Baby boomers and millennials, the two largest generations of Americans, often clash on the environment, social consciousness and politics.
They also battle to buy houses – specifically single-family and starter homes and low-maintenance condominiums.
Boomers, it seems, want to downsize at the same time their children and grandchildren are trying to buy their first homes.
With both generations vying for what is a limited inventory on the market, the result is high demand that has sellers receiving multiple bids – sometimes above list price – and the losing bidders walking away dazed, deposit check in hand.
It’s a scenario playing out in some markets in the Greater Lehigh Valley and the country, depending on location and availability, as both generations – each numbering more than 75 million – look for housing for the next decade.
“There are similar search criteria between the baby boomer and the millennial and a similar property type desired by both demographics,” said Brad Patt, senior vice president of Berkshire Hathaway HomeServices Fox & Roach Realtors, Lower Macungie Township.
And if millennials cannot find the starter homes they are seeking, if they can afford it they move up to the middle section of the market, competing with boomers looking to downsize, said Brian Schaitkin, senior economist with The Conference Board, New York.
“In terms of baby boomers who are downsizing into those mid-range homes, how that plays out is going to depend on market to market,” he said.
According to the Pew Research Center, in 2016 the millennial population surpassed the number of baby boomers as the largest generation in the U.S., totaling 79.8 million between 18 and 35. Millennials also comprise the largest group of homebuyers (34 percent), according to the National Association of Realtors, based in Washington, D.C.
While boomers – ages 53 to 71 – still account for the largest number of households in the U.S., that will change as millennials increasingly enter the market.
“What we’ve seen over the past few years is that, coming out of the housing bubble, millennials were a key driver of increased growth, especially when you get into 2012 through 2014, where household formulation growth picks up as a result of some delayed pent-up demand by millennials,” Schaitkin said. “As they are forming households, they are also purchasing houses.
“Over the last year or two, that pent-up demand factor has slowed. So you have seen a slow-down in the housing market not in terms of prices but in terms of activity, in terms of residential construction.”
MORE DEMAND FOR EXISTING HOMES
The slowdown of residential construction has created increased demand for existing homes.
According to a Joint Center for Housing Studies of Harvard University study, millennials in their 20s and 30s now search for starter homes. On the opposite side of the aging spectrum, baby boomers will be looking for retirement homes and smaller single-family homes as they downsize.
A recent report by Trulia found more search activity for starter homes than what is available on the market.
Some observers believe the changing needs of millennials and baby boomers will drive the housing market through the roof in the next 10 years.
Depending on the location and housing stock available, demand from both generations today vying for similar-priced properties has created multiple bid scenarios and higher sales prices.
LOCATION OVER SPACE
Schaitkin doesn’t think the boomer-millennial dynamic occurs on a national level. While some boomers may downsize in markets where they live, others may relocate closer to children or to retirement destinations such as Florida or Arizona.
“It’s a matter of location choice,” he said. “Millennial homebuyers are likely to value convenience more than space, the ability to be near desirable locations, in many cases more urban areas, over having a backyard. … As a result, that’s going to curtail location choice.
Schaitkin said it’s more of a preference for location over space and amenities.
“That is going to drive how housing prices evolve,” he said. “And that’s also going to depend on how it is that the most desired metropolitan areas deal with zoning regulations as demand increases to live in those areas.”
Zoning played a role when millennials Meredith and Don Hudak and their six children relocated from Oklahoma to Mahoning Township, Carbon County.
“When we were looking for a home, we were looking within a 45-minute-to-an-hour drive to his family. Close, but not too close,” Meredith Hudak said.
“I own a pot-belly pig, so finding somewhere that would accept my pig as a pet and not a farm animal was extremely important. Mahoning [Township] is very farmer and animal friendly.”
Location was one priority for the Hudaks, who moved from a 2,300-square-foot home with four bedrooms, two bathrooms and a one-car garage on about a half-acre of land to a 2,700-square-foot home with five bedrooms, two bathrooms and a five-car garage on 1.59 acres.
The property is in a suburban area within minutes of shopping and other desired amenities.
“I love the schools here,” Meredith Hudak said. “This is the best move educationally for my children I could have made. There is so much to do, family oriented wise. It’s very refreshing.”
With six children 4 to 15, the Hudaks also wanted a place with enough space to entertain friends and parents.
A Lehigh County baby boomer couple wanted less space.
Richard and Betty Oertner sold their 2,800 square-foot, four-bedroom, split-level home in Slatington. The couple wanted to move closer to their children after a health issue and the need for health insurance benefits changed their priorities.
“My wife decided she wanted to buy an older and smaller home because there’s only the two of us,” said Richard Oertner. “My children are gone. When you have kids, you want to have as much room for them as you can.”
Like the millennials, Oertner and his wife enjoy activities and amenities of small-town living. The couple bought a 1,200-square-foot, two-bedroom 1937 Cape Cod in Palmerton, which is closer to where their children live.
‘The taxes are quite a bit [less] in the home we purchased compared to what we had, about $4,000 difference,” Oertner said. “My wife and I are on a fixed income. There’s no reason for us to have a big home anymore.”
LESS EXPENSIVE HOME
The Oertners represent one group of baby boomers downsizing to live more comfortably with lower financial responsibilities.
“We actually don’t see as much of a downsize for the baby boomers as we used to,” said Jessica Lautz of the National Association of Realtors. “Our baby boomers are typically buying a space that’s a little bit smaller than what they had in the past.
“What they do downsize on is price, and also buying a newer home than they are moving from. When they downsize on price is really when you start impacting the low inventory because millennials and boomers who are downsizing on price would be competing for a similar type of property.”
According to Lautz, the most popular home for all generations is a single-family, detached home with about 1,800 square feet in a small town or rural area.
“We also see that affordability is absolutely at play here,” she said. “So you may want to live in a city center if you don’t or even if you do have children.
“Unfortunately, it’s very expensive, and there is very limited inventory to do that.”
Limited inventory and tight affordability represent key drivers in the residential real estate industry today, Lautz said.
“The high demand for any property on the market that is affordably priced is causing the prices to increase,” Lautz said. “In some communities, it’s common for multiple bids on properties that are affordably priced where there would be high demand and really not enough inventory to go around for those buyers.
“We do see that boomers may want to stay in their family home and may opt to put off downsizing for the time being. That in itself could constrict inventory.”
Patt of Berkshire Hathaway HomeServices Fox & Roach noted some of the similar-type properties in demand he sees from both generations.
“[Baby boomers] are looking to downsize to perhaps condo amenities where they can turn the key and leave on the weekend and have grounds maintained, the exterior of the property maintained,” he said. “[Millennials] want the ability to travel on weekends. They want the ability to have a carefree lifestyle when it comes to housing.
“By that, I mean there would be the maintained, condo-type solution where they can just turn the key on the weekend and go travel.”
Another professional who has seen that trend for some time yet sees similarities and differences between those desires.
“They are looking for different types of homes in most cases,” said Bill Sands, broker with Sands & Co. Real Estate, Wyomissing. “The millennials … want the condition of the home to be move-in ready and love when a home has the technology already in place.
“They want to have it pre-wired for their sounds and their technology. They want smart-home technology. They want things like thermostat and light … garage doors that can open through their smartphone.”
ONE FLOOR VS. TWO FLOORS
According to Sands, both generations desire maintenance-free living with an open floor concept and walk-in amenities and put a high value on being near medical and recreational facilities.
“Millennials are looking for that upgrade, that savvy, open-floor plan that new and more vibrant look,” he said. “Baby boomers are looking for that, too, but they are looking for it on one-floor living, where millennials are definitely looking for more of a two-story, different than a retirement-type home.
“They are very different profiles of what appeals to each of those audiences. I don’t think you’re going to see one compete with the other in the same market for the same inventory.”
Another agent agrees with Sands.
“A lot of the baby boomers are downsizing,” said Sandi Meisse, associate broker with ReMAX Results, Sciota, Monroe County. “They want one level, of course, and they are trying to get closer to their families.”
She said there are a lot of first-time homebuyers in the market.
“Some of them are vying for the same properties,” Meisse said. “Baby boomers are looking more for one-levels. Millennials and first-time homebuyers, they like two stories more than they like one-levels.
“So, if they can get something in their budget that has more than one level, they like that, where the baby boomers are looking for the ranches. They tend to like different things, not so much competition, not as much as one would think.”