It’s no secret that baby boomers are wealthier than millennials, but how much does it help explain the state of America’s housing market. While most millennials have now reached their “peak” home-buying age, their parents’ generation is holding them back from buying the start-up homes they’ve always dreamed of. The share of millennials homebuyers outnumbered boomers from 2014 through last year, when Boomers pushed their kids aside and took back their place As the best homebuying group in America. The Bank of America Institute, a bank-run economic think tank, has logged into the market with its biannual “Housing Morsel,” isolating the main reasons this happens, along with a few teases about where millennials and boomers are migrating in their search for housing.
The report looks at the domestic migration patterns of Bank of America customers over the past several years, citing its real-time estimates. population The streams give him nearly a year of additional insight into Census Bureau data, particularly with regard to immigration trends.
Citing Fed data, the BofA notes that the older generation has eight times as much wealth as millennials, $73 trillion compared to about $9 trillion. (Yes, baby boomers have had decades longer to accumulate wealth, but according to St. Louis FedMillennials own about 84 cents for every $1 that baby boomers own at the same age.)
While millennials made inroads at the beginning of the pandemic, they were quickly overtaken by seniors once interest rates started to rise. Boomers want to downsize for retirement, millennials simply want starter homes—and only one group has the cash to win.
“In the current environment of rising home prices and interest rates, baby boomers are better equipped financially to buy homes,” the Bank of America report reads.
Why would your parents’ friends outbid you on your starting house
A lot of baby boomers wealth is Already held in real estate stocks, which can be used in new homes closer to family and friends. That’s what divorced millennials don’t have yet, at least relatively. While millennials will own about $5.5 trillion in real estate assets at the end of 2022, say boomers She owns nearly $19 trillion. (It can also be pointed out that Boomers’ desire to be closer to their children and grandchildren prevents these family members from building their own residential fortunes.)
Boomers are also living longer, which is a positive development for humanity, but also one that means fewer homes for other generations, given the shortage of supplies in the United States. Meanwhile, millennials have entered “one of the most competitive, affordable, and unforgiving housing markets in recent times.” Even the wealthiest in that group are turning away, finding the American Dream increasingly elusive.
Definitely another possible reason for baby boomers to catch on is because they are richer and have more money on hand they are likely to be less sensitive to rates so the increase in mortgage rates from less than 3% to or as high as 7% He didn’t discourage homebuying fees nearly as much.
In the near term, Bank of America expects millennials to remain largely on the sidelines — the stock currently on the market is too expensive for many. But the bank is optimistic that this trend will not continue forever. Housing demand for millennials, those under the age of 35, is likely to rebound in the coming years.
Boomers and millennials don’t move to the same places
And the BofA also found that domestic migration patterns caused by the pandemic continue into 2023. Both boomers and millennials are leaving large, expensive cities like Boston, New York, San Jose, and San Francisco (although the pace of leaving New York and San Francisco has slowed compared to the early years of the pandemic). Interestingly, they move to different places.
Millennials are moving to cities like Austin, Cleveland, Dallas, and Tampa. Meanwhile, the 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.
While large outflows usually mean higher housing prices, this is not the case anymore in some of these cities. Prices have risen so much in 2020 and 2021 in cities like Austin, according to the BoA, that they may have finally reached a tipping point. With interest rates also rising, no one can afford to pay more.
“As the federal interest rate hike pushed up borrowing costs for these homes, demand has softened despite continued population growth in these popular cities, correcting higher home prices,” the report reads.
However, inflows still lead to significant rent increases – especially since owning is still very expensive. Average rent in April 2023 in Austin increased 11% over a year ago, according to BoA, while average rent in Orlando and Tampa increased 14%.
While many millennials moving to cities like Austin may continue to rent for now (that’s all they can afford), Bank of America says the massive inflows mean that over the long term, home prices will continue to rise in these popular destinations. .
