Millions of U.S. Retirees Are Fueling a Surprising Housing Crisis – Is Your Home Value at Risk?

According to a recent Redfin survey, 78% of baby boomers plan to retire in their existing residences. According to a Redfin research from 2022, 28.2% of all “large homes,” which are classified as having three or more bedrooms, are occupied by empty-nest boomers.

However, only 14.2% of such residences are owned by millennials, who are more likely to have children at home. In many places, the days of elders downsizing and clearing out family homes are a thing of the past due to financial constraints, and the effects of this are only now becoming apparent.

These residences weren’t always considered an elderly solution. Renovating bathrooms to include zero entry showers and retrofitting accessible objects like ramps and elevators are costly projects that people on fixed incomes cannot readily afford.

The reasons behind retirees’ inaction

Home Qualified’s founder and president, Ralph DiBugnara, provides a summary of the problem. “The largest issue I observe with homeowners today is that, due to high mortgage rates and high home values, they are cash poor, equity rich, and have few alternatives for fixing their situation.

At this point in their lives, baby boomers want to downsize or move, but they are unable to do so due to a shortage of available homes, which has increased costs.

They are being kept in homes with equity because of this, as well as the high cost of a new house because of rising interest rates and insurance premiums. This plays a significant role in the market’s inventory shortage issue as well.

According to Gupta, “Boomers’ control over a large share of the housing market also has a broader economic effect,” indicating that the impact of this trend is extremely real and felt by many.

A large number of Boomers have significant home equity, which enables them to secure retirement or leverage their property for wealth. However, it might be difficult for younger generations to accumulate comparable wealth through homeownership.

The wealth gap between Boomers and later generations may deepen as real estate continues to be out of reach for younger buyers, with homeownership emerging as a key factor in financial inequality.

Senior-friendly housing may become more in demand in the rental market as more Boomers age in place or decide to downsize into more accessible housing options.

Renting for longer periods of time may become more common among Millennials and Gen Z, who are already delaying purchase because of growing costs.

As younger people put off buying homes, it may become more difficult for them to save money for down payments, which could result in higher rents, particularly in coveted urban locations.

Solutions

As many seniors may only live on Social Security and little else, Jesse Saginor, associate professor of real estate development at the University of Maryland School of Architecture, Planning and Preservation, suggests a few solution.

It includes a significant increase in funding, subsidies, tax credits, and/or zoning flexibility to allow for the construction of affordable senior housing.

Therefore, that approach focuses on creating affordable and attainable housing for senior  providing they are willing to relocate. Considering their fixed wages, it eliminates the barrier to housing.