It\u2019s no secret that baby boomers are vastly wealthier than millennials, but just how much helps explain the state of America\u2019s gerontocratic housing market. While most millennials have now reached the \u201cpeak\u201d homebuying age, their parents\u2019 generation is keeping them from buying the starter homes they\u2019ve long dreamed of. <\/p>\n\n\n\n
Related: Gen-Z Has No Boots: How the Baby Boomers Robbed Three Generations<\/a><\/p>\n\n\n\n The share of millennial homebuyers surpassed boomers from 2014 until last year, when\u00a0boomers shoved their children aside and reclaimed their place<\/a>\u00a0as America\u2019s top homebuying group. The\u00a0Bank of America<\/a>\u00a0Institute, an economic think tank operated by the bank, checked in on the market with its semiannual \u201cHousing Morsel,\u201d and isolated the key reasons why this is happening, along with some surprises about just where millennials and boomers are migrating on their housing searches.<\/p>\n\n\n\n The report looks at domestic migration patterns of BofA customers over the past few years, noting that its real-time estimates population<\/strong> flows give it nearly a year of extra insight over Census Bureau data, particularly with regard to migration trends.<\/p>\n\n\n\n Citing Federal Reserve data, BofA notes the older generation holds eight times the wealth of millennials, $73 trillion compared to around $9 trillion. (Yes, baby boomers have had decades longer to accumulate wealth, but according to the St. Louis Fed<\/a>, millennials own around 84 cents for every $1 owned by baby boomers at the same age.)<\/p>\n\n\n\n While millennials made headway at the start of the pandemic, their elders soon overtook them again once interest rates started rising. Boomers want to downsize for retirement, while millennials simply want starter homes\u2014and only one group has the cash to win out<\/a>.<\/p>\n\n\n\n \u201cIn the current environment of high home prices and interest rates, baby boomers are better equipped financially for home purchasing,\u201d Bank of America\u2019s report reads.<\/p>\n\n\n\n Much of the baby boomer generation\u2019s wealth is already held in housing equity<\/a>, which can be leveraged for new homes closer to family and friends. That\u2019s the upper-hand millennials don\u2019t quite have yet, at least comparatively. While millennials held around $5.5 trillion in real estate assets at the end of 2022, boomers held almost $19 trillion<\/a>. (It can also be pointed out that the boomer desire to be closer to their children and grandchildren is keeping those family members from building their own housing wealth.)<\/p>\n\n\n\n Boomers are also living longer, a positive development for humanity, but also a development that means less housing for other generations, given the U.S.\u2019s supply shortage. Meanwhile, millennials have entered<\/a> \u201cone of the most competitive, expensive, and unforgiving housing markets of recent times.\u201d Even the wealthiest of that cohort are striking out<\/a>, finding the American Dream increasingly unattainable<\/a>.<\/p>\n\n\n\n To be sure, another likely reason boomers have pulled ahead of their children is because, being wealthier and having more cash on hand, they\u2019re likely less rate-sensitive, so the surge in mortgage rates from below 3% to at or above the 7% level hasn\u2019t deterred their homebuying charge nearly as much.<\/p>\n\n\n\n In the near term, Bank of America expects millennials to largely remain on the sidelines\u2014the current inventory in the market is far too expensive for many to afford. But, the bank is optimistic that this trend won\u2019t last forever. Housing demand will likely rebound for young millennials, those younger than 35, in the years to come.<\/p>\n\n\n\n Pandemic-induced domestic migration patterns are persisting into 2023, BofA also found. Both boomers and millennials are leaving large, expensive cities like Boston, New York, San Jose, and San Francisco (although the pace they are leaving New York and San Francisco is slowing compared to the early years of the pandemic). What\u2019s interesting is they are largely moving to different places.<\/p>\n\n\n\n Millennials are moving to cities like Austin, Cleveland, Dallas, and Tampa. Boomers, meanwhile, are headed to Las Vegas, Phoenix, Orlando, and Tampa.<\/p>\n\n\n\n Charlotte, Houston, and Philadelphia are also popular destinations, while Chicago, Detroit, and Washington D.C. have continued to see people leave.<\/p>\n\n\n\n While large inflows usually mean rising home prices, that\u2019s not the case anymore in some of these cities. Prices rose so much in 2020 and 2021 in cities like Austin, according to BoA, that they might have finally reached a tipping point. With interest rates also on the rise, no one can afford to pay even more.<\/p>\n\n\n\n \u201cAs Fed rate hikes pushed up borrowing costs for these homes, demand dampened despite continued population growth in these popular cities, which has led to a correction in home price appreciation,\u201d the report reads.<\/p>\n\n\n\nWhy your parents\u2019 friends are outbidding you for your starter house<\/h2>\n\n\n\n
Boomers and millennials aren\u2019t moving to the same places<\/h2>\n\n\n\n