Whether you’re considering buying or selling a home these days, chances are you’re either a baby boomer, or one that supports you financially.
At $436,800, the median home US sale price It is still significantly higher than the $329,000 median price seen in the quarter just before the late winter 2020 period, when the Covid-19 pandemic hit.
And it continues to rise little by little: the monthly index of the housing market S&P CoreLogic Case-Shiller showed relative price increases for February, March and April.
“The ongoing recovery in house prices is broad-based,” Craig Lazzara, managing director of S&P DJI, said in a statement. The top 20 metropolitan markets posted monthly price increases in April, with 12 markets showing price acceleration, according to the report.
With affordability at near record lows and inventory still very limited, many shoppers, especially first-timers, will continue to find the market challenging for the foreseeable future, experts say.
Mortgage interest rates now around 7%. As a result, the average monthly payment (principal and interest) that a homebuyer can now expect to pay is almost $2,000, according to the National Association of Realtors — almost double the figure for 2020.
Buyers also need to make more money. An income of about $95,000 per year is needed to qualify for a 30-year mortgage with a 20% down payment (NAR calculations are based on a slightly lower estimate of current median home value).
“There will be no return to the 3% rates we had during the pandemic,” Bright MLS chief economist Lisa Sturtevant said in a statement on Thursday. “Homebuyers have had to accept the ‘new normal’ of rates around 6.5% or even slightly higher.”
Who is driving the current market rally?
To a large extent, they are cash buyers. These people can bypass mortgage rates entirely and buy a home directly at cost.
Last month, real estate data group Redfin reported the share of cash purchases had risen to a third of the entire US housing market, the highest level since 2014.
While the demographics of these shoppers may be mixed, there is overwhelming evidence that some baby boomers are an economic force behind these all-cash purchases, experts say.
“Some cash sales are coming from millennials, but they may be borrowing from ‘mom and pop’ or a relative,” said Taylor Marr, Redfin’s deputy chief economist.
Marr added that the homeownership rate for Gen Z adults (ages 18-27) has already surpassed the rate for Gen X (ages 44-59). that they owned homes while still in their 20s, a phenomenon that can also be attributed to an older generation stepping in to help their children become homeowners.
Some of these boomers have benefited from the skyrocketing value of their homes, leading to “historically high levels of real estate wealth,” Bright’s Sturtevant said in a follow-up interview.
“It’s not like most people are emptying their checking accounts,” Sturtevant said. “They are rolling over their real estate wealth.”
“There are millionaires and the 1%? Yes. But it has really trickled down to the middle class,” Sturtevant said.
Whether a baby boomer is in the buyer’s market looking to downsize or supporting a dependent, it is this group that has kept the housing market buoyant. The National Association of Realtors said in March that baby boomers now make up 39% of homebuyers, the most of any generation, and an increase from 29% last year.
“Baby boomers have the upper hand in the home buying market,” Jessica Lautz, deputy chief economist and vice president of research at NAR, said in a statement. “Most of them are repeat buyers who have home equity to propel them into their dream home, whether it’s a place to enjoy retirement or a home close to friends and family. They live healthier and longer and do home exchanges later in life.”
suburban rule
As with anything related to housing, the health of the market also depends on location. The monthly S&P CoreLogic Case-Shiller housing market index for April showed Miami, Chicago and Atlanta were posting the biggest year-over-year gains among the 20 big cities. Overall, 17 of the 20 cities reported lower prices in April on a 12-month basis, with Boston, San Francisco and Cleveland showing slight increases of 0.1%, 0.1% and 0.9%, respectively.
There’s also variation by density, with suburbs booming thanks to increased job demand for people in their prime earning years, like millennials, who are also starting homes and increasingly working from home.
New C.sample data ensus the percentage of US workers doing their work from home increased from 5.7% of workers in 2019 (about 9 million people) to 17.9% in 2021 (about 27.6 million people) , and about half of the homeworker cohort is now between the ages of 25 and 44.
That puts urban core areas at a certain disadvantage, Sturtevant said.
“As many people continue to work from home, commuting close to work is not attracting people back to cities,” he said, adding: “Cities have not and may never come back in terms of attracting the same level of buyers.
The suburban renaissance also reveals how millennials, now the largest overall demographic in the United States, have the same social preferences as their parents now that they have entered their parenting years.
“In 2018 or 2019, you would have said millennials would never move to the suburbs — it was all about going back to the city, to walkable neighborhoods, to conveniences,” Marr said, adding, “But now that they’re raising families and breaking ties with travel, there is less priority to be near a city center. People are now valuing space, a home office, a patio.
“So I think the typical housing life cycle, where you buy or rent a condo or a townhome, then once you start raising a family, you move to a larger space in the suburbs, that’s consistent. with each generation throughout the ages.
