Housing inventory shortages continue to plague the real estate market, and the generation that’s most to blame is Baby Boomers.
In fact, the new Housing Shortage Study from realtor.com shows there are two major reasons for the housing shortage: Boomers’ reluctance to sell and the fact that homes already fit current family needs. As a result, this is keeping a large share of properties off the market, and out of the hands of Millennials, the study respondents report.
The findings are part of an online survey of 1,054 randomly selected, current homeowners across the U.S. conducted on behalf of realtor.com between July 6th and 13th. The respondents were asked a series of questions aimed at examining the root causes of the current national inventory shortage.
The study found that among Millennials, about 59% are not planning to sell their home within the next year, while 35% are planning to sell their home and 6% are unsure. Millennials made up about 60% of total homeowners who plan to sell their home within the next year.
This is good news for the housing market, as they will be selling their starter homes, the most sought-after price point in today’s market. In fact, the number of starter homes is down 17% from last year, compared to the 10% decrease in medium-sized homes and 5% in larger homes.
“The housing shortage forced many first time home buyers to consider smaller homes and condos as a way to literally get their foot in the door,” realtor.com Chief Economist Danielle Hale said. “Our survey data reveals that we may see more of these homes hitting the market in the next year, but whether these owners actually list will depend on whether they can find another home.”
But the number of Baby Boomers ready to sell their home is significantly lower. About 85% of Boomers indicated they are not planning to sell their home in the next year. And this generation holds a much higher stake in the housing market with a 78% homeownership rate, compared to 41% among Millennials.
Therefore, as Baby Boomers decide to stay in their current home, this removes about 33 million properties from the market, most of which are urban condos or suburban single-family homes – the most popular choice among Millennials.
“Boomers indeed hold the key to those homes the market desperately needs, both in the urban condo and the detached suburban home segment,” Hale said. “But with a strong economy and rising home prices, there’s really no reason for established homeowners to sell in the short term.”
“Although down-sizing might be on the minds of boomers, they face the same inventory shortages and price increases plaguing Millennials,” she said.
Older generations aging in place is nothing new to the housing market. What is new, however, is the sudden increase in the population of 55 to 74 years, which increased 30% in the past 30 years from 16% of the total population in 1985 to 21% in 2015.
Why are homeowners choosing to stay in their current home? About 63% answered that their current home meets the needs of their family, the survey shows. Another 16% attributed low interest rates, 15% answered recently purchasing their home and 13% cited the need to make improvements and low property taxes.
“Life events drive real estate transactions,” Hale said. “When the majority of home owners feel their family needs are being met by their current home, there is nothing compelling them to put their home on the market.”
And of course, Baby Boomers were the most likely to say their home is meeting their current family needs at 72%, compared to the share of Millennials who answered the same at 52%.