Boomers vs. Millennials: How Their Housing Wealth Stacks Up

The U.S. housing market lost nearly $3 trillion to rising mortgage rates between June 2022 and February 2023 — but it has since recovered and then some.

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According to Redfin data, the market hit a record $47 trillion in June as scarce inventory propped up values even while demand remained lukewarm. Along the way, millennials gained more housing value than any other demographic and hit a generational milestone when they surpassed the Silent Generation in total worth.

Even so, the younger set is nowhere near one of the generations in between. In terms of property wealth, the baby boomers have the best house on the block.

Millennials Are on the March — But Still Way Behind Their Parents

Millennials saw the total value of their homes grow to $5 trillion year-over-year in the first quarter of 2023 — an increase of 2.9%, the most of any age group.

But that’s small change compared to their parents.

Baby boomers now boast a combined $18 trillion in housing wealth, more than three times that of the millennials.

The younger demographic surpassed the oldest for fairly straightforward reasons — members of the Silent Generation are dying or moving into retirement homes in greater numbers. But the explanation for the enormous gulf between boomers and millennials is a bit more nuanced.

“The disparity between baby boomers and millennials when it comes to housing wealth is indeed multifaceted and can be attributed to several factors,” said Rod Khleif, real estate investor, author and host of the “Lifetime Cash Flow Through Real Estate Investing” podcast.

Find Out: 5 Reasons the Housing Market is Reversing

Equity and Appreciation Take Time — And Boomers Have More of It

The most obvious explanation for the wealth gap is the age gap — 57- to 75-year-olds have been at it longer than 25- to 40-year-olds.

“Baby boomers have had more time to accumulate housing wealth due to their longer tenure in the market,” Khleif said. “Their homeownership journey began earlier, allowing them to benefit from decades of appreciation and equity growth.”

But the older set also got an earlier jump in young adulthood.

“The boomer generation actively started purchasing homes around the age of 25,” said Matt Walsh, a licensed agent in Virginia and owner of Academy Home Buyers. “Millennials turned 25 right around 2010. They witnessed their parents and family suffer through the housing crash of 2006-’09 and did not buy houses at 25 years old. They are now buying houses at an average age of 32 or greater.”

Homeownership involves time-based wealth-building — and a late start makes it harder to catch up.

“The millennials, on average, will never achieve the same housing wealth as the boomers simply because they will not have been in the game as long,” Walsh said. “Millennials are buying houses seven to 10 years later in life than previous generations, therefore owning homes and gaining equity seven to 10 years less.”

Boomers Enjoyed More Favorable Economic and Market Conditions

GOBankingRates spoke to experts who cited changing attitudes toward homeownership, the tendency of millennials to pursue other investments and the value they place on geographical freedom as reasons for their delayed entry into the market.

But many stayed on the sidelines for reasons that were beyond their control.

“The substantial gap in housing wealth between baby boomers and millennials isn’t merely a result of generational financial habits,” said Pete Evering, business development manager at Utopia Property Management. “It’s fundamentally driven by shifting economic realities.”

Affordable Housing and College Gave Boomers More To Put Toward Real Estate

The first factor that millennials couldn’t control is the soaring cost of housing as a percentage of income.

“Baby boomers entered the housing market when prices were more affordable and their properties appreciated over time,” Evering said. “In contrast, millennials often find themselves in markets where home prices have skyrocketed, making it increasingly challenging to purchase a home.”

The other big element is income growth, which has failed to keep pace with the rising cost of living and education.

“Stagnant wages, coupled with the burden of student loan debt, have hindered their ability to accumulate wealth and make homeownership a reality,” Evering said. “This isn’t merely a matter of financial choices but a reflection of the economic environment they face, characterized by high housing costs and economic uncertainties.”

It Takes Decades To Build Equity and One Loan To Lose It

Not only have millennials faced greater challenges and had less time to accumulate housing wealth, but they’re much more likely than their boomer parents to siphon off that wealth once they accumulate it. The Redfin report revealed a startling anomaly in the data. Even though millennials saw the biggest percentage gain in home values, they lost a staggering 18.2% of their home equity over the same period, more than any other generation by far.

“Baby boomers might have adhered to more conservative borrowing practices, while millennials could have faced economic pressures that led them to borrow against their equity or make costly housing decisions,” said Mike Qiu, licensed real estate agent and owner of Good As Sold Home Buyers.

Redfin surmises that millennials turned to home equity loans and lines of credit to pay off their student loans and credit card debt — borrowing to compensate for borrowing.

“These financial choices can significantly impact wealth accumulation over time, influencing the widening generational gap,” Qiu said.

Finally, the older set got a head start on equity just as it got a head start in years.

“Boomers were much more likely to purchase starter homes with significant down payments,” Walsh said. “Today’s buyers are much more likely to put down less than 20% on homes that are way more expensive.”

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This article originally appeared on GOBankingRates.com: Boomers vs. Millennials: How Their Housing Wealth Stacks Up

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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