The ‘silver tsunami’ is about to hit the housing market—but millennials and Gen Zers may not come out any better in the wash

In terms of the housing market, baby boomers pretty much have it made. They own homes worth a whopping $18 trillion combined, compared to just about $5 trillion for millennials as of the first quarter of 2023, according to a Redfin report released in August.

But a big change is on the horizon for the housing market, says an analyst who also predicted the financial crisis of 2008. Meredith Whitney, deemed the “Oracle of Wall Street” by Bloomberg, says a “silver tsunami” of baby boomers will start downsizing next year and 2025. Citing an AARP report, Whitney said 51% of people over the age of 50 are set to downsize to smaller homes. That would bring more than 30 million housing units to the market, she said during Yahoo Finance’s Invest Conference on Tuesday. 

“You’ll see a supply-demand dynamic shift,” the founder and CEO of Whitney Advisory Group said. “I think it’s rate agnostic because older people have lower mortgages, if any mortgage at all.”

Millennials and Gen Zers who are desperate to break into the housing market may breathe a sigh of relief at that prediction—although it would be premature. The mass downsizing isn’t expected to happen for the next year or two, plus there are factors aside from baby boomer competition locking younger generations out of buying a house. Other economists argue that this phenomenon will happen over a decade. This means that many millennials will miss out on any lower home prices resulting from the silver tsunami, Mark Fleming, chief economist with Fortune 500 financial services company First American, told MarketWatch. Two-decade-high mortgage rates and escalating home prices are really what has kept these two generations out of the housing market—and, for many, parked at their parents’ homes. 

Indeed, the housing market has gotten so expensive that 20% of millennials and 68% of Gen Zers still live with other family members, according to a RentCafe report released Monday. And of those who report living with family, about a third say they plan to stay there for at least two to five years. The typical millennial living with family shares the home with three or four other people and is more likely to be employed in lower-paying jobs such as food services, construction, or education, the report shows.

“Overall, millennials are slower when it comes to leaving the nest compared to previous generations: 18% of baby boomers and 17% of Gen X were living with their parents at the same age as today’s average millennials,” according to the report. “Younger generations may find it more appealing to continue living in the parental home in order to save money on expenses, such as child care costs, utility bills, rent or a future down payment.” 

This trend is largely happening in the most expensive housing markets, including Los Angeles and New York City, the report said. As of October, the median price for sold homes in Los Angeles was $968,000, and New York City was $705,000, according to Assuming a 20% down payment and current mortgage rates of 7.5% to 8%, buying a home in these markets is out of reach for many people. 

Could a silver tsunami fix the housing affordability crisis for younger generations?

But even with all the money younger generations are saving by living at home with their baby boomer parents, it’s often still not enough to get into the high-priced housing market. In fact, every two in five Gen Zers and millennials who are planning to buy a home in the next year  work side hustles in order to save up for a down payment, a Redfin study shows. Plus, some millennials have even started asking for down payment cash on their wedding registry.

That’s because home prices are still out of reach for these generations. The median-priced home in the U.S. costs more than $311,000, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, meaning a homebuyer putting down a standard 20% would need more than $62,000 to put an offer on a house.

Although a silver tsunami may tip the supply-demand scale, it doesn’t solve the problem of housing affordability. There still may not be enough younger buyers who can afford to purchase a home when the silver tsunami starts.

“That’s why prices have got to come down to be commensurate with rates,” Whitney said. “There’s a mismatch here.”

Another complication is that while some baby boomers will downsize into retirement communities, others  shift to  smaller homes—i.e. the starter homes that younger generations want. That could continue to push millennials and Gen Zers out of the housing market and further drive up starter home prices.  In the end, the ones with the most cash—likely the boomers—will win out.

“There’s a big overlap between select baby boomers and select millennials,” Ali Wolf, chief economist at Zonda, a distributor of housing market data and consulting, previously told Fortune’s Chloe Berger, “The key difference here is that the baby boomer will likely be able to tap home equity by selling their existing home, allowing them to perhaps make a more compelling offer on the home compared to the millennials, especially if the latter group are still renting.”

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