With their $75 trillion nest egg, baby boomers have played a significant role in boosting the US economy through their spending. Moreover, they are now utilizing a portion of their wealth to take advantage of a struggling housing market.
During the initial phases of the pandemic, boomers seemed satisfied with “aging in place,” opting to stay in their homes and carry out renovations instead. However, recent research conducted by the National Association of Realtors reveals that boomers now account for 39% of all home buyers.
Furthermore, boomers are bypassing high mortgage interest rates by making all-cash purchases, effectively pushing aside buyers who are financially constrained and securing their position at the forefront of the housing market.
Among the younger boomers, aged 58 to 67, the percentage of all-cash home purchases in 2023 has risen to 32%, compared to 22% in 2022, as reported by the National Association of Realtors. This increase is even more significant for older boomers, aged 68 to 76, with 51% of them buying homes without a mortgage, up from 32% the previous year.
According to Redfin, 34.1% of home purchases in the US were made in cash in September, which is an increase from 29.5% the previous year and the highest rate since 2014.
Redfin highlighted that wealthier Americans have a greater advantage in today’s housing market, and among all generations, boomers are the most affluent.
“Only affluent Americans can avoid the impact of high mortgage rates,” stated Sheharyar Bokhari, a senior economist at Redfin. “Furthermore, they are able to save more money by spending less on housing and avoiding interest payments.”
The US population aged 65 or older accounts for nearly 18%, the highest level recorded since 1920, as per the Census Bureau. However, boomers possess approximately half of the total net worth in the US, according to the Federal Reserve.
Approximately 24% of that wealth, which amounts to $19 trillion, is invested in real estate. This surpasses the $16 trillion that boomers possess in pensions and comes close to the $21 trillion they hold in stocks. Moreover, boomers bear fewer financial obligations compared to younger generations, such as lower consumer debt, and are less susceptible to the effects of student loan repayments.