Baby Boomers are Making it Hard for First-Time Homebuyers to Grab a Home
For years there was a predictable course of homeownership. First-time homebuyers would enter the market by purchasing a “starter home” at around 29 years of age. After two to three years these homeowners would purchase their “forever home.” At retirement age, homebuyers traditionally downsized their homes for something smaller and more manageable. This traditional course of homeownership kept home buying trends predictable: as one generation moved out, the next generation moved in.
Now, both Boomers and Millennials are bucking the trends and changing the traditional course of homeownership. As a result, these two generations are in direct competition with one another for the same homes.
According to a Merrill Lynch and Age Wave retirement study, not only are Boomers not downsizing, many are upsizing. The study showed that 49% of retirees moved to a comparable home in their last move, and 30% moved into larger homes.
Hefty savings and the ability to “age in place” are keeping Boomers in larger homes longer. Danielle Hale, Chief Economist for realtor.com® says, “In a real estate market that is tipped in the favor of sellers, boomers and older homeowners are really the ones holding the cards.” These financially secure homeowners are “generally better equipped to deal with market conditions,” she added.
Many Boomers are taking advantage of the seller’s market and using the profits from their existing home sale to buy a similar sized or larger home near their family. Living close to relatives allows aging seniors to maintain their independence while gaining the peace of mind that help is near should it be needed. These factors are at least partly responsible for Baby Boomers representing the largest segment of sellers at 43% according to realtor.com®.
Also bucking home buying trends are Millennials. This group represents the largest segment of home buyers, according to the National Association of REALTORS® (NAR). These buyers are not only entering the homebuying market later than their predecessors, many are skipping the “starter home” and opting to make their first home their “forever home.”
This trend is due in part to rising home costs. A Student Loan Hero study showed that Millennials will pay 39% more than Boomers did for their first homes in the 1980s. In order to save for a sizable down payment, these homebuyers are waiting longer to enter the home owning game. And when they are ready to buy, they’re looking for larger homes with more bedrooms and outdoor space.
The shifting needs of Boomers and Millennials is putting them in direct competition with one another in terms of price point, size, and amenities. What differentiates these groups however is their buying strategy.
Baby boomers are typically relying on their cash reserves to make their offers more financially appealing to sellers. However, tech savvy Millennials are finding and scooping up homes quicker than their Baby Boomer competitors.
The key to winning in the home buying game for both Boomers and Millennials is to have a firm understanding of the market you’re buying in and to work with an experienced REALTOR® who knows specifically who you’re up against and how best to position your offer so you come out on top.