Who Will Buy All The Baby Boomers’ Houses?

I saw a great real estate story today talking about who will buy all of the baby boomers houses once they're gone. And this is a question that I have proposed and talked about in numerous past real estate videos because this is going to be something that's going to change the entire housing market in the next decade, guys, because about one-third of all U.S. homes and nearly half of the real estate wealth is held by baby boomers. So it is pretty safe to say that baby boomers control the entire housing market right now. Even when it comes to buying homes, baby boomers are the largest group of home buyers as of right now. Baby boomers purchase about 42% of all the homes that are sold right now. So when baby boomers are all gone, and many of them will be gone in the next 10 years, and within the next 20 years, there'll be almost none left. That begs the question, who is going to be buying homes then and who is going to be buying all of the homes that they own right now? There was a post on X the other day from another real estate personality that said, quote, the largest generation in history needs to sell the most expensive houses in history to the most indebted generation in history. What could go wrong? And I think that's a fantastic outlook on exactly where this whole thing is headed, guys. And the next generation down is Gen X, the one that never gets talked about, according to all you Gen Xers out there. But Gen Xers are in the most debt compared to any other generation right now. Gen Xers, on average, hold about $158,000 in household debt. Millennials are a little bit behind at $132,000 in household debt. Now, a lot of that probably is mortgage debt, but the reality is for a lot of people, it's also not. It's also a lot of student loan debt. It's a lot of credit card debt. It's a lot of auto loan debt. It's a lot of other types of debts that are not attached to housing. And if baby boomers are buying 42% of the homes today, Gen Z and millennials are only buying 4% and 26% respectively. So the younger generations are very far behind in terms of being able to buy homes in today's market. And we know this because last year, the average age of America's first-time homebuyers hit a record 40 years old. Here's what the experts are saying is going to happen, and I will read you what they say, and I'll give you my opinion on this. First of all, once baby boomers' homes finally land on the market, they might struggle to find buyers who can afford them. And those homes might not be a good fit for those willing to purchase them. Well, right off the bat, what happens to houses like that, guys? If houses are on the market and the owner is dead, and it needs to be sold because it's an estate sale now, and they can't find anybody to buy it, what are they going to do? They are going to lower the to the point where someone is willing to buy it. That's how real estate deals work. According to chief economist, Daryl Fairweather at Redfin, she says, these homes will be suitable for millennials with young children, but they may have significant deferred maintenance and require renovations. Well, great. That just means you're going to get the house at an even lower price because if people already can't afford them, and on top of that, it needs a full renovation, well, guess what? That means the price is going to have to come way, way down for somebody to actually get in there and be interested in buying that house. They also say that these boomer homes might become available in parts of the country that are less appealing to younger generations who are busy building their careers and forming their families. And the homes that are located where all the jobs are, are going to be the most valuable. However, the homes located in retirement destinations far from jobs will be difficult to sell and could drop in value. Well, that's something I actually totally agree with when it comes to the expert opinions. Location is always everything when it comes to real estate. And the closer the house is to an economic booming area, then of course, the more that home is going to versus, you know, if it's in the middle of a retirement community in Florida, that's 20 miles away from any decent jobs. Well, that's not going to be the same. But one thing I want you guys to think about is this, the sheer amount of supply, okay? If baby boomers own one third of all homes in the United States right now, that means one third of those homes will be sold at some point in the next couple of decades. Sure, some of them will be inherited and some of them will end up getting moved into by whoever inherits the home, guys. But the stats say, and have said for a long time, that about 75% of homes that get inherited end up getting sold anyhow. So it's only a very small percentage of these homes that are actually going to get lived in by who inherits them. And these numbers are staggering. We're talking about tens of millions of homes that need to be sold in the next couple of decades as this silver tsunami, great wealth transfer happens. Here's something else that Daryl Fairweather said. She says these homes that are located in the less desirable areas or retirement areas will likely drop in value until the owners accept a low price or they will stay vacant for once. Somebody who is mainstream in real estate is starting to get on the same page that I have been on for years. And I've been telling you guys, this is where things are headed. A lot of people complain, well, we want affordable housing right now, Michael. Right now it is too expensive and I need to buy a house today. I don't have time to wait 10 or 20 years. And that's a fair point. And I'm not telling anyone they should wait if that's your situation. But just know that since this is coming at some point down the road, if you do buy today, there's a good chance that your home could drop in value too. This is the part everybody forgets about. People think that home prices always go up. They just go up forever, especially because of inflation. And traditionally that has been true. But traditionally you have to remember, we've never really seen a situation in history where so many homes are going to have to get sold within a relatively short period of time to a bunch of people who can't afford to buy them. That has never happened before. So because that situation is unprecedented, it is reasonable to think that we are going to see an unprecedented drop in home values when this does happen. What is the alternative guys? Like who is going to step in and buy all of these homes that need to come up for sale? You know, the current generations who would like to buy them already can't afford them now. And in the future, you know, they're going to be asking more for these houses. People will have even less money if this economy continues in this direction. So who's going to be the buyers? That's what I'm asking you. Let me know in the comments, who is going to buy all of these homes? Before people would say, oh, it'd be all the institutional investors, be BlackRock and Blackstone and all of these guys, American Homes for Rent. Well, they just got banned. They can't own more than 350 homes. So they're not going to be coming to the rescue. Even if they did and they bought up all those houses, they would be turning them into rentals because that's what they do. And with that many rentals flooding the market all in a relatively short period of time, next thing you know, rent prices would be crashing and the incentive for people to buy would go even lower. Here's something else interesting that Daryl Fairweather said. She says the turnover and redevelopment of housing in the most expensive coastal areas will allow younger generations to affordably live in the most desirable cities. Now, that is an optimistic view, and I think it could end up being true. If enough places come up for sale, maybe it could be affordable again. Now, it's not like you're going to see 30 million homes hit the market all in one shot, guys. That's not how this works. But just think about this, you know, with like only 1.4 million homes for sale or something like that right now in the United States, that is just a blip on the radar compared to the amount of homes that are going to be for sale in 10 years from now and 15 years from now, and 20 years from now. You could see the new market reality where it's normal to have five or six million homes available on the market for sale at any given time. What do you think that's going to do to prices? Prices are already coming down right now in many metros across the country with only 1.4 million homes for sale. What's going to happen when we have five or six million homes for sale? They keep talking about this shortage of homes that doesn't really exist in the United States, guys. There is no shortage. It's just a shortage of homes that are available for sale that people can actually afford to buy right now. That's it. But as far as the actual number of houses that will need to trade hands, we don't have a shortage. I think this is actually going to be a huge change for the better in the future for the overall housing market. And it's not Baby Boomer's fault, guys. Like, you know, they grew up in probably the best time to grow up in American history in terms of when it comes to investing and money in the stock market. Any sort of asset that was purchased during Baby Boomer's prime years has exploded in value. They also had great jobs that outpaced inflation throughout most of their working careers. This is just something that isn't really happening to the generations today. And so I think that in the future, anybody who's like, say, in their 20s right now who wishes they could afford to buy a home, you're going to get your chance, guys. I mean, look, the average homebuyer today, first-time buyer, is 40 years old. So that leaves you, you know, 15 to 20 years, depending how old you are, to eventually be that homebuyer. And if you do the things that I say on this channel, you make sure you don't have any debt, you save money, you make investments. By the time you get your turn, you are going to get your turn. You are going to be able to get a house for a good price. You are going to be in a financially secure position to buy that house. And you're going to get arguably an even better deal than what somebody who's buying today might get. But, you know, the mainstream media, they refuse to accept the reality on all of this. They are just completely disconnected from what's going on about why people are not buying houses. You know, the first thing that they always point to is interest rates, guys. You know, they say, oh, the demand for mortgages and refinancing transactions fell 3% week over week. And mortgage rates are now at the highest level they've been in over a year. You know, the 30-year fix is at 6.81% right now. And we might continue to see interest rates go up now that we're in this never-ending war with Iran that was supposed to last two weeks. Don't forget about that, right? Two weeks, guys. Yeah, how long has it been again? Yeah, that's not getting any better. Gas prices are above $4 a gallon on a national average again. And inflation continues to get worse. All of that points to the fact that we are going to see interest rates continue to rise. The bond market is calling the Fed's bluff. They don't believe that inflation is getting under control. And they are forcing up the treasury yields, which forces up mortgage rates and every other type of loan rate that you might need. But they refuse to mention anything about prices. They just say here, well, you know, if mortgage rates were to drop to 5%, then this would somehow bring everybody out of the woodwork and people would be going out and buying houses. Well, we saw that, you know, like what, a year, year and a half ago, it got down to 5.5% or even 5.3% for some well-qualified buyers. Did it bring people back in? No, it didn't. So they just refuse to acknowledge the real problem, which is prices. And those prices are going to be impacted once we see the big wealth transfer happen. And the big baby boomer sell-off that's going to happen is already started in some cases over the next 20 years. And it's to the point now where this slow housing market is affecting real businesses and causing real job losses, guys. You know, so many people want to stay completely in the dark about this and not acknowledge what's going on. But even Zillow, one of the biggest names in real estate, is now firing 7% of their workforce because of how slow the housing market is. They just announced earlier this week that they're going to be firing 500 employees. That's 7% of their entire employee base. And the reason why the CEO said that they're firing all these people, they quoted, because of a flat housing market. This is what is required of us to grow at scale. These changes are about ensuring that we have a disciplined cost structure and getting more efficient with the right people in the right positions. The opportunity in front of us is as large as it's ever been and we're building toward it with urgency and a structure that will get us there. Man, I don't know. These corporate bigwigs must all get taught this in the school of ripping everybody off of how to say things that make no sense and don't really mean anything when they have to give press release statements. Like every single time you read one of these statements on why companies are firing people, it is literally just a bunch of mumbo jumbo that doesn't really say anything. But at least his short quote of a flat housing market does say something. That does give us the real reason of why they're firing people, you know, because Zillow makes a lot of their money off of homebuyers contacting real estate agents through Zillow. They sell those leads to real estate agents who are willing to pay when somebody wants to find out more information about a home. But think about the chain of reaction here. Real estate agents are quitting. We've seen millions of agents quit over the past couple of years and millions more are predicted to quit in the next couple of years and the ones who are staying in the business might not have the marketing budget that they had three or four years ago when the market was booming. They can't afford to pay for these leads and you know Zillow is charging more for these leads than ever and so their revenue goes down. Real estate agents need to be selling homes for a website like Zillow to make money. And guess what? This is already Zillow's second round of layoffs this year. The other one was smaller. It was 200 people. Now it's 500 people. So it's not like something that just happened yesterday. This has been a growing problem because of the slow housing market. Now you could argue that Zillow is just making excuses because just like many other big corporations their first quarter earnings came in very strong with revenue up 18% year over year and net income growing over 8 million dollars. So on paper the company's making more money but they are looking at this market right now and saying you know what we need to get ahead of this and get rid of people now before this starts causing us to see our profits go down. And remember that's what corporations do. And today I'm walking on Silk Oak Circle here in San Rafael, California and all these little cul-de-sac streets along here. And here's another thing that backs up what I just said guys when it comes to mortgage rates not being the problem that it's been prices all along and how this future baby boomer home sell-off is going to help relieve the situation substantially. Check this out. The K-shaped economy is showing up in housing. Luxury sales continue to rise as starter home sales fall. Well starter homes are the most affordable homes that ever hit the housing market right. They say that the availability of lower price homes for sale is increasing but it doesn't mean that buyers can afford them. Sales of starter homes fell 5.4 percent in May compared with just a year ago despite there being four and a half percent more homes available. That is information according to Zillow. Think about it. There are four and a half percent more starter homes for sale than there were a year ago yet the sales fall. Why? Because all we keep hearing is it's it's it's we need to build more homes. We're short all these homes right we don't have any houses. Well if we don't have any houses then why aren't people buying the houses that are out there right now? Oh because they can't afford the prices people are asking for them even with starter homes. This is a fundamental issue we have with real estate. This is also an issue that literally cannot go on forever. There always comes a point with every seller at some time in their selling journey where they decide they have to sell and some of these sellers just haven't hit that point yet but many of them are going to especially if they are baby boomers. They say that starter home buyers have more choices now more price cuts and less competition which is a recipe for getting out there and buying guys. The problem is it's still too expensive. The unfortunate reason people are not buying these homes is because buyers are either unwilling or unable to purchase a home. I mean even if you are in the position to buy right now this economy is on very very shaky ground. You know we don't know where things are going from here anymore. Things have gotten so wobbly that it's not predictable like it used to be. You know we had a very long period of stability before the pandemic and ever since then it has been completely unstable. They say here that even with slower rent growth inflation is eating into parts of household budgets making it harder to save for a down payment. They also didn't say that wage growth has been non-existent when you account for inflation. People are making less money today than they were two or three years ago when you factor in inflation. That's another huge problem. But at the same time the sales of luxury homes which are pegged at homes that are worth 1.9 million dollars or more were up 6.2 percent year over year in May. At the same time starter homes are falling. Then they say here well you know the median home price reached an all-time high of 440,600 dollars in June which is 49 percent higher than it was in June of 2020 according to the National Association of Realtors. Yeah because all of those expensive houses are the ones that are selling and every other house is just sitting on the market or not getting sold. If we look at the most recent sales report from the National Association of Realtors going back to June of this year guys you can see that it is totally obvious that the transactions that are growing the most right now year over year are between the 750,000 and even 1 million plus price points. In all regions of the country those home sales are growing by double digits anywhere between 12 to over 22 percent. Meanwhile on the low end of things it's only growing by eight percent or two percent or ten percent or even negative in some parts of the country like the northeast and the midwest. Starter homes sales are falling in those regions. Only in the western United States starter home sales increasing by a good amount at 25 percent year over year. But the highest transaction growth in every region of America is in the 750,000 to a million price range and the 1 million and up price range guys. They're literally telling you who's buying homes and who isn't. And it is by and large only the wealthy participating in this housing market right now. And it makes total sense because they're the only ones who can afford to participate. They own you know pretty much the entire stock market. They can sell some stocks and buy a house with cash no problem. They don't need to worry about what mortgage rates are or they're not worried about their job security or anything like that if they have millions of dollars ready to deploy. But for the bottom 80 percent of people in this country they are simply priced out of buying even starter homes. And mark my word you are going to see these homes continue to get price cuts to the point where people are actually willing and able to buy them guys. That is how supply and demand works. That's how real estate has always worked and will continue to work in the future. I know it seems like things have been upside down for a while because they have. You know when you have a pandemic and you have a government that injects six trillion dollars into the economy it's going to mess things up for a while. But now that that was six years ago things are starting to level out again. Things are coming back to the new normal and reality is setting in. And baby boomers control a third of all of the homes in this country and they're not getting any younger guys. So if you are younger and time is on your side you are going to have an opportunity. If you're somebody who's my age and you know pushing 40 years old and you've been wanting to buy and you haven't yet that might be a different story. You might not be able to wait. In that case if that's you just make sure that you are getting the best deal you can in this economy and in this market and make sure you can truly afford to buy so you don't end up upside down in that home. That's the worst place that you can end up. A lot more people are ending up like that now who bought over the past few years. Learn from their mistakes. Don't end up like them. And remember guys if you need a real estate agent whether you're a buyer or seller I can set you up with one totally free. All I have to do is use the link down in the description below and somebody from my team will reach out to you ASAP and if you use it not only does it help you but it also helps the channel and I appreciate it. And if you don't want to wait for my next video to come out check out this one on the screen right over here and I will see you in the next one.