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Look Less at Millennials and More at Boomers

It's true that first time home buyers have always been a group with major housing market influence. However, recent reports from Freddie Mac's economists tell us that we should be paying more attention to the over 55 age group, primarily the Baby Boomer generation.
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There is plenty of press about why the millennial generation isn't buying homes like in the past. It's true that first time home buyers have always been a group with major housing market influence. However, recent reports from Freddie Mac's economists tell us that we should be paying more attention to the over 55 age group, primarily the Baby Boomer generation.

Why is this older generation stated to be, in some ways, controlling the evolution of the housing market for the next dozen years or so? It's in large part due to the equity this generation holds in their homes. Two statistics give us the big picture:

Age Group Population Equity in Homes
Under age 55 233 million $ 4 Trillion
Age 55 and older 86 million $ 8 Trillion

While the older generation only comprises a little over a third of the population, this group holds double the equity in homes. Freddie Mac also makes the point that they're not excited on the whole with the thought of selling their homes. This is a major chunk of inventory.

An Urban Institute reports states that households over the age of 55 will account for more than half of the growth in households in the decade from 2010 through 2020. We've also been reading a lot about the younger generation staying at home with the parents longer. Between the economy and student debt, they are not excited about buying a home. As long as they are living with parents, selling and downsizing isn't in the plan.

This age group holds such a large portion of all home equity because a great many of them owe nothing on their homes, no mortgage debt. All of the home value is equity, running up the numbers considerably. Only 19% of those under 55 own their homes mortgage-free. On the other side, the over 55 age group has 52% enjoying mortgage-free home ownership.

The over 55 age group isn't rushing to list their homes for sale, in no small part because they aren't seeing good alternatives in senior housing. They are reluctant to move their assets into other housing that isn't alluring or doesn't show significant benefits for their lifestyle.

Controlling this huge chunk of not only housing inventory but also wealth, this older group will influence the housing market significantly, but the question is how? They may continue to sit on their wealth and in their homes. However, if new senior housing initiatives appeal to their idea of what retirement should look like, then it could be a very different story.

What if they do sell and some of that equity is used to help their children in purchasing their own homes? This could spur a major uptick in markets around the country. Home prices could start rising more due to demand than to the lack of adequate supply that's fueling prices right now.