(CNN) — Buying a family-sized home with three or more bedrooms used to be possible 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 Generation Z adults with children? even harder.
Meanwhile, Baby Boomers are staying in their larger homes longer, preferring to stay in their old place and stay active in familiar neighborhoods. And even if they sell, where will they go? There is a shortage of small houses in those neighborhoods.
As a result, Baby Boomers with half-empty homes own 28% of the largest homes, and Millennials with children own only 14%, according to a Redfin analysis released Tuesday. Generation Z households own only 0.3% of homes with three or more bedrooms.
“Boomers love their homes. Even if they wanted to sell, it is now prohibitively expensive for many Millennials,” Redfin senior economist Shahryar Bukhari, who conducted the analysis, told CNN. “These are larger homes where only one or two people live and they’ve usually bought them a while ago, so they have value.”
According to research, this represents a change from the historical norm. Ten years ago, young families were just as likely to own larger homes.
The report defines the age groups in the 2022 census data as: Generation Z adults between 19 and 25 years old, Millennials between 26 and 41, Generation Were in the middle.
Although Millennials with children have households half as large as those without children, Millennials represent about 28% of the country’s adult population, the largest share of any generation.
With many young people already delaying having children while they work to achieve stability in their families and careers, the well-established milestone of purchasing a family home is increasingly out of reach.
The lock-in effect due to fees is only half the story
Some homeowners of any age want to sell right now. This is destroying the inventory of homes for sale and keeping prices high.
Even though current homeowners have record levels of equity in their homes, there is little incentive to sell.
According to ICE Mortgage Technology, a mortgage data company, more than 90% of current homeowners have mortgages with rates at 6% or less. With the current average rate for a 30-year fixed loan hovering around 6.6%, almost everyone except recent home owners would accept a mortgage rate higher than their current rate if they were to sell and buy another home.
According to Bukhari, this is what keeps some Baby Boomers in their homes, but that’s only part of the reason.
“Half of these baby boomers own their homes, so the flat rate doesn’t apply to them,” he told CNN. “They’re not downsizing. Even if it’s just one or two people, or a couple, they love their big house.”
For those who own their home, the average monthly cost of home ownership, which includes insurance and property taxes, among other costs, is just $612, according to the report.
“Logically, empty nesters are the group most likely to sell larger homes and downsize,” Bukhari said. “Now their children don’t live at home and they don’t need as much space. The problem for young families is that their parents’ generation is putting their larger homes up for sale, as Boomers don’t have much motivation to sell, financial or otherwise.
Boomers have always loved their home
Today, older Americans own a much larger share of larger households than they did a decade ago, and younger families own a smaller share.
but its owners have changed
Ten years ago, in 2012, empty nesters of the Silent Generation, aged 67 to 84 at the time, occupied 16% of homes with three or more bedrooms. This generation of children
But empty nest baby boomers still owned the largest homes. In 2012, empty nest boomers, ages 48 to 66, owned and occupied 26.4% of homes with more than three bedrooms in the United States, about the same proportion as today.
Millennials have the biggest homes
The lowest proportion of young families in large homes are in coastal areas such as California and Florida, where larger homes are more expensive. Instead, the Midwest is where Millennials have the highest proportion of large homes. But there is no city where Millennials with children own more than 18% of the largest homes.
At least 20% of large homes across the country are owner-occupied vacant properties. But popular immigration destinations as well as California cities like Riverside, California have the smallest proportion of homes with more than three bedrooms, at 21.9%; Salt Lake City with 22%; and Austin, Texas, with 22.2%.
What’s in store for the future?
There is a slight ray of hope for next year: affordability is expected to improve somewhat in 2024, Bukhari said.
Mortgage rates have been trending downward and are expected to decline further as 2024 progresses. This will reduce the cost of home ownership for young families.
As mortgage rates fall, more homeowners will see the gap between their current mortgage rate and the current rates on another home narrow, making a sale more attractive.
But Bukhari says potential home buyers shouldn’t hold their breath expecting a “silver tsunami” of elderly homeowners selling their homes en masse.
“Some boomers are ready to move into a condo or move somewhere new to retire, and the mortgage rate lock-in effect is starting to wane,” he said.
But “there will not be a flood of inventory. “There will be a mess,” he said.