There are some advantages to aging with greater knowledge, wisdom and money which allows those that are older to buy homes. Recently, 42% of buyers in the US were aged between the age of 60 and 78 and vastly outnumbered millennials. 40%-50% of those older than 60 were also able to use cash while over 90% of millennials took out a mortgage. Here are some thoughts on this subject:
1. People are living longer, more productive lives. For many, things seem to happen later in life including family formation and having kids. Many are starting new careers in their 50's and 60's. Many are buying their first home much later in life too.
2. As life expectancy grows (especially for wealthier people with access to the best medical care), many people are inheriting much later in life too, which may partially explain the volume of 60+ year old buyers. Someone who is 65 years old may have a parent who is 90 years old.
3. The volume of older cash-rich buyers (whether from savings, extended investment compounding growth, the sale of a business, higher budget empty nesters with more disposable cash, or inheritance later in life) is an insulator for the overall real estate markets. When this large chunk of buyers are not reliant on (higher) mortgage rates, those rates matter less.
4. Older generations used to owning large homes that may have appreciated in value over the decades are armed with capital to buy two or more homes in different locations.
In other words, while some bemoan the concentration of lots of wealth amongst older generations, maybe this is also something to celebrate? No one lives forever, so this wealth is passed on or spent, sooner or later. And yes, when that happens, we may see a sharp increase in the inventory of homes for sale. The millions of Babyboomers retiring now or slowing down, buying homes that younger buyers may have traditionally bought, will ultimately come back to the market. Some say it's a silver tsunami waiting to happen, yet more people are having to decide whether to sell a home that has soared in value and pay a big capital-gains tax bill, or hold on to it to give to their children tax-free after they die via a tax-free transfer on death deed. And then the kids may get to sell, saving lots in taxes too perhaps?
Baby boomer homeowners hold around $17 trillion in home equity. 75% of them are planning to leave their current home or the proceeds from its sale to their children or other relatives. I think the (older) kids will be just fine!
