Baby boomers are expected to flood the market with 21 million houses and a lowering-income median could mean millennials unable to afford home purchases. | Source: AP Photo/David Zalubowski, File
  • Baby boomers own half of all American homes. As they reach old age, they’ll sell up and unleash 21 million houses on an already frothy market.
  • Millennials and Gen X can’t afford to buy the flood of homes on the market, potentially triggering a national housing crisis.
  • Signs of an imminent US housing bubble are already flashing red as price/income ratio hits record highs.

Baby boomers rode the housing bubble all the way to top. And now they’re about to pop it.

A whopping 50% of all homes in America are owned by the over 55s. But what happens when they retire and downsize? What happens when they move to community homes or unfortunately pass away?

The answer is worrying. There could be an epic crisis in the housing market.

“A wave of homes for sale, hitting the housing market. A scale we haven’t seen since the housing bubble in the mid-2000s… This is homes being sold by baby boomers like myself and there’s no-one there to buy them” – Fox News.

Boomers will sell an estimated 21 million homes in the next two decades (a quarter of the total US housing market).

The problem is, Gen X and millennials can’t afford to buy them.

Millennials can’t afford to buy boomer homes

A New American report revealed that millennials earn 20% less than boomers at the same stage of their life. Wage stagnation, decline in company benefits, and a rise in contract work means millennials can’t afford the same homes their parents could.

millennials housing downpayment
Half of renting millennials have zero savings to put towards a home downpayment. Source: Apartment List

According to Apartment List, one in five millennial renters now think they’ll be renting forever. That figure rises to one in four in Californian cities.

As real wages stagnate, house prices are running away. The average price-to-income ratio in 2017 hit 4.2 (in California it’s as high as 8). Back in 1980 it was just 3.2.

house prices to income ratio 1980
Home price-to-income ratio in 1980 was an average 3.2. Source: Joint Center for Housing Studies, Harvard University
home prices housing bubble 2017
By 2017, the home price-to-income ratio has increased to 4.2. Source: Joint Center for Housing Studies, Harvard University

Unable to scrounge a downpayment, millennials are doomed to become “Generation Rent.”

A survey analysis from Apartment List reads:

We estimate that at current savings rates, only 25% of millennial renters will be able to afford a 10% down payment on a median-priced home in the next 5 years.

Gen X can’t save the housing bubble either

But what about Gen X? Can they fill the gap and buy up all the boomer homes? Not likely. Gen X took a major hit from the 2008 recession and now struggle with many of the same money issues as millennials.

“I wish GenX and older millennials were given more space to talk about the impact of the recession on our lives. Wiped out savings, career paths diverted, homeownership delayed, debt everywhere we turn, the feeling of being perpetually behind what your parents accomplished” – Writer Austin Channing Brown.

Many in their 40s report struggling to get by and stuck in a cycle of renting.

“Mid 40’s, renting a house, buried in student dept for a degree that has done me no good at all, barely getting by. We have more in common with younger millennials than we do with boomers” – Gen Xer, Gwen Gilpin.

Is the housing crisis already here?

All of this may seem like a decade away from playing out, but some believe the housing crisis is much more prescient. According to the US Commerce Department, sales of new and existing homes slumped in September 2019, down 8.8% year-over-year.

Fannie Mae also hinted at a potential slump in its latest report. Homebuyer sentiment declined 2.7% in October with a net share of 21% of Americans say that now is a good time to buy a house. All this despite mortgage rates at record lows, giving a small boost to affordability.

With strong whispers of US recession around the corner, the appeal of big-ticket purchases like houses has already started to fall.

This article was edited by Samburaj Das.

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