What's New
Three quarters of American baby boomers are likely to leave much of their $17 trillion in home equity to their children sparking a "silver tsunami," new research from Freddie Mac has found.
Why It Matters
Data collected by the Federal Reserve shows that since 2000, baby boomers—those born between 1946 and 1964—have also enjoyed the largest share of real estate when measured by generation, a trend that has broadened since the 2008 financial crash and the passing away of the Silent Generation.
This share continued to expand during the COVID-19 pandemic and its aftermath, with the younger Generation X and millennial generations also widening their share of America's housing market.
What To Know
Government sponsored lender Freddie Mac has found that three quarters—75 percent—of baby boomer homeowners plan to leave their current home or the proceeds from the sale of their home to their children or family members when they pass on.
The research also found that 68 percent of baby boomers are planning to "age in place"—meaning they will not be seeking new homes to live out their retirement years. Another recent study conducted by Redfin in April 2024 found 78 percent of all baby boomers plan to stay in their current home for retirement.
While their children—Gen X and millennials—have not quite amassed the same share of real estate in their lives so far, they are likely to benefit from a "silver tsunami," Freddie Mac said in its new report, which is largely down to skyrocketing value of real estate in recent years.
According to the Federal Reserve Bank of St. Louis, the median sales price of a home has almost doubled since the first quarter of 2004, when a home would set you back an average of $212,700. These days, the median is $420,000.
The chances of this mass real estate inheritance shift happening is further improved by the high proportion of baby boomers saying they will look to other equity sources outside of their homes to fund their retirements, such as cashing in on savings, Social Security benefits, retirement and investment accounts, as well as pensions. Only 9 percent of baby boomer homeowners said they plan to use their home equity or a reverse mortgage to see them through their post-working years.
What People Are Saying
Sonu Mittal, SVP and head of single-family acquisitions at Freddie Mac, said in a statement: "Clearly the Baby Boomer generation has benefited from our country's unique housing finance system, and it is imperative that we ensure this system remains in place to help Boomers and the many generations that follow."
In the short term, some experts have said boomers holding onto their family homes is leading to a shortage of suitable housing for purchase for younger generations.
New York City real estate broker Alexandra Gupta told Newsweek: "Baby boomers are increasingly choosing to 'age in place,' meaning they remain in their homes longer instead of selling to downsize or relocate. This trend is contributing directly to the housing shortage, as millions of homes that would otherwise be available to younger buyers remain occupied."
Redfin chief economist Daryl Fairweather said in a statement: "The government isn't prioritizing building housing for seniors, which is further encouraging older Americans to stay put, exacerbating the inventory shortage. Politicians should focus on expanding housing stock that meets the needs of older Americans, which could help with housing affordability and availability for all."
What's Next
Such an enormous transfer of wealth will likely reshape the finances of younger generations, and the $17 trillion trove is only likely to grow as baby boomers age. The youngest boomers are currently 60 years old, meaning there is plenty of time for house values to appreciate further before younger generations inherit.
English (US) ·