found that about six in 10 millennials feel good about finances, which is likely because 78% rely on some help from their families to get by. Things aren’t looking up for millennials though, as Wolf explains that those who rent “shouldn’t expect the market to get much easier in the near term” because supply is still limited and there are buyers less sensitive to price gouging. A recession could upend him, but Wolf notes that doesn’t change the fact that building affordable housing with a large pool of buyers is becoming increasingly difficult. While the housing market may cool off, “buying an entry-level home is likely to remain a challenge for home shoppers for the foreseeable future,” she adds.
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