‘Silver tsunami’ from downsizing baby boomers is headed for housing market, analyst says
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The U.S. housing market could have a major shift on its horizon thanks to a phenomenon that could put tens of millions of homes on the market over the next couple of years.
Meredith Whitney, an analyst who called the 2008 financial crisis, described what will happen when baby boomers age out of their homes and start downsizing a “silver tsunami.”
“You’ll see a supply-demand dynamic shift,” Whitney, founder and CEO of Whitney Advisory Group, told Yahoo Finance’s Invest Conference on Tuesday.
Citing AARP estimates, Whitney said 51% of people over the age of 50 are set to downsize to smaller homes, a shift she predicts will begin late 2024 and into 2025 and persist for decades to come. That could bring more than 30 million housing units back on the market, Yahoo Finance reported.
Even though today’s high mortgage rates of 7% to 8% have been weighing on buyer demand, Whitney doesn’t expect rates will impact the wave of baby boomers selling their homes.
“I think it’s rate agnostic because older people have lower mortgages, if any mortgage at all,” she said.
Whitney also predicted U.S. home prices will start to come down as the supply of homes for sale goes up because of this “silver tsunami,” warning there could be risk if not enough younger buyers are able to absorb the homes freed up by baby boomers.
However, while that might sound like good news for millennials and Generation Z on the surface, other economists argue that younger generations could run into other problems.
Because the shift will take place over the next 10 years, millennials (many of whom are now of home-buying age), will likely miss out on that “silver tsunami,” Mark Fleming, chief economist at First American, recently told MarketWatch.
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Plus, there could be another complication. Even though baby boomers will downsize, not all will end up in retirement communities. Many could move into smaller homes, meaning they could snap up more affordable starter homes that younger generations would otherwise buy, Fortune reported.
“That could continue to push millennials and Gen Zers out of the housing market and further drive up starter home prices,” Fortune reported. “In the end, the ones with the most cash — likely the boomers — will win out.”
Older generations hold the vast majority of housing wealth in the U.S. The value of homes owned by baby boomers was roughly $18 trillion as of the first quarter of 2023, according to a Redfin report issued in August. In contrast, Generation X held about $13.4 trillion while millennials held about $5 trillion.
“There’s a big overlap between select baby boomers and select millennials,” Ali Wolf, chief economist at Zonda, told Fortune. “The key difference here is that the baby boomer will likely be able to tap home equity by selling their existing home, allowing them to perhaps make a more compelling offer on the home compared to the millennials, especially if the latter group are still renting.”
Meanwhile, millennials and Generation Z have had a more difficult time making their way into home ownership than previous generations as incomes have not kept pace with home price increases.
They’re taking longer than older generations to move out. About 20% of millennials and 68% of Generation Z still live with other family members compared to 18% of baby boomers and 17% of Generation X that were living with their parents at the same age as today’s average millennial, according to a recent RentCafe report.
“Younger generations may find it more appealing to continue living in the parental home in order to save money on expenses, such as child care costs, utility bills, rent or a future down payment,” the RentCafe report states. “On the other hand, it’s also likely that more and more millennials and zoomers might choose to remain home to care for family members.”
