Struggling to find a house for sale? Older Americans may be to blame, according to a new report.
Findings published by real estate brokerage Redfin show that baby boomers, who are currently between the ages of 57 and 75, are aging in place, which is fueling both a nationwide inventory shortage and rising home prices.
The typical homeowner spent close to 12 years in their home in 2023, nearly double the average seen two decades ago but down slightly from the peak of 13.4 years in 2020.
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The driving force behind that increase is older Americans. Nearly 40% of boomers have lived in their home for at least 20 years, according to Redfin, while another 16% have lived in the same residence for 10 to 19 years.
Previously, older generations would move into smaller homes once they retired, which freed up inventory for younger families and first-time buyers. However, while boomers are reaching retirement age, they are choosing to stay put and are therefore not freeing up the existing home supply.
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Older Americans are hanging onto their homes largely for financial incentives, according to the study. More than half of boomers own their homes with no outstanding mortgage. Even those still paying off their mortgage likely have a much lower rate than they would if they sold and bought a new home with today’s rates, which are hovering around 7%.
“Lack of homes for sale and high housing costs contributes to people staying in their homes longer, and people staying in their homes longer contributes to lack of inventory and pushes prices higher,” the study said. “Long homeowner tenure, particularly among baby boomers, is an obstacle for young first-time buyers trying to break into the market.”
The sharp rise in mortgage rates over the past two years has created a “golden handcuff” effect in the housing market: Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.
Economists predict that mortgage rates will remain elevated for the first half of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.
Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a recent Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.
