Millennials face challenges in a costly housing market, losing advantage in property acquisition. A National Association of Realtors webinar chart depicts millennials yielding ground to baby boomers.
Leading home buying in the past decade, millennials now cede ground to baby boomers, as shown in a chart. According to the National Association of Realtors ‘ chart, baby boomers have gained momentum in the housing market, surpassing millennials.
Baby boomers now lead the housing market, taking over from millennials who held the position for a decade. Between July 2021 and June 2022, boomers became the largest homebuyer group, unexpected but prominent.
Why Millennials Face Housing Difficulties
Millennials face housing difficulties due to student debt, competition, and elders, which results in delaying home buying. Generation size and age push more millennials into homeownership, overcoming the challenges.
According to recent National Association of Realtors data, boomers secured 39% of home purchases, up from 29%. During the same time frame, millennials’ market share dropped to 28%, contrasting with the previous year’s 43%.
The housing market hierarchy shifted as baby boomers gained dominance in home purchases, surprising the market. Boomers’ share of homes bought increased to 39% in July 2021 – June 2022, compared to 29% earlier.
Factors Behind Elders Outshining Youngers
Despite millennials having an advantage in numbers, various factors enabled boomers to outshine them. When facing competitive bidding, offering a lump sum becomes advantageous, particularly in a cash form. Cash transactions stood out as the key factor allowing boomers to surpass their successors.
For years, millennials faced economic challenges, hindered by the Great Recession’s impact on early careers. Compared to previous generations, they had lower odds of out-earning parents due to the recession’s aftermath. Builders didn’t meet the rising demand from young buyers due to inadequate home production after the recession.
Growth Factors of Millennials in 2019
Between 2010 and 2019, only around 21,000 single-family homes were started per million people annually. This number was just half the construction during the three decades preceding the mentioned years. Millennial economic struggles stemmed from recession effects and insufficient home construction during these years.
In 2019, millennials improved their position as the recession’s impact waned, benefiting from a robust job market. With growing savings and a population of 72.1 million, millennials became the largest generation, surpassing boomers.
Despite postponing life milestones and having less wealth, millennials increased their home purchases significantly. The recession’s effects diminished, enabling millennials to strengthen their economic standing and homeownership rates. Despite challenges, better economic conditions and a larger population empowered millennials to lead in home buying.
Robust Housing History of Boomers
Boomers benefited from an era of robust housing construction, unlike millennials. In the 1960s and 1970s, homebuilders initiated around 50,000 housing starts annually per million people. The rate was more than double that of the 2010s, states the National Association of Home Builders.
This construction surge elevated homeownership; over 50% of boomers owned homes by age 30. In contrast, Gen Xers and millennials had 48% and 42% ownership rates, respectively.
Boomers maintained their home buying activity longer, diverging from their predecessors who stayed in one home. The portion of recent buyers aged 60 and above increased by 47% from 2009 to 2019.
According to Zillow’s study, millennials contend with heightened competition from parents and grandparents’ generations.
Increasing Cash Transactions since 2021 Helps Boomers
During the pandemic, boomers used economic advantages to reenter the market more actively than before. Cash transactions have increased since early 2021; around one-third paid all cash in October.
This marked the highest cash payment share since 2014, as reported by Redfin. Boomer’s economic strengths enabled them to make a strong return in the housing market during the pandemic.
The Difference in Approach to Home Buying
Millennials aim to ascend the housing-wealth ladder, while boomers prioritize slowing down through recent home purchases.
According to NAR, boomers aged 58 to 76 seek smaller homes and proximity to loved ones post-retirement. With a focus on settling down, it’s uncertain whether boomers’ dominance will persist or waver. Whether recent boomers’ moves reflect an anomaly or a lasting trend remains unclear.
Lautz refrained from forecasting the sustainability of the comeback when questioned about it. The sustainability of boomers’ resurgence in the market remains uncertain, noted Lautz.
The intent behind boomers’ recent moves could determine if their lead endures or is short-lived.
How do all of these reflect?
Despite possible price drops, home costs will likely stay considerably higher post-pandemic than before. Boomers want to avoid nursing homes like their predecessors, ensuring an active housing market role.
In a “haves” vs. “have nots” market, homeowners with equity will remain an advantage. The advantage of equity-rich homeowners over first-time buyers is expected to persist.
Millennials understand time is on their side, as boomers will eventually exit the market. However, waiting may not be optimal, given signs of Gen Z’s upcoming presence in the market.