Boomers Own a Third of All Housing Wealth—Here Are the Markets They Dominate

As baby boomers and older Americans age and begin to downsize, some cities are poised to see new housing become available to younger generations.

But the "silver tsunami" of home sales won't hit all cities in the same way. And, the instability roiling the market today could exact a toll of its own.

Boomers and the Silent Generation own an outsized share of the housing market, according to a census data analysis from the National Association of Home Builders. The 61.2 million Americans over 65 have a homeownership rate of 78.6%.

Boomers and older are just 18% of the U.S. population, but control a staggering 34.1% of the housing stock value—29.6 million homes and $13.8 trillion in housing value in all. And the decisions these boomers and Silent Generation members make in their retirement years stand to have a major impact on the housing markets where they dominate.

"Given the outsized share of homes occupied by baby boomers, the release of this housing stock will have a significant effect on housing markets," NAHB economist Catherine Koh wrote in the report. "However, the effect across regional markets will vary greatly depending on the prevalence of aging householders, migration patterns, and the severity of affordability constraints."

The 'silver tsunami' is coming, but probably not for your city

Retirement destinations in Florida dominate the top five metros of boomer and Silent Generation housing wealth.

Wildwood-The Villages tops all others with a 68.2% homeownership rate by households that are 65+. Nearby Homosassa Springs follows, then Punta Gorda and Sebastian-Vero Beach, with rates of 52.7%, 52.5% and 50.9%. Naples-Marco Island rounds out the top five, with 49%.

The next 10 metros feature three Arizona locales and one each in New Mexico and Massachusetts.

NAHB cross-referenced headship rates—the percentage of adults designated the head of household—with senior housing stock to determine where seniors are holding significant housing stock that younger people could absorb.

Many markets are a mismatch. For instance, expensive cities like New York, Los Angeles, and San Diego have high housing demand but a low exposure to older adults who can contribute to the supply. On the other side are retirement communities where a lot of seniors live but which aren't likely to be major economic drivers.

That leaves many cities where there are a lot of boomers and Silent Generation dwellers and are relatively affordable. Those with positive economic growth, like Raleigh-Durham, NC, will benefit from retirees moving and freeing up housing stock.

Others with flatter growth and economic potential, like Cleveland, actually risk local oversupply, because there aren't enough young people moving there to take up those homes.

And, NAHB determined that older people tend to live in older homes. So some of the housing stock they leave is best left for redevelopment.

Sentiment and pessimism

This news might be welcome to younger Americans, who are pessimistic about their housing prospects. Harris Poll released a survey this month that found 85% of Americans want to be homeowners. But 55% don't think they'll ever be able to afford to.

Consequently, 47% say they feel they've put their lives on pause because of housing costs, Harris found.

Realtor.com economist Joel Berner said these older homeowners have major incentives to stay in their homes. Think high mortgage rates and other tax advantages, as the appreciation in home values collides with fixed incomes. Indeed, Harris found 77% of Americans cited mortgage rates as a reason to stay put.

Berner agreed with NAHB that retiring seniors offer a steady source of relief in some affordable markets. But he believes the ultimate answer has to come from the supply side: building more homes.

"We've been discussing this silver tsunami for several years now, and it has yet to clearly come to bear," Berner said. "It appears to be more of a gently rising tide."

Policy ideas to get boomers moving

One policy proposal for encouraging seniors to downsize is altering the capital gains tax exclusion. It currently lets sellers exclude up to $250,000 in profit if single, or $500,000 if married and filing jointly, when they sell a primary home, with few strings attached.

But since Congress didn't tie that number to inflation when it set the scheme in 1997, the rise in home values "locks in" long-term homeowners. Last year, NAR estimated that 1 in 3 homeowners have built up more home equity than the capital gains exclusion. It expected that number would grow to 56% by 2030.

Rep. Jimmy Panetta, a California Democrat on the House Ways and Means Committee, introduced a bill to double the limit, allowing home sellers a much larger tax exemption. Over 110 co-sponsors have signed on to his More Homes on the Market Act.

At a January NAR event, several policy experts dissected the challenges of altering the limit, which could have major implications on tax revenue for the federal budget.

Michael Kelley, senior director of the Bipartisan Policy Center, said that a targeted measure, such as for older adults motivated to downsize, is smarter. They are locked in to homes where they raised their children, and where new young families want to buy.

"It could help some of these first-time homebuyers who are eligible and ready to get into the market," Kelley said. "It probably doesn't work in every city, every county, every state."

Berner also said expanding the tax exemption could bolster housing stock.

"This is an outdated figure that is keeping homeowners who have been in place for a long time and seen major home value appreciation from selling," Berner said. "Boosting this exclusion would help free up some long-locked-up inventory."