Jan 184 min read

Empty Nesters Are Dominating the Large Homes Market: An In-Depth Analysis

Empty nesters, predominantly from the baby boomer generation, are significantly leading the pack when it comes to owning large homes in the United States. This ownership trend is not only reshaping the real estate landscape but also influencing the housing decisions of younger generations like millennials and Gen Zers. Let's dive deep into this intriguing housing trend.

The Ownership Divide: A Snapshot

Based on the latest U.S. Census data analysis, it's revealed that empty nesters — defined as households headed by baby boomers with one or two adults living in the home — own nearly 28.2% of the country's large homes (homes with three or more bedrooms). In comparison, millennials with children own just 14.2% of such homes. The disparity is even more pronounced for Gen Zers with kids, who own a minuscule 0.3% of these homes.

Interestingly, despite millennials making up the largest share of the country's adult population (28%), they lag behind empty nesters in owning large homes. The reasons are multifaceted, ranging from financial constraints to changing lifestyle preferences.

Why Do Empty Nesters Own More Large Homes?

Several factors contribute to the outsized share of large homes owned by empty nesters. Let's explore them one by one.

Financial Incentives

For most empty nesters, there's little financial motivation to sell their large homes. About 54% of baby boomers who own homes have no outstanding mortgage. The median monthly cost of owning a home, including insurance and property taxes, is merely $612 for this group. And for those boomers who do have a mortgage, the interest rate is considerably lower than the current market rate.

Affordability Challenges for Younger Generations

On the other hand, millennials and Gen Zers face obstacles in finding and affording large homes. In 2023, homebuying hit a record low in terms of affordability, especially for younger Americans. The lack of home equity from a previous home sale, coupled with the short supply of large homes due to the mortgage-rate lock-in effect, poses significant challenges for these generations.

Changing Attitudes Toward Homeownership

Some young Americans are showing less interest in homeownership. A recent survey found that 12% of millennials believe they will never own a home and are not interested in homeownership. Furthermore, 7% said they don't plan to buy because they don't want the hassle of home maintenance.

Boomers' Wealth Accumulation

Baby boomers have benefited greatly from the economic boom of the 1990s, which allowed them to purchase newly built homes and accumulate wealth. They've seen their home values grow four times faster than incomes over the past few decades, leading them to hold half of the wealth in the U.S., much of which is in real estate.

Time Advantage

Being older, baby boomers have had more time to buy homes and build equity. They're also largely in their 60s, still young enough to manage their homes without assistance. This lack of motivation to sell or downsize means that a flood of large homes hitting the market soon is unlikely.

Impact on Millennials and Gen Zers

The dominance of empty nesters in the large homes market has had a significant impact on younger generations, influencing their housing decisions.

Higher Rates of Renting

With fewer large homes available for purchase, many millennials with kids are opting to rent instead. They account for nearly 25% of three-bedroom-plus rentals in the U.S. Some millennials, along with Gen Zers, are also choosing to live with family or roommates due to affordability issues.

Changes Over Time

The ownership disparity of large homes has increased over the past decade. In 2012, young families were as likely as empty nesters to own large homes. But today, empty nesters dominate the large homes market, a trend that seems unlikely to reverse in the near future.

Geographic Trends in Large Home Ownership

The trend of empty nesters owning large homes is evident across the U.S., regardless of the metro area. They own at least 20% of large homes everywhere in the country, with the highest shares in Pittsburgh, PA (32.1%), Birmingham, AL (31.1%), and Cleveland, OH (30.8%).

On the other hand, millennials with kids own no more than 18% of three-bedroom-plus homes in any metro area. They have the largest shares in relatively affordable inland metros like Indianapolis, IN (17.6%), Minneapolis (17.4%), and Cincinnati, OH (17%).

The Future of Large Homes Market

Although the dominance of empty nesters in the large homes market is unlikely to change drastically in the short term, there might be a gradual shift in the coming years. As some baby boomers start downsizing or moving for retirement, there could be a trickle of large homes hitting the market, providing opportunities for younger families to move up the property ladder.

In conclusion, the large homes market is heavily influenced by empty nesters. Their financial advantages, coupled with the challenges faced by younger generations, have created a significant ownership divide. But as demographics and economic conditions evolve, we may see a gradual shift in this trend in the years to come.

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