Boomers in the US don’t want to leave their homes, and that’s a problem for young families

(CNN) — Buying a family-sized house with three or more bedrooms was possible for young people with children. But with home prices rising faster than wages, mortgage rates still near 23-year highs, and a nationwide housing shortage, many millennials with children can’t afford it. What about Generation Z adults with children? But harder.

Meanwhile, baby boomers are staying in their big homes longer, choosing to age in place and stay active in familiar neighborhoods. And even if they sell, where will they go? There is a shortage of tiny houses in that neighborhood.

As a result, baby boomers own 28% of large vacant homes and millennials with children own just 14%, according to a Redfin analysis released Tuesday. Only 0.3% of Generation Z households own homes that have three bedrooms or more.

“Boomers love their homes. Even if they want to sell, it’s prohibitively expensive for many millennials now,” Shehriar Bokhari, a senior economist at Redfin, who conducted the analysis, told CNN. “These are big homes where just There are only one or two people living and they usually bought a while ago, so they have value.”

According to research, this represents a change from the historical norm. Ten years ago, young families were just as likely to own large homes as empty nesters.

The report defines the age groups in the 2022 census data as follows: Generation Z adults between the ages of 19 and 25, Millennials between 26 and 41, Generation X between 42 and 57 and Baby Boomers between 58 and 76.

Although millennials with children own homes half as large as those without children, millennials represent about 28% of the nation’s adult population, the largest share of any generation.

With many young people already delaying having children while working to stabilize their families and careers, the well-established milestone of buying a family home is increasingly out of reach.

The lock-in effect due to fees is only half the story

Few homeowners of any age want to sell now. This is crushing the inventory of homes for sale and keeping prices high.

Even though current homeowners have record levels of equity in their homes, there is little incentive to sell.

According to mortgage data company ICE Mortgage Technology, more than 90% of current homeowners have mortgages at 6% or less. With the current average rate for a 30-year fixed loan hovering around 6.6%, almost all but the most recent homeowners will accept a higher mortgage rate than their current rate if they sell and buy another home.

According to Bokhari, this is what keeps some baby boomers in their homes, but that’s only part of the reason.

“Half of these baby boomers own their homes, so the flat rate doesn’t apply to them as well,” he told CNN. “They don’t just downsize. Whether it’s just one or two people, or a couple, they love their big house.”

For those who own their home outright, the average monthly cost of homeownership, which includes insurance and property taxes, among other expenses, is just $612, according to the report.

“Logically, empty nesters are the group most likely to sell larger homes and downsize,” Bokhari said. “They no longer have children living at home and don’t need as much space. The problem with younger families whose parents’ generation wants to put their big houses up for sale is that boomers don’t have much motivation to sell, financial or otherwise.

Boomers have always loved their homes

Today, older Americans account for a much larger share of large households than a decade ago, and younger families account for a smaller share.

But its owners have changed

Ten years ago, in 2012, silent generation empty nesters, then aged 67 to 84, occupied 16% of homes with three bedrooms or more. This is a smaller proportion of those with children than members of Generation X, who were then between the ages of 32 and 47 and occupied 19% of those large households.

But empty-nest baby boomers still had the largest homes. In 2012, empty nester boomers, then aged 48 to 66, owned and occupied 26.4% of homes in the United States with more than three bedrooms, compared to today’s proportion.

Millennials own the largest homes

Young families have the smallest share of large homes in coastal areas such as California and Florida, where large homes are more expensive. Instead, the Midwest is where millennials own the highest proportion of large homes. But there is no city in which millennials with children own more than 18% of large homes.

Empty nesters own at least 20% of large homes nationwide. But they have the smallest share of homes with more than three bedrooms at 21.9% in popular immigration destinations as well as California cities such as Riverside, California; Salt Lake City with 22%; and Austin, Texas, with 22.2%.

What is there for the future?

There is a small silver lining for next year, Bokhari said: Affordability is expected to improve somewhat in 2024.

Mortgage rates are trending downward and are expected to decline further as 2024 progresses. This will reduce the cost of home ownership for young families.

As mortgage rates fall, more homeowners will notice the difference between their current mortgage rate and current rates on other homes, making selling more palatable.

But prospective homebuyers shouldn’t hold their breath anticipating a “silver tsunami” of older homeowners selling their homes en masse, Bokhari says.

“Some boomers are ready to move into a condo or move to a new place to retire, and the mortgage rate lock-in effect is beginning to ease,” he said.

But “there won’t be a flood of inventory. “There will be a trickle,” he added.