- Boomers and millennials are vying for homes, according to a new Zillow report. Boomers wins.
- Boomers have more money to win bidding wars as they benefit from an appreciative market.
- Buying a home has been tough enough for millennia, struggling with sky-high prices and a shortage of starter homes.
Baby boomers and millennia are in a housing war.
It is boomers who are winning, according to a Zillow report released this week. It found out that so many boomers are active in the housing market that it has become harder for millennia to buy a home.
As seen in the chart below, Americans 60 and older have been more active in the housing market over the past decade than people in the same age group 10 years earlier. The share of home buyers in this cohort grew by 47% from 2009 to 2019. Meanwhile, the share of younger buyers aged 18 to 39 in the last decade has shrunk by 13% in the same time frame.
All of this is happening as millennials, now America’s largest generation, are aging into their highest year of house purchase. This is largely due to the fact that boomers benefit from an appreciative housing market. U.S. housing values had already risen 31.2% from 2009 to 2019, according to Zillow, and the pandemic’s hot demand for housing only increased the values further.
The desire for more space in an era of telework triggered a housing boom that quickly turned into a historic stock crisis. Housing prices shot up, reaching a record high of $ 386,888 in June, and competition rallied. Bid wars, offers with all cash and higher payouts became the norm for a housing frenzy.
The most likely to win victoriously are longtime homeowners. As the Zillow report shows, their equity gains give them the opportunity to offer a cash offer over younger buyers, one of the most important strategies for winning a bidding war.
“Whether you cut back or move to a new city, it means baby boomers are more active, competition that previous generations did not have when they bought their first home,” said Jeff Tucker, senior economist at Zillow in a statement. “And older buyers have the benefit of a lifetime of savings and equity to take advantage of a competitive offer.”
Millennials are dealing with their second housing crisis
Buying a home right now is already challenging enough, especially for millennia that have been boxed out of the housing market for a host of other reasons.
Pre-pandemics struggled aspiring millennial homebuyers struggled to save for payouts as they dealt with the economic downturn in the Great
, staggering student loan debt and rising cost of living. In 2020, many finally had enough savings to take on home ownership as interest rates fell to historic lows. But the declining inventory and the hefty prices that followed created new challenges at affordable prices, and they were left with their second housing crisis in a dozen years.
The pandemic and a substructure of housing since the Great Recession are partly to blame. There have been 20 times fewer homes built in the last decade than in any decade as far back as the 1960s, Daryl Fairweather, chief economist at Redfin, told Insider back in April. She added that there were not enough homes that millennials, who are the largest generation, could buy.
The biggest victims of this shortage are the homes that millennials can most afford: the starter home. It was already dying out before the pandemic, only to see supply decline even more in the last 18 months. While the housing market has since begun to cool and contractors have begun to build more homes, these homes are at the higher end of the market, NARs director of housing and commercial research, Gay Cororaton, told Insider.
Even boomers who are not shopping for a new home are exacerbating the housing shortage. Instead of selling their homes to move into nursing homes or with their families, as previous older generations have done, many age “in place.”
With so few homes on the market and often outbid by those that are, millennials have had to get creative to make their homeowner dreams come true and resort to more affordable options like moving out to the suburbs, buying fixer-overers or create their own municipality.
As the Cororaton said earlier this year, homeownership is becoming “more difficult for millennia”. Boomers only make the problem worse.