(CNN) — Buying a family-sized home with three or more bedrooms used to be feasible for young people with children. But with home prices rising faster than wages, mortgage rates still near 23-year highs and a nationwide housing shortage, many millennials with children can’t afford it. What about Gen Z adults and kids? Harder.
Meanwhile, baby boomers are spending more time in larger homes, preferring to age well and stay active in familiar neighborhoods. And even if they do sell, where will they go? There is a lack of small homes in these communities.
As a result, baby boomers with vacant homes own 28% of larger homes, while millennials with children own just 14%, according to an analysis released Tuesday by Redfin. Only 0.3% of Generation Z households own houses with three bedrooms or more.
“Baby boomers love their homes. Even if they want to sell, prices are now prohibitive for many millennials.” Sheharyar Bokhari, senior economist at Redfin said he was responsible for the analysis. “These are larger houses that only have one or two people living in them, and they’re usually bought a while ago, so they’re valuable.”
Research shows this represents a change from the historical norm. Ten years ago, young families were as likely to own a large home as empty nesters.
The report defines the age groups in the 2022 Census data as follows: Generation Z adults are between 19 and 25 years old, Millennials are between 26 and 41 years old, and Generation X is between 42 and 41 years old. Between 57 years old, baby boomers are between 58 and 76 years old.
Although Millennials with children own half as many large homes as Millennials without children, Millennials make up about 28% of the nation’s adult population, the largest share of any generation.
As many young people have put off having children as they work for family and career stability, the established milestone of buying a family home becomes increasingly out of reach.
Lock-in effects due to fees are only half the story
Very few homeowners of any age are willing to sell right now. This has crushed the inventory of homes for sale and kept prices high.
Although current homeowners have record levels of home equity, there is little incentive to sell.
More than 90% of homeowners currently have mortgages with interest rates of 6% or less, according to mortgage data firm ICE Mortgage Technology. The average interest rate on a 30-year fixed loan currently hovers around 6.6%, and almost all but the most recent homeowners will accept a higher mortgage rate than current rates when selling and buying another home.
That’s why some baby boomers stay home, but it’s only part of the story, according to Bockari.
“Half of these baby boomers own their homes outright, so the flat rate doesn’t even apply to them,” he told CNN. “They just haven’t downsized. Even if it’s just one or two people, or a couple, they like their big houses.”
For those who own their home outright, the average monthly cost of homeownership, which includes expenses like insurance and property taxes, is just $612, the report said.
“Logically, empty nesters are the group most likely to sell their larger home and downsize,” Bockari said. “They no longer have children living at home and don’t need as much space. The problem for younger families who wanted their parents’ generation to sell their larger homes is that baby boomers don’t have much incentive to sell, financial or otherwise. .”
Baby boomers have always loved their homes
Today, older Americans own a much larger share of large homes than they did a decade ago, while younger families own a smaller share.
But its owner has changed
Ten years ago in 2012, empty nesters from the “silent generation” (then aged 67 to 84) occupied 16% of homes with three bedrooms or more. That’s a smaller percentage than members of Generation X with children, who at the time were 32 to 47 years old and accounted for 19 percent of these large homes.
But even so, empty-nest boomers have the biggest homes. In 2012, the share of empty-nest baby boomers aged 48 to 66 who owned and occupied 26.4% of U.S. homes with three or more bedrooms was about the same as today.
Millennials own the biggest homes
Young families make up the smallest share of larger homes in coastal areas like California and Florida, where larger homes tend to be more expensive. Conversely, the Midwest is the region with the highest proportion of millennials owning large homes. But in no city do millennials with children own more than 18% of large homes.
Empty nesters own at least 20% of large homes in the country. But they accounted for the smallest share of homes with three or more bedrooms at 21.9% in popular immigrant destinations and California cities such as Riverside, Calif.; Salt Lake City at 22%; and Austin, Texas, at 22.2%.
What else is there in the future?
There is a glimmer of hope for next year: affordability is expected to improve in 2024, Bokhari said.
Mortgage rates are trending downward and are expected to fall further by 2024, which will lower the cost of home ownership for young families.
As mortgage rates fall, more homeowners will find that the gap between their current mortgage rate and the current rate on another home narrows, making a sale more affordable.
But Boccari said potential homebuyers anticipating a “silver tsunami” of older homeowners selling their homes en masse shouldn’t hold their breath.
“As some baby boomers prepare to move into apartments or somewhere new to retire, the mortgage rate lock-in effect is starting to ease,” he said.
But “there won’t be a flood of stocks. There will be a trickle,” he added.