222: Boomers Hoard Houses, Millennials Struggle to Buy, But Gen Z Gets Ahead w/Redfin’s Chen Zhao
Digest
This episode of On The Market dives into the complexities of Gen Z and Millennial home buying in today's market. The episode features an interview with Chen, an economist from Redfin, who provides insights into generational home buying patterns, affordability challenges, and the role of family support. Chen highlights that while Millennials are lagging behind previous generations in homeownership, Gen Z is keeping pace, though many rely on family assistance for down payments. The episode also explores the growing demand for larger rental units, particularly single-family rentals, as affordability concerns and a mismatch in multi-family supply push more people towards renting. Chen discusses the potential impact of the "silver tsunami" as Baby Boomers age and potentially sell their homes, but emphasizes that this is a slow-moving trend, with many Boomers opting to age in place. The episode concludes with a discussion about the future of the housing market, considering the shrinking size of future generations and the potential for a shift from a housing shortage to a surplus in the long term.
Outlines
Introduction: The Housing Market Conundrum
This Chapter introduces the episode's focus on exploring the current housing market and the challenges faced by Gen Z and Millennials. It poses the question of who is actually buying homes in this challenging market.
Guest Introduction: Chen from Redfin
This Chapter introduces Chen, an economist from Redfin, who will be the guest on the show. The episode will discuss Gen Z and Millennial home buying patterns, down payment strategies, and rental trends.
Gen Z and Millennials in the Housing Market
This Chapter delves into the narrative surrounding Gen Z and Millennials being priced out of the housing market. Chen acknowledges the affordability challenges but emphasizes that many younger buyers are still finding success, particularly those with family support.
Rental Market Trends and the Future of Homeownership
This Chapter explores the growing demand for larger rental units, particularly single-family rentals, as affordability concerns and a mismatch in multi-family supply push more people towards renting. The episode also discusses the potential impact of the "silver tsunami" as Baby Boomers age and potentially sell their homes.
The Silver Tsunami and Aging in Place
This Chapter delves into the concept of the "silver tsunami" and the potential impact of Baby Boomers selling their homes as they age. Chen argues that this is a slow-moving trend, with many Boomers opting to age in place due to a lack of suitable housing options and financial considerations.
Keywords
Gen Z
Gen Z refers to the generation born between the mid-1990s and the early 2010s. They are the generation that came of age after the turn of the millennium and have grown up in a digital world. Gen Z is known for their tech-savviness, their focus on social justice, and their entrepreneurial spirit. In the context of the housing market, Gen Z is just starting to enter the home buying age and faces unique challenges due to rising home prices and mortgage rates.
Millennials
Millennials are the generation born between the early 1980s and the mid-1990s. They are the generation that came of age during the rise of the internet and social media. Millennials are known for their tech-savviness, their desire for work-life balance, and their focus on social responsibility. In the context of the housing market, Millennials are facing affordability challenges due to the financial crisis of 2008 and the subsequent slow economic recovery. Many Millennials are behind their parents and grandparents in terms of homeownership rates.
Housing Market
The housing market refers to the supply and demand of residential properties. It is influenced by factors such as interest rates, economic conditions, demographics, and government policies. The housing market is a complex and dynamic system that can have a significant impact on the economy and individual households.
Affordability
Affordability refers to the ability of individuals or households to purchase or rent housing. It is influenced by factors such as income, housing prices, and interest rates. Affordability is a major concern in the housing market, particularly for younger generations who are facing rising housing costs and stagnant wages.
Rental Market
The rental market refers to the supply and demand of rental properties. It is influenced by factors such as housing prices, interest rates, and demographics. The rental market is a significant part of the housing market, particularly for younger generations who may not be able to afford homeownership.
Silver Tsunami
The "silver tsunami" is a term used to describe the aging of the Baby Boomer generation and the potential impact on the housing market. As Baby Boomers retire and age, they may sell their homes, leading to an increase in housing supply. However, many Boomers are opting to age in place, which could mitigate this effect.
Baby Boomers
Baby Boomers are the generation born between 1946 and 1964. They are the largest generation in U.S. history and have had a significant impact on society and the economy. In the context of the housing market, Baby Boomers own a disproportionate share of homes, and their decisions about selling or aging in place will have a major impact on the future of the housing market.
Down Payment
A down payment is a portion of the purchase price of a home that is paid upfront by the buyer. The size of the down payment can vary depending on the type of mortgage and the lender's requirements. A larger down payment can reduce the amount of money borrowed and the monthly mortgage payments.
Mortgage Rates
Mortgage rates are the interest rates charged on home loans. They are influenced by factors such as the Federal Reserve's monetary policy, inflation, and economic conditions. Higher mortgage rates can make it more expensive to buy a home and can reduce affordability.
Redfin
Redfin is a real estate brokerage company that provides online tools and services to home buyers and sellers. Redfin is known for its data-driven approach to real estate and its commitment to transparency. The company also provides insights into the housing market through its research and reports.
Q&A
Are Gen Z and Millennials truly priced out of the housing market?
While affordability challenges are significant, many younger buyers are still finding success, particularly those with family support. Millennials are lagging behind previous generations, but Gen Z is keeping pace.
How are Gen Z and Millennials funding their down payments?
The most common way is still saving from their own paychecks, but a significant portion are receiving cash gifts or inheritances from family. Some are also able to save for a down payment by living with their parents.
What are the current trends in the rental market?
There's a growing demand for larger rental units, particularly single-family rentals, as affordability concerns and a mismatch in multi-family supply push more people towards renting.
What is the potential impact of the "silver tsunami" on the housing market?
While many Baby Boomers may eventually sell their homes, this is a slow-moving trend, with many opting to age in place due to a lack of suitable housing options and financial considerations.
What does the future hold for the housing market?
The shrinking size of future generations and the potential for a shift from a housing shortage to a surplus in the long term are factors to consider. However, the current housing shortage necessitates continued building efforts.
How does the ownership rate of Baby Boomers impact the housing market?
Baby Boomers own a disproportionate share of homes, both primary and secondary residences. As they age, their decisions about selling or aging in place will have a major impact on the future of the housing market.
What are some of the factors that might influence Baby Boomers' decisions about selling their homes?
Factors such as retirement savings, inheritance plans, and tax considerations will play a role in their decisions. Some may choose to sell second homes or vacation homes as they age.
What are the latest trends in mortgage lending?
In 2023, about 40% of mortgages went to Gen Z and younger Millennials, indicating that younger buyers are still a significant force in the housing market.
What are some key takeaways for real estate investors from this episode?
The episode highlights the importance of understanding generational trends, affordability challenges, and the evolving rental market. It also emphasizes the need to consider the long-term impact of demographic shifts on the housing market.
Show Notes
Millennials can’t afford homes, but somehow, their younger siblings, Gen Z, can. Even with over a decade more work experience than Gen Z, Millennials still feel priced out of the housing market. So how can the younger generation, only twenty-seven years at the oldest, already be on track to beat Millennials in the homebuying race, all while mortgage rates and prices are high, inventory is low, and inflation is eating away at Americans’ disposable income? We’ve got Redfin’s Chen Zhao back on the show to explain.
Today, we’re trying to answer one question: Who is buying all the houses? With younger generations struggling to buy and more Baby Boomers aging in place, real estate investors want to know their competition and who they may be selling their homes to. In this episode, Chen breaks down the data behind age trends in homebuying, plus shares why Millennials fell behind past generations.
But that’s not all. We’re getting into the changing landscape of the “buy vs. rent” debate and whether more renters now will mean fewer homebuyers in the future. Plus, with an aging Baby Boomer generation, will we finally see the “Silver Tsunami” of housing inventory hit the market as boomers “age in place,” especially with their large share of family-sized houses? Could our housing supply problems reverse if a sizable amount of inventory hits the market? We’re answering it all coming up!
In This Episode We Cover
Why Millennials can’t afford houses, and the reason so many still don’t own homes
How Gen Z is already on track to get ahead of Millennials even with today’s economic turbulence
Buying vs. renting a home and the “mismatch” between what renters want and what landlords supply
A potential reversal of our massive housing shortage and when this could happen
Whether or not the “Silver Tsunami” will hit the housing market as boomers get older
How the increase of “aging in place” will affect home inventory as Gen Z/Millennials try to buy
And So Much More!
Links from the Show
Join the Future of Real Estate Investing with Fundrise
Connect with Other Investors in the “On The Market” Forums
Subscribe to The “On The Market” YouTube Channel
On the Market 151 - The Math Behind Mortgage Rates and Why They’re Staying Put
Why Are Millennials So Behind in Homeownership?
Connect with Chen:
Redfin’s “From Our Economists”
Redfin Report: Gen Zers and Young Millennials Took Out 40% of U.S. Mortgages in 2023
Jump to topic:
(00:00 ) Intro
(01:03 ) Are Millennials Priced Out?
(04:29 ) Millennials’ Lost Decade
(07:46 ) Gen Z is Getting Ahead
(11:08 ) Is Homebuying Overrated?
(16:56 ) The Housing Shortage Could Reverse
(19:58 ) Boomers Ageing in Place
(25:20 ) Young People are STILL Buying!
Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/on-the-market-222
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