Boomers Can't Sell Their Homes and It's About to Get Worse

America's demographics have just flipped. Millennials are broke. Gen Z doesn't want the suburbs, and the foreign buyers are disappearing. Now, tens of thousands of boomers are waking up to homes that they can't sell.

They're too large and are built for a population that simply just doesn't exist anymore. So, let's jump into what has been going on with this boomer panic, especially here in Florida. The reality is that the boomers are freaking out and they can't let their real estate values go down because that is where the majority of their wealth is trapped. Apparently, from the statistics that I have seen, 3.2% of boomers are considered net worth millionaires.

The majority of boomers have their net worth trapped in their house as a form of equity. This chart is really interesting. It comes from the Federal Reserve Board in Goldman Sachs Global Investment Research and it basically shows that baby boomers along with the silent generation control about 70% of household equity in full mutual fund ownership by for real estate which is absolutely crazy. And look at Gen X and and the millennials.

There's a lot of money that's going to be transferring to the next generation over the next 10 to 15 years. And it's going to make a a massive change for housing moving forward in terms of the size of housing. And then how will first-time home buyers compete against the baby boomers who are downsizing? The boomers hold the most real estate assets out of any generation.

This chart comes from realtor.com. They put out a great report with tons of data in it. But as you can see, the silent and earlier generations are at 4.38 trillion. The baby boomer generation is at 19.51 trillion.

Gen X is doing okay at 14.14 and the millennials are at 9.9. Obviously, this has to do with the longevity and the time frame that the house was purchased, but 38% of homeowners in Florida are boomers or or older and that wealth will likely transfer to the next generation within the next decade. According to studies is about 40 to 80% of boomers or older will pass away and transition out of their house in the next decade from here on out. So when we look at where the retirees hold the most of that real estate wealth, pretty interesting.

Florida comes up as one of the top spots with five of the top 10 metros u holding the most real estate wealth. They are in Florida and you could see this is South Florida and on the most of these are on the water but the reality is that a lot of these retirees also don't have that much of savings as I mentioned earlier 3.2% 2% of them are millionaires. So, it's these extraordinary houses that are worth, you know, 20, 30, $40 million that are owned in cash where a lot of people own their wealth. But that is not the majority of boomers.

The majority of boomers rely upon the equity in their house to fund, you know, their daily lives. They get home equity lines of credit and things like that. So, what happens when real estate asset prices come down or real estate becomes so unaffordable when they want to sell or downsize? They can't because there's no buyers at that price point that can afford it.

The next generation simply cannot afford it. The reality is that the boomer transfer of wealth will be absolutely insane. So baby boomers and older generations are responsible for 81% of all upcoming wealth transfers. 100 trillion out of a projected 124 trillion.

Although millennials will accumulate the largest share of that, Gen X is expected to m inherit more in the near term about 14 trillion over the next 10 years compared to the millennials. When we look deeper into this, the timing highlights by 2045 the majority of that will be passed down. Some of that going to charity in the next generation about 18.8 trillion in real estate assets alone in the next decade will transfer hands. This is a massive real estate transfer.

The question will be who is going to purchase those homes? Will the people who inherit the homes keep them? Probably not. They they often don't live in the same area or the same state and will need to be sold or even renovated.

And that's a huge opportunity for flippers if they can flip and find the next target market. This is a Wall Street Journal article that came out in 2019. It says, "Okay, Boomer, who's going to buy your 21 million homes?" That's the estimate of homes that they can see coming on the market moving forward. And sellers are freaking out.

I can tell you right now, there's boomers who are looking to sell in my neighborhood that I live in and they can't find buyers for them. The buyers for them are only people who can relocate from California or New York and are used to those type of prices and are totally okay purchasing mostly in cash or at least 50% of their down payment cash and have a low payment. That is unfortunately not the majority of people. The majority of people who live here locally are completely priced out of the market and that's a huge problem.

So if more and more boomers pass away and their houses are vacant, who are they going to sell to if it's not somebody relocating here? There's just not going to be enough demand to fill this massive amount of supply that'll be coming on in the next decade or so. So we call this the silver tsunami. Even Birkshshire Hathaway is commenting on this about the demographics.

So, if you're in real estate and you're not talking about talking about demographics, it's one of the most important things that you'll see play out in the next 10 to 15 years. Between 13.1 and 14.6 million boomers will abandon home ownership from 2026 to 2036, raising housing industry fears that such a large inventory of homes could lead to price collapses. This is definitely true in Florida specifically. And the article says, "As baby boomers age, they're expected to leave behind homes that many prospective buyers won't be able to afford.

This could shake the already tenuous housing market as demand among older and younger home buyers shift towards smaller affordable homes. We are absolutely seeing this. Homes that are, you know, 1,200 to 2,000 square feet are getting gobbled up. But the ones that are 3,000 plus square feet, especially since most home buyers aren't even, you know, a lot of people we talked to today aren't having as family household formation.

They're not having kids and they don't need the larger square footage. First-time home buyers won't want to buy these bigger, outdated houses from the baby boomers, nor do they have the money to be able to do so. So, as affordability deteriorates, the listings will sit idle. We're already seeing this in Florida.

Of course, we're having a shift, a downshift from the the period of time that prices just went up 52% in the last 5 years. And the inventory will will lead to collapse. But they will compete. This is a really important part to understand.

BA baby boomers will compete and win against other firsttime home buyers in the marketplace as they downsize because they will have the larger down payment and they'll be more okay paying more of their money to get the house that they want because they're nearing the end of their life. So experts anticipate that when baby boomers finally decide to relocate from retirement, sell their houses in Mass, it will worsen the housing affordability crisis for younger generations because this will push up the prices of those firsttime home buyer houses, those smaller units. As the boomers sell their houses and purchase smaller homes with cash, they are inadvertently making it harder for firsttime home buyers and lower income buyers to compete. Millennials and Gen Z will need to compete for homes with senior baby boomers, Gen Xers approaching retirement, and even the institutional investors like Black Rockck, which owns upwards of 60,000 residential homes in its portfolio.

This is exactly why you see American Homes for Rent Progress homes, First Key. These companies went out there and purchased properties in that 1,200 to 2,000 square foot price range. They track these demographic changes over a period of time. They know what's coming and they're way ahead of you, 10 steps ahead of where you are today.

So, look, this is some this is a phenomenon we are seeing right now play out in Florida. Home sellers are so fed up with cutting their list prices because that's the majority of their wealth in their real estate. They're just yanking their homes off of the market altogether and they're just saying, "I'm just going to I'm just going to stay here. Maybe I'll just stay here.

I won't move close to family. If I can't get the equity out of the house, they won't be able to buy a new house and so they just stay put because they're on often pensions or fixed income or living off of their 401k some or some combination of the two or three and they're just staying they're like I I can't change things right now and they're praying that the market will get better but every indication uh in the market is shooting up red flares saying nothing's really going to get better in the next 12 to 24 months. So they're just sitting still and they're living in an area where maybe they don't want to live because of this issue. So buyers aren't stubb stubborn.

They're actually just priced out. So the American housing market is in a deep freeze. Even lower prices aren't going to convince stubborn buyers. We're seeing this left and right.

Actually, we're coaching our real estate agents. You know, if the if the seller is not truly motivated, don't even bother taking the listing. You need to understand why they're actually selling because this is happening left and right. They're pulling their property off of the market.

They're dropping their price to the lowest comp in the area and it's still not getting any traction. And then they're dropping it below all the actives in the area and they're still not getting any traction. The reality is you have to cut your price, the price of your home to such a low level that it makes it feel like it's an insanely good deal for you to be able to sell your house today. Or it has to have a unique factor like there's a lake in the back, the pool is beautiful, the lot is amazing, it's a highly desired neighborhood.

If it is not perfect mint condition, you better believe buyers are going to negotiate like crazy with you because now they have so many options that they did not have before. And I wouldn't say that the buyers are stubborn. They're just priced out and fed up with the situation. And they're older, by the way.

The buyers who are buying right now are much older than in the past, and they're first-time home buyers a lot older. So median age of the home buyer right now is above 55 years old, which is crazy. It used to be around 30. And the first-time home buyer age is 38 years old, up from 30.

So, first-time home buyers are waiting longer to buy because they can't afford the prices with today's mortgage rate. And any home buyer who's buying right now, it's basically near a boomer. Boomers are 61 years older plus. You know, basically people right on the cusp there are the ones who are buying.

Maybe they're selling a house and then buying another one. And we see that a lot. A lot of downsizing happening which again is pushing out those first-time home buyers and they're competing. We see some first, you know, of these properties be purchased all cash.

It's like either a home buyer that's 38 years old loaded up with debt and can barely afford, you know, to rub two nickels together to get their deal across the finish line or it's somebody who's got full cash offers and they have a house contingency because they have to sell their larger house to move into one that they're downsizing into. So, we're seeing this change. It's also pushing, you know, people back from household formation, from having kids. When they don't buy their first house, they wait longer to have their kids as well.

The reality is that it's an affordability crisis. 52 million people cannot afford a house over $200,000. So, if you're a seller listening to this, you need to get real. Like, there's less buyers for your price point.

A lot of sellers I talk to who are in the $5 to $700,000 price point, they are just not aware of this information. They don't understand that it's so unaffordable to people at today's mortgage rate. And one way to talk to a seller and let them know is like this is what the mortgage payment is on your house today. Do who do you think is actually going to be able to purchase this and pay that type of payment?

It's certainly not going to be, you know, this bottom, you know, 52 million people out there who are eligible home buyers that just can't afford that that level of payment. So the again home buyers are getting completely priced out especially the locals here. The people who are buying are going to be those people relocating or selling one house they have equity in and moving into another one and purchasing it cash. As you know we are in a monster bubble.

This is inflationadjusted home prices. We are way beyond the 2006 2007208 bubble. And we have this new bubble that was completely Fed induced. And it's a speculative bubble because we had so many investors drive up the prices in such a short period of time with demographic changes and migration changes.

Well, migration is down 80% from the peak to Florida. We're normalizing. Okay, it's not that bad. We're normalizing.

There are still people relocating here, but it's slowing down and there's some people who are relocating out. Florida is a very unique state where we do go through boom bus cycles. So that's very possible in my opinion we'll see Florida real estate prices come down 35% from the peak over the next 3 to four years coming back to normal which is badly needed. We need affordability here.

We need the next generations to be able to invest in properties here, fix them up and you know be a be part of the community. You act differently when you're an owner than when you're a renter. Uh and you care more about the community and you start thinking more long term when you're an owner versus when you're a renter, which is good. The south specifically is seeing this massive inventory spike.

This part of this is that the builders thought that the demand was going to last forever, right? This heightened level of demand. The reality is the people who wanted to move here had just moved up their move, you know, two to three years in advance. And so there's this massive purchasing period and now it's reversing going back to normal.

But here in Florida, you can see that we're already 22% above the preandemic level. So, you know, we are in a position where we can continue to see inventory rise very, very rapidly. This is just the inventory for sale. This comes from the Reventure app.

Great data on that platform. And I think we'll continue to see inventory continue to skyrocket and maybe double the prepandemic levels that we've seen. Uh that's definitely a possibility. The only reason that wouldn't happen is because prices chase down quickly.

And we think that prices again will come down over the next uh 12 to 24 months even if the Fed somehow figures out how to reduce rates uh you know working with Powell which I don't believe will happen. I think we'll likely see one or two rate cuts this year but it's not going to be 300 basis points as uh as President Trump says. I think you know we are at all-time highs for most asset classes. So, I don't think that there's any reason to really push mortgage rates down when only six states out of the entire country are really feeling this shift in housing.

And Florida is one of the worst. Texas is the worst. And then Florida is right behind it. And then we see some other areas like Arizona, South Carolina, North Carolina, Colorado, and areas of California.

So, Florida's rough. This is where the baby's boomer baby boomers wealth is. This is where they're it's crazy. So you could see, you know, if if five spots here are where the wealth is and this is and prices are coming down, then boomers wealth is basically evaporating very quickly.

Thankfully, the stock market is keeping up. If if we saw real estate prices come down and the stock market come down, I think the boomers would be freaking out a lot more than they are right now. But they are freaking out about their house values and they are listing it for 6 months, not getting any bites because they're unrealistic on the price and then they're taking the property off of the market. So, the question is, who will buy these houses longterm?

This is something that we think about a lot is who's going to be that next buyer for the 3,00 to 3500 uh foot home. Maybe it's somebody who gets an inheritance, but will inheritance really change much of what's going on when you know when you think about people who win the lottery, they end up just spending it all the way that they had before. That was the way that's their habit. I don't think that just inheriting wealth will mean that they'll keep it.

Most people just buy the car, buy the house, buy buy, etc. But that doesn't mean they're going to buy the house in the same area that the property was sold. So if the property is sold in Florida and then they move to some other state, then the the wealth transfer is actually moving out of Florida and then we have a vacancy. So I think the most likely situation, just like most heirs, they'll spend all their money into consumerism.

The banks will get control of all that money back. They'll sell more of this stuff and, you know, it's it's going to be unfortunate, but that's just how the case is. And then will money flow out of Florida's larger houses? I think so.

I think there was only a certain number of people who will relocate here that'll have the wealth to be able to purchase these larger houses. And they they do like the larger houses. The problem is that the boomers will be passing away faster than people will move here and move into those larger houses. So that's my prediction.

And I appreciate you watching. What do you think? Do you think that this silver tsunami is going to absolutely decimate the Florida housing market? I think it will long term.

I'm bullish on properties that are in good neighborhoods that are 1,200 to 2,000 square feet, but these larger houses I'm no longer bullish on. I think that the demand and the affordability issues are just not are just not going to make that happen. Would love to hear from you. If you have any questions, let me know.

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Look forward to connecting with you more. Thanks so much.