Baby Boomers Block Young Homebuyers from Buying a Home

Currently, baby boomers homeowners are making it difficult for younger generations to buy new homes. The housing market has revealed that recovering home values are boosting the equity of older homeowners. This allows the baby boomer generation to buy new or a second home in another location, which can be used as a vacation property. Many baby boomers also have the capability and resources to buy a new home with cash—while younger adults are faced with higher housing prices that exceed their buying power.

For prospective homebuyers, the prices of homes have risen faster than their incomes. Currently, home prices are now on the high end of the relationship between median home prices, median family income, and young families need to see faster income growth in order to save additional money to make a larger down payment. New homes are being targeted towards baby boomers that are age 55 and older because they are working longer and due to their rising home equity and net worth. These are factors that contribute to the increase of all-cash transactions when buying a home. Roughly 42% of residential sales in December 2013 were all cash purchases, up from 18% in December 2012.

Older homeowners are increasingly able to purchase new homes with cash only after they sell their current home. One factor holding back the growth of owner-occupied homes has been a weak purchase demand from young families and households. Many early-career professionals are living with high student debt burdens that strain their capacity to borrow. Late-career professionals and baby boomer homeowners have the ability to help sustain housing sales. The 2014 housing market shows a positive outlook because the market indicates that the economy is slowly recovering.


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