The American housing market has a big problem on its hands. The biggest group of typical buyers looking to get into their first homes do not want the homes of the biggest group of typical sellers. Most Millennials recoil at the sight of most Boomers’ houses.
Boomers have stayed put and renovated
Boomers were probably the most “different” generation America had ever seen. There were a lot of them, and they were fantastically independent-minded. Now, there are still a lot of them, and they still value their independence.
As a result, many Boomers have tried to live independently for as long as they possibly can. The generation migrated to the seashore and the hot sunbelt in the Carolinas, Florida, Texas and Arizona. Independence meant getting away from it all in exurbs, miles away from schools and groceries.
Staying in their homes meant renovating them to suit their needs, and those renovations were expensive. Wide doorways and wider halls to accommodate wheelchairs, big bathrooms with ramps and grab bars and low-maintenance exteriors with a ramp to the front door were all perfect.
Millennials may be as “different” as Boomers were
For many Millennials, it is hard to think of a less appealing buy. Fixing these homes to suit their needs would be expensive and, because Millennials waited longer to marry and have children and buy houses, they tend to be adults with debt and responsibilities. They want a house that is ready for them.
They are looking for smaller houses that are either up-to-the-minute contemporary or with the charm of mid-century or even before. They commonly expect plumbing and electrical systems that can do what they feel they need them to do.
And they often prefer some landscaping challenges with local shops and intimate communities at their doorsteps.
A housing marketplace suffering from balance problems
A study by Freddie Mac has estimated that if Boomers were more like their parents in being willing to leave independent living sooner, 1.6 million homes that they now occupy would already have been on the market. That is a shortfall in available homes.
Meanwhile, Millennials are willing to spend about 40% more of their income than Boomers were for their first home. The shortfall combined with a change in tastes and needs are all boosting the price of starter homes. Add the record debt load of Millennials, and you have a complex set of imbalances in the marketplace that will not be easily fixed.