When generations collide: the boomer hold on housing and the millennial struggle to claim a slice of the American pie
Because homeownership is by far the dominant and most familiar way of building up wealth to the typical American, the success of each generation in attaining a better life than their parents is absolutely rooted in their success grabbing more of the housing stock out there — their piece of the American pie.
Unfortunately, decades worth of inflexible building codes, the natural inclination of housing market incumbents to fight new development, and the eroding appeal of trade work despite the desperate need for it has created a march toward unaffordable housing. So if you showed up early, say you were a boomer. You were lucky. Generation X took it the hardest during the Great Financial Crisis (GFC) and millennials are going to be heavily impacted by pandemic-era appreciation.
The boomer hold on housing
Boomers were in their late 30’s and early 50’s in 2000 and so finished with the bulk of life’s moves before the housing bubble and bust. As a generation, they were in a position to simply hold and wait for home values to come back. And did they! Of course boomers faced hardships too like rapidly changing job markets and the GFC wasn’t kind to retirement accounts, but homeownership and housing wealth has been a powerful buoy in the storms that followed. Now living longer, aging in place, and in many cases still housing adult children, older generations hold more and more of housing wealth.
In 2000, households with heads aged between 56 and 70 were 15.8% of the adult population. By 2019, their share reached 23.3% (aging of the population due to living longer). Their share of total housing wealth, however, increased even faster. Holding 21.5% of total home value in 2000 the share grew to 31.2%. Focusing on that gap between the age group’s share of the population and their share of total home value owned, knowing it widened in the boomer’s favor from 5.7 percentage points to a difference of 7.9 percentage points, helps us account for the aging of the population.
The boomer hold on housing value is the strongest in classically expensive markets like urban Honolulu (8.9 ppts), San Diego (8.2 ppts) and Los Angeles (7.7 ppts) metros. Other markets where the boomer hold is particularly strong are those currently attracting more boomer movers from across the U.S, metros like Charleston, SC (7.7 ppts), which increased its share of all long-distance movers (out of the top 100 metros) in this age group by 1 percentage point.
Generation X took the brunt of the last crisis
Generation X was in their first-time buying prime during the bubble’s build up, an easy time to buy a home due to irresponsible underwriting in mortgages. Unfortunately that created a bubble that culminated in the 2008–09 Great Financial Crisis that hit when Gen X was in their very late 20s and into their 40s — prime buying ages. That means that more than other generations they experienced the foreclosures and ill-timed moves required by life’s milestones and shocks rather than to optimize housing outcomes. Even though home values indeed recovered (and then some) not all of this generation rode them back up. Since prices recovered far before housing production, the share of total wealth owned by 41 to 55 year-olds (30.4% in 2019) continued to fall faster than this age group’s share of the population (24.1% in 2019). This age group’s hold on housing fell from holding 9.8 ppts more than their “fair share” in 2000 to 6.3 ppts in 2019.
Because Gen Xers were the dominant buyers over the past decade, their share of total value owned above and beyond their share of the population is greatest in some of the fastest growing markets from the mid-2010s, markets like Boise (6.8 ppts) and Seattle (6.7 ppts).
Millennials struggled pre-pandemic and will take the biggest hit on this crisis.
Millennials’ share of total home value owned is far below previous generations at their age. And facing the current market, millennials could be wondering how they’re supposed to take their hold on the housing market. The share of the population aged 26–40 stabilized over the past 10 years to 26.4% in 210 and 2019. Yet in a “failure to launch” (move out of a home headed by an older generation member to form one’s own household as a household head, even if that still means living with roommates), this age group’s share of all household heads kept dropping. Their share of the American pie (total home value owned) has eroded even faster, and now stands at only 16.8% versus their 26.4% of the adult population, a gap of almost 10 percentage points. Back in the 2000s, that gap was only 7.4 points.
While the barrier to forming your own household is more closely linked to rental affordability, millennials’ lack of progress in claiming their share of the American pie at the metro level is strongly correlated with the metro’s eroding down payment affordability, which we measure with “years-to-save” — a metric simulating how long it takes to save for 20% down on the typical home with a very aggressive savings rate of 10% (or only 10% down with a more modest 5% household savings rate). For example, the gap in millennials’ housing value attainment (below their share of household heads this time) is largest in the markets where it is hardest to build up enough savings to access homeownership, metros like Los Angeles (12 ppts gap and 20 years-to-save), San Francisco (13 ppts gap and 18 years-to-save), and San Diego (13 ppts gap and 17 year-to-save).
This relationship is important. Over the course of the pandemic extreme home value appreciation significantly eroded down payment affordability, so the ability of millennials to build housing wealth in many markets was materially impacted. Where years-to-save increased the most — like in Austin, TX, Phoenix, AZ, and Riverside, CA — we should expect a larger gap in millennials’ attainment in the future.
So what now? The millennial generation is huge and sitting on top of peak first-time buyer ages. This is their time in life to make progress, to grab hold, and yet housing markets have never been more challenging. In many ways, it’s hard because the size of the millennial generational wave itself is so big. Part of it is because boomers are a big generation too and still using the housing stock. Add the increasing financialization of real estate and you’ve got more and more buyers with an asset management lens in the mix with first-time buyers. But, study after study has shown that those are only problems because our pace of building has been too slow. To build faster and add the housing we need, we’ll have to get more flexible — both in what we build and where we build it. That might be a hard pill for those holding property in housing markets as they were to swallow.
