The Unexpected Benefits of High Home Prices for Empty Nesters

Since 2020, high home prices have been blamed on a number of issues. These include supply chain shortages, sparse construction, and a lack of inventory. When inventory is discussed, the subject of baby boomers inevitably arises.

Twenty-seven percent of the adult population in the U.S. are baby boomers, and were born between the years 1946 and 1964. On the other hand, 28% of the adult population are millennials, born between 1981 and 1996. And yet, empty nest baby boomers own 28.2% of the homes with three or more bedrooms in the U.S., and millennials with children own just 14.2% of these same homes.

Before blaming baby boomers for holding onto their current homes rather than downsizing, let's examine why boomers are not moving and how new, higher home prices benefit them.

Monthly payments

Some baby boomers have lived in their homes long enough to pay them off, meaning 54% of those who own a home own it outright. Moreover, many of those who still owe money to their mortgage lenders took advantage of record-low interest rates during the pandemic to refinance their home loans.

With roughly 11,200 baby boomers retiring each day, it makes no sense to downsize into a home that will likely cost far more than they're paying now and deplete their checking accounts each month.

And lest you're tempted to believe that all baby boomers are in the same financial situation, consider this: Unlike the oldest retired boomers, most of those entering or nearing retirement now do not have pensions. By the time they hit the workforce, pensions were either being phased out or had already gone the way of the dodo. They may receive some Social Security, but they're on their own when it comes to making up the gaps in their monthly budgets.

Each segment of baby boomers had their own unique experience. For example, the oldest baby boomers went to college when it was relatively easy to pay as you go. But just 19 years later, by the time the youngest boomers filled college campuses, tuition costs had spiked dramatically. Many older boomers managed to take a job and remain with the same company until they retired. For the younger faction, one-third of all manufacturing jobs in the U.S. disappeared between 2000 and 2010, just as they entered middle age. Layoffs became the norm as the loss of manufacturing led to losses in dozens of other industries.

That's not to say that baby boomers are to be pitied. The generation born before 1964 has certainly faced fewer hurdles to higher education and housing than younger generations. However, it does help explain why the idea of leaving a home they can currently afford makes so little sense.

The benefit of high home prices: High home prices force empty nesters to triple-check their budgets before leaving a home with no mortgage or a very low mortgage balance left.

Stability during a time of change

If you've never been an empty nester, it may not occur to you how jarring the situation can be. Sure, you can walk around the house wearing nothing but a smile, but it's a huge transition. Couple that with the transition of retiring, and it can feel like the world is turning upside down.

As psychotherapist Richard B. Joelson wrote, life transitions are challenging because they force us to face the future with a feeling of vulnerability. When an empty nester finally retires, they can lose a sense of their identity, especially if they're leaving a job they were very dedicated to. Joelson says they can lose a sense of where they fit in the world.

The benefit of high home prices: Staying in place until home prices and interest rates cool enough to justify downsizing can provide stability during a time of transition.

Equity

For those empty nesters building their "forever home" or considering a move, high home prices mean getting more from their current home than they might have ever imagined.

And if they're going to hang around a bit longer, it means having more equity to tap if they need it. With enough equity in their home, an empty nester knows they can access a home equity loan if they're ever in a pinch.

The benefit of high home prices: A greater number of options for empty nesters, whether they eventually want to move or plan to remain in their homes as long as possible.

The phrase "empty nester" implies that the nest was once full. If that's the case, that means most empty nesters raised children. And as anyone with children knows, parents want the best for their kids, even when they're fully grown. Even though empty nesters are currently being blamed (partly) for the housing shortage, chances are most are anxious for a time when anyone who wants to buy a house can afford to do so.