Baby boomers and their cash are driving the housing market right now

NEWS July 20, 2023


 Baby boomers and their cash are driving the housing market right now

Whether you're contemplating buying or selling a house these days, it's likely you're a baby boomer — or are financially supported by one.

At $436,800, the median home sale price in the U.S. remains significantly higher than the $329,000 average price seen in the quarter just before the late winter 2020 period, when the Covid-19 pandemic struck.

And it continues to inch higher: The monthly S&P CoreLogic Case-Shiller housing market index showed relative price increases for February, March, and April.

“The ongoing recovery in home prices is broadly based,” Craig Lazzara, managing director at S&P DJI, said in a release. All 20 major metro markets logged monthly price gains in April, and 12 markets showed price acceleration, the report found.

With affordability at near-record lows and inventory still very limited, many buyers, especially first-timers, will continue to find the market challenging for the foreseeable future, experts say.

Mortgage interest rates now hover around 7%. As a result, the median monthly payment (principal and interest) a home buyer can now expect to pay is nearly $2,000, according to the National Association of Realtors — almost double the 2020 figure.

Buyers need to earn more money, too. An income of about $95,000 per year is needed to qualify for a 30-year mortgage with a 20% down payment (the NAR's calculations are based on a slightly lower estimate of the current median home value).

"There will be no return to the 3% rates we had during the pandemic," Bright MLS chief economist Lisa Sturtevant said in a statement Thursday. "Homebuyers have had to accept the ‘new normal’ of rates around 6.5% or even a little higher." 


Who is driving the current market rebound?

To a large degree, it's all-cash buyers. These individuals are able to sidestep mortgage rates entirely and purchase a home outright at cost.

Last month, the real estate data group Redfin reported the share of all-cash purchases had increased to one-third of the entire U.S. housing market, the highest level since 2014.

While the demographics of these buyers may be mixed, there is overwhelming evidence that some baby boomers are an economic force behind these cash purchases, experts say.

"Some cash sales are coming from millennials, but they may be borrowing from 'the bank of mom and dad' or a relative," said Taylor Marr, Redfin deputy chief economist.

Marr added that the homeownership rate of Generation Z adults (age 18 to 27) has already surpassed the rate of Generation X (age 44 to 59) who owned homes when they were still in their 20s, a phenomenon also attributable to an older generation stepping in to help their kids become homeowners.

Some of these boomers have benefited from the skyrocketing values of their homes, which has led to “historically high levels of housing wealth,” Bright's Sturtevant said in a follow-up interview.

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