2024 Matchmaking Trends: The Importance of Empty-Nesters for Agents

Given the challenging state of housing affordability in 2023, it's not unexpected that millennials and Gen Z encountered greater difficulties in buying homes, let alone moving to larger ones. Millennials with growing families felt the additional costs more sharply, whereas boomers generally experienced a milder impact.

As per a recent report by Redfin, baby boomers whose nests are empty possess twice as many large homes as millennials with children. This is primarily attributed to the fact that this demographic typically has more equity available compared to younger generations when seeking their next home.

As it happens, this isn't entirely unfavorable news for Generation Y and Generation Z.

Empty-Nest Boomers Possess Double the Homes Compared to Millennials with Children

Boomers experiencing empty nests (defined as households with 1-2 adults and no minor children) possess nearly 3 in 10 (28.2%) of large U.S. homes—approximately double the proportion owned by millennials with children (14.2%). Baby boomers with households of 3+ adults, often with adult children living with them, own 7.5% of large U.S. homes. Gen Zers with kids own the smallest share, accounting for just 0.3%.

The presented data stems from Redfin's examination of U.S. Census data from 2022, representing the most recent year for which such data is accessible. To enhance clarity, the data delineates the percentage of large U.S. homes (those with three or more bedrooms) owned and inhabited by each generation, categorized by household type and size.

In Redfin's analysis, three distinct household categories were identified:

1. 1–2 adults residing in the home without minor children, categorized as "empty nesters" for boomers.
2. 3 or more adults living in the home without minor children.
3. Households with adults living alongside their minor children.

Age brackets for each generation in 2022:

- Adult Gen Zers: 19-25 years old

- Millennials: 26–41

- Gen Xers: 42–57

- Baby boomers: 58–76

Millennials, constituting 28%, represent the largest share of the U.S. population, followed by boomers (27%), Gen Xers (25%), and Gen Zers (12%).

Factors Contributing to the Significant Proportion of Large Homes Owned by Empty Nesters

In contrast to millennials with children, who typically require larger homes more than empty nesters, boomer empty nesters are notably more inclined to possess spacious residences.

The primary factors include:

1. Boomers have lacked substantial financial motivation to sell their expansive homes. A majority (54%) own their homes outright without any mortgage, resulting in a median monthly homeownership cost for this demographic, encompassing insurance, property taxes, and additional expenses, of just $612. Given such favorable terms, it's understandable that few would be willing to relinquish these benefits without an equivalent incentive.
2. Boomers with mortgages typically enjoy significantly lower mortgage rates compared to the current average. Even if they opt to downsize, they might still encounter comparable monthly housing costs.
3. Millennials and Gen Zers face increased challenges in locating and affording homes, especially larger ones, which are scarce. The combination of the lock-in effect, a shortage of housing, and limited affordability puts younger generations at a disadvantage in the pursuit of spacious homes. One contributing factor is their tendency to lack the equity that older generations possess.
4. A portion of millennials and Gen Zers is not inclined towards homeownership. As per a recent survey by Redfin, over one in ten millennials (12%) who express doubt about ever owning a home are not even interested in homeownership. Additionally, 7% mention that they have no intention of buying a home due to the perceived inconvenience and costs associated with maintenance. Some younger individuals prefer residing in urban areas with convenient access to local attractions such as restaurants and theaters. This lifestyle choice typically does not align with the ownership of large homes.
5. Boomers have amassed considerable wealth, benefitting from favorable economic conditions during their peak earning years. The economic prosperity of the 1990s provided an opportunity for many older homeowners to build wealth and acquire large homes at the pinnacle of their careers. Over the past few decades, home values have surged at a rate four times faster than household incomes, resulting in these homes accumulating substantial equity. As a result, boomers currently hold approximately half of the total wealth in the United States, with a significant portion tied to real estate. Individuals who purchased homes more than two decades ago allocated a smaller proportion of their income to housing costs compared to today's millennial and Gen Z homebuyers.
6. To state the obvious, boomers are also more advanced in age, giving them a longer timeframe to purchase homes. Moreover, a considerable number acquired homes with the anticipation of their households expanding over time.

A surge in the availability of large homes on the market is unlikely in the near future. Logically, empty nesters represent the most probable demographic to sell expansive homes and opt for downsizing, given that they no longer have children residing at home and require less space. However, the challenge for younger families hoping for their parents' generation to list their larger homes lies in the fact that boomers lack significant motivation to sell, both financially and otherwise. With generally low housing costs and the majority of boomers still in their 60s—sufficiently capable of self-sufficiency and home maintenance—there is limited incentive for them to move. Nevertheless, some boomers are expressing readiness to downsize, considering condominiums or relocation for retirement. Additionally, the easing of the mortgage-rate lock-in effect suggests that while there may not be a flood of inventory, there will be a gradual increase.

Examining it from a different perspective, nearly 45.5% of all boomer households with 1–2 occupants in the U.S. possess spacious homes. In contrast, just over 27% of millennial households with children and approximately 3% of Gen Z households with children own large homes.

Largest Proportion of Three-Bedroom-Plus Rentals Occupied by Millennials with Children

Millennials with children represent the most substantial portion, comprising approximately 24.8%, of all U.S. rentals with three or more bedrooms, leading among generational groups. Following closely are millennials without children, making up 11.6%. The subsequent significant share is held by boomer empty-nesters at 11.4%.

Sheharyar Bokhari, a senior economist at Redfin, suggests that young first-time buyers seeking relatively spacious homes should explore new construction options. Almost all newly constructed homes feature three bedrooms or more, and an increased number have become available as builders aim to sell surplus homes initiated during the heightened buyer demand of the pandemic homebuying boom. Additionally, some of these builders are providing incentives such as mortgage rate buydowns, offering budget-conscious buyers a reduction in monthly housing costs.

A Chance for Matchmaking

Although boomers might lack a tangible financial motivation to relocate, they may consider doing so sooner rather than later for various reasons:

• The potential for a "silver tsunami" in the coming years
• The chance to transition into a smaller, easier-to-maintain, and potentially more cost-effective residence
• The wish to reside in closer proximity to children or grandchildren
• The preference to live in a warmer location

During Tuesday's Hot Sheet, Byron Lazine emphasized the potential for agents to facilitate connections between boomer empty-nesters with spacious homes and millennials whose households are expanding beyond their current living spaces, if they haven't already done so.

If you consider that 28% of empty-nester boomers own these sizable homes, while only 14% of millennials with kids possess such properties, there's a significant matchmaking opportunity. This presents a chance to proactively address the potential impact of a silver tsunami or navigate a different market dynamic, channeling these homes towards the millennial generation where there is a clear demand. This is the aspect I've been emphasizing to assist agents in recognizing the prime opportunity. Building relationships within the baby boomer demographic is the key path for securing listings over the next 5-10-15 years in your community.

Presently, agents have a unique chance to assist boomers, particularly those residing in the 28% of spacious U.S. homes, by showing them the option to exchange their current home for something newer, potentially with lower maintenance, in a downtown, walkable area. Simultaneously, this presents an opportunity to aid millennials and Gen Zers with children in discovering affordable homes with greater living space for their expanding households.