“3 Key Reasons Why Baby Boomers are Forcing Millennials Out of the Housing Market”

Why Baby Boomers are Outbidding Millennials for their Starter Home

It’s no secret that baby boomers are much richer than millennials. However, it’s the extent of this wealth gap that explains the gerontocratic state of America’s housing market. Millennials have finally reached the age where they want to purchase starter homes, but their parents’ generation is preventing them from realising this dream.

How Baby Boomers are Determining the Housing Market

The Bank of America Institute has released a semi-annual report that highlights why baby boomers have been keeping millennials from owning their starter homes. The report looks at the domestic migration patterns of BofA’s customers in recent years, providing additional insight into Census Bureau data.

Boomers are Ahead of Millennials in the Housing Market

The report cites Federal Reserve data, which shows that baby boomers have eight times more wealth than millennials. The baby boomer generation owns around $73 trillion, while millennials have around $9 trillion. Despite this wealth gap, millennials overtook baby boomers as the top homebuying group from 2014 to last year. Still, baby boomers reclaimed their title as the top buying force after interest rates started to rise.

Boomers Want to Downsize, While Millennials Want Starter Homes

The younger generation wants to purchase starter homes and start a family. The baby boomer generation is focused on downsizing for retirement and relocating closer to family and friends. The report suggests that baby boomers are better equipped financially to purchase a home in the current environment of high home prices and interest rates.

Why Baby Boomers Outbid Millennials

A significant portion of the baby boomer generation’s wealth is already held in housing equity. This equity can be leveraged to purchase new homes closer to family and friends. Millennials don’t have this advantage as they currently hold around $5.5 trillion in real estate assets compared to baby boomers’ almost $19 trillion. In addition, baby boomers are living longer, which means less housing for other generations due to the US’s supply shortage.

Boomers and Millennials are Moving to Different Places

BofA’s report also found that the pandemic-induced domestic migration patterns of 2022 are persisting into 2023. Both baby boomers and millennials are leaving large, expensive cities like Boston, New York, San Jose, and San Francisco. However, they are heading to different places. Millennials are moving to cities like Austin, Cleveland, Dallas, and Tampa, while baby boomers are headed to Las Vegas, Phoenix, Orlando, and Tampa. Charlotte, Houston, and Philadelphia are also popular destinations, while Chicago, Detroit, and Washington D.C. have continued to see people leave.

Conclusion

The Bank of America’s report suggests that millennials will likely remain on the sidelines for now as the current inventory in the market is too expensive for many to afford. Despite this, the bank is optimistic that this trend won’t last forever. In the years to come, housing demand will likely rebound for young millennials (under 35). While large inflows often lead to rising home prices, this isn’t the case in some of the cities that baby boomers are moving to due to the interest rate hikes. However, the inflows are still leading to large rent increases, especially as owning remains unaffordable. The enormous inflows mean that over the long term, housing prices will continue to rise in these popular destinations.