Baby boomers dominate the American housing market. They have real estate with a total value of $ 19 trillion. It's $ 5 trill More than the X generation and twice as much as they have millennials.
In the 1960s and '70s we had a boom for the construction of houses, which caused a large supply of the market. At the age of 30, many boomers or half of them had their own home. Since then, however, a lot has changed. The difference between income and the price of houses has only increased over time. This means that The apartments are less affordable.
On the other hand, millennials entered the market in a difficult period. Many of them graduated in 2008, i.e. at the very peak of the financial crisis. They had long student, work was really difficult, and everything looked different than before.
Purchase of real estate and generational differences
The consequence of this is the fact that millennials had to delay the capture of many large milestones that Baby Boomers reached their age. For example, we are talking about buying the first house.
- 69 percent Baby Boomers had its home at the age of 40
- Only 62 percent millennials had their own home of the same age
Of course, the generation with is not yet 40 years old, but the data show that they are in a better situation, because 30 percent. 25-year-olds have their own home. However, the situation may change soon and it can be a big change, because the Baby Boomers generation is getting old. And when they move to nursing homes, separate apartments for older people or die, there will be many properties on the market. Real estate experts call it Silver Tsunami.
In 2019, Zillow estimated that 25 percent Houses inhabited by their owners can hit the market in the next 20 years. It's 20 million houses.
We can expect that Baby Boomers will start moving out of their homes around 2030, i.e. after reaching the age of 80. So who should use this supply surplus? It will probably be a generation of Z.
Before the 2030, the generation Z will be at the age of 30, which is the best age to buy the first house. Older millennials will be 49 years old. Buying a house at such a late age means that they will still pay back a mortgage in retirement.
However, it is not so black and white because The real estate market is extremely unpredictable.
Silver Tsunami will change the real estate market
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Baby Boomers. Will the Z generation take advantage of their homes?
However, excess houses do not necessarily mean that their prices will fall. There are other factors that we also need to consider.
The first is the fact that The aging process of the generation is slow and gradualwhich can give the demand time to catch up and satisfy the surplus supply. Another option is that Baby Boomers can hand over their homes to their children.
Let's think about the situation in which houses are too low. Such a person may not want to put his home for sale, right? Instead, he can stop it and rent it to get extra money.
Let's also think about the location of the houses. Are they in areas where younger generations will want to live? In what condition are they? Many of them may require renovation, which in itself will be expensive.
The generation with take over the heirloom after boomers
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I talked to an economist dealing with the housing market, who raised the issue I didn't even think about. More and more investors are competing for houses. This means that Demand can catch up with supply and even exceed it. Boomers really shaped the real estate market and can shape it for the last time. This time, however, the beneficiaries may be the Z.
Author: Laila Maidan, Business Insider journalist
