Demographic changes are among the most significant factors affecting the real estate market, especially considering they can influence everything from supply and demand to housing values.
Such shifts can be triggered by various different factors, including population growth, age distribution, household composition, and income levels. The 2023 Profile of Home Buyers and Sellers from the National Association of Realtors® shows that the current real estate market is boomer driven. For instance, the average seller is sixty years old, and repeat buyer fifty-eight years old. Indeed, they are creating a unique dynamic in the landscape in a number of different ways—and will likely continue doing so for years to come.
Downsizing trends
As baby boomers enter retirement, many are opting to downsize from their larger family homes to more compact living. For some, the goal is simply to find something that’s maintenance free and easier to manage, while others are choosing to age in place but require a property that will support their needs. Either way, this trend is increasing the demand for smaller homes, particularly single-level homes, condominiums, and town houses.
What’s more, Yahoo Finance reports that this downsizing trend is expected to cause a “silver tsunami” beginning late 2024 into 2025, potentially bringing an additional 30 million units to the housing market. This is because more than 50 percent of boomers (representing 70 percent of homeownership) will likely downsize to make adjustments to their living situations. And experts anticipate this trajectory to persist for several decades.
Financial implications
In 2022, baby boomers accounted for 39 percent of the homebuying market, marking a 10 percent increase from the previous year. Having minimal to no mortgage payments, they have more buying power and are less likely to be impacted by higher interest rates, enabling them to make larger down payments or even purchase homes with cash—half of older boomers (1946-1954) and one-third of younger boomers (1955-1964) are cash buyers. This gives them a competitive edge over millennials and Gen Xers who have not yet accumulated similar home equity, making it easier for them to outbid their younger counterparts. That said, the silver tsunami is poised to cause an increase in inventory and a decline in home prices, assisting first-time homebuyers in attaining homeownership.
Life-changing events
Major life changes often trigger the need to sell or buy. For boomers, these may include health issues, the death of a spouse, or financial concerns. As mentioned earlier, retirement is perhaps the biggest factor with this generation at the moment, with more and more entering this phase and choosing to downsize.
Multigenerational households
While some baby boomers choose to live independently, others prefer to live with family members, forming multigenerational households. In fact, since COVID-19, there has been an uptick in this household structure as the older population begins to sell their homes and move in with their adult children to receive the support they need and want. This trend has increased demand for larger homes accommodating extended families.
As the baby boomer generation ages, they will naturally transition out of homeownership, creating opportunities for younger individuals to enter the real estate market. Whether you’re aiming to purchase your first home or explore other real estate endeavors, seek guidance from a knowledgeable real estate agent to help kick-start your journey.
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