The Growing Trend of Baby Boomers Retaining Homes Stifles Market Inventory

A recent report reveals that Americans are staying in their homes twice as long as they did 20 years ago, particularly within the older generations who show less inclination to sell and relocate. The typical U.S. homeowner now spends almost 12 years in their home, an increase from the 6½ years noted two decades back as per observed by real estate firm Redfin. Despite a slight decrease from the 2020 peak of almost 14 years, the motivations that once sparked homeowners to relocate have since dwindled.

This trend, markedly prevalent among baby boomers, is causing a slump in home sales which hit a 30-year low last year according to the National Association of Realtors, due to homeowners being tied down by lower mortgage rates. A majority of boomers are entering retirement with elevated rates and home prices, causing this lock-in effect which appears widespread across a vast majority of regions, with the exception of a few affordable metro areas where home ownership changes hands after an approximate seven years.

A significant number of baby boomers have inhabited their homes for decades with intentions of this continuing. Stats show that almost 40% of individuals born between 1946-1964 have housed within their properties for a minimum of 20 years. This, coupled with prolonged homeowner tenure, is posing barriers to younger, first-time buyers attempting to penetrate the market. Additionally, empty-nester boomers own twice as many large homes as millennials, causing an imbalance that results in a scarcity of affordable inventory for younger generations.

The majority of baby boomers have a strong grip on their homes, with Redfin reporting that around 80% of boomers owning their homes, in comparison to 72% Gen X and 55% of Millennials. This ownership gap has led to many millennials either renting or living with their parents.

Boomers show little motivation to part with their homes, largely due to financial advantage. Over half of the boomers who own homes have no mortgage, meaning they possess their property outright. The median monthly cost of home ownership, including property insurance and taxes, was $612 in January 2024. Moreover, a majority of the boomer homeowners who do have mortgages owe small amounts at low interest rates. Hence, factors such as fixed income alongside tightened lending standards have boomers choosing to age in place.

A significant determinant of high homeownership tenure rates is the West Coast with Los Angeles claiming the top spot for an average stay of almost 19 years. Conversely, affordable cities mainly in the South, have the highest turnovers, with Louisville, Ky., marking the shortest holding period of slightly over seven years.

Increased retention of homes has raised home prices to an all-time high in January, reaching $379,100 according to the NAR. With this surge in price, it surpasses the wage growth thereby not only affecting the affordability for first-time buyers but also the potential for repeated purchases. Thus, shedding light on the enduring housing affordability crisis, this recent rise in homeowner tenure rates is expected to either remain steady or increase slightly.