Any first-time homebuyer who has tried to purchase a home over the past few years with no luck is not shocked at the reasons: high home prices, high-interest rates and costly mortgages, low starter-home inventories, and frustrating bidding wars.

What may be surprising to them is just how much of a role that Baby Boomer parents and grandparents play in the current housing market.

An interesting Wall Street Journal feature entitled “Baby Boomers Bought Up the Big Homes. Now They’re Not Budging” explains part of the reason that home inventories, especially for mid-sized and large homes, are making it difficult for Millennials to move in or move up. 

In short, Baby Boomers bought big homes (of three bedrooms or more) to raise families decades ago. Although their children are grown and gone and they might normally trade down to something smaller or move into a community, many Baby Boomers have reasons to stay put. They have paid off their mortgages (or carry low balances with low-interest rates). They like the communities they live in, and many of their Baby Boomer neighbors have stayed put too. They are deterred by the high interest rates when purchasing new homes. 

Far more Baby Boomers and far fewer Millennials reside in large homes than previous generations. The Journal explains:

About 28% of all U.S. homes with three or more bedrooms are owned by people between the ages of 60 and 78 living by themselves or with another adult, according to a Redfin analysis of 2022 census data. Millennials living with children own just 14% of these bigger homes. A recent Fannie Mae survey found that most Americans 60 and older don’t intend to ever move. 

Just a decade earlier, empty-nesters in the silent generation, who at the time were about 67 to 84, owned 16% of homes with three or more bedrooms. Meanwhile, members of Generation X with kids, who were 32 to 47, owned 19% of those large homes, Redfin found. 

Baby Boomers are not just sitting in big houses but on piles of cash. Their home values have ballooned, allowing them to amass significant wealth. Boomers own half of all of the $32 trillion in home equity in the U.S., according to a Redfin analysis of Federal Reserve data.

Enthusiasm for buying a new home is waning as homebuyers feel the prospects of actually closing the deal are glum. Less than one-quarter (23%) of Americans who started last year intending to buy a home did so by year’s end.

Young generations increasingly see their dreams of owning a slice of America slip away. Perhaps, the pessimism so prevalent among Americans about the U.S. economy is driven by the loss of hope among younger generations that they will never achieve what their parents and grandparents once had.

How Policy Plays a Role

Even though Baby Boomers occupy large homes, they are not the culprits for the housing crunch. The decline in new home construction since the Great Recession has led to fewer homes, especially at the lower end of the housing market.

Expanding housing supply—whether new single-family homes, multi-units, or additional dwelling units (ADUs)—is the solution. That begins with relaxing the restrictive regulatory environments that outlaw or create costly and time-consuming hurdles to construction. As we’ve written, states and cities are exploring ways to expand ADUs as a solution to the housing affordability crisis.

The National Realtors Association’s Common Ground publication, called for regulatory changes to address burgeoning housing shortages in the fall of 2021:

The need for action, though previously glaring, has become blindingly clear since the pandemic exacerbated underlying trends: Housing prices, already astronomical, ballooned with shrinking inventory, shutting millions of young families and others out of homeownership. Fully half of renting American households are “cost burdened” where housing is concerned, meaning they are shelling out a share of their income that makes them economically vulnerable.

Their policy ideas are even more relevant now that the housing market is still thawing from the Federal Reserve’s anti-inflation campaign, which raised interest rates significantly. But let’s not forget that massive reckless federal spending especially in 2021 touched off high inflation, and we are all still paying the price.