When boomers ‘age out’ of their homes, this is who will benefit the most. It’s not their children.

As boomers age and move to more senior-friendly housing, or pass away, their homes will be freed up. But since that process will likely take up to a decade, millennials — who are coming into their prime home-buying years now — will likely miss out on the so-called silver tsunami of homes hitting the market, Mark Fleming, chief economist at First American, told MarketWatch in an interview at the Mortgage Bankers’ Association’s annual conference in Philadelphia, Pa. 

The U.S. housing market today is facing a shortage of homes as homeowners hold out selling their current homes so they can hang onto mortgages with ultra-low rates. A lack of inventory is pushing home prices up, which alongside 30-year mortgage rates inching closer to 8%, is straining buying power.

Aging boomers may be a source of supply — but only in the longer-term.

“That aging out will begin to pick up pace as baby boomers get into their 70s or 80s,” Fleming said. “It will be a big source of supply, maybe not in the next five or 10 years but in the next decade.”

“America is growing older, with baby boomer homeowners totaling 32 million as of 2019 and increasingly becoming a larger source of existing homes for sale — 4.4 million units annually — as they transition to other housing options or pass away,” Gary V. Engelhardt, professor of economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University, said in a report.

So “we have a sort of a generational mismatch,” Fleming said. “What would have been more ideal would have been if baby boomers aged out earlier to be a source of supply for their own children.” 

Millennials, generally considered to be those born between 1981 and 1996, are now 27 to 42 years old. The Gen Z generation is considered to be people age 11 to 27. Gen X — people age 43 to 58 — is in the mix too, but because it’s a smaller generation, “it makes much less of a demographic difference in housing,” Fleming noted.

These are the cities where the ‘silver tsunami’ will create housing inventory

The cities most likely to see the biggest effects from homeowners aging out include retirement hubs like Miami, Orlando, Tampa, and Tucson, as well as places where young residents have left such as Cleveland, Dayton, Knoxville, and Pittsburgh, according to data from Zillow from 2019.

For members of Gen Z keeping a watchful eye out for boomers aging out of their Florida homes, Zillow’s senior economist Jeff Tucker had one key piece of advice.

“Rapidly rising insurance and maintenance costs, as well as declining availability of homeowners’ insurance, are adding a one-two punch on top of higher housing costs there,” he explained.

“More flooding and extreme weather events in 15 to 20 years could exacerbate those problems, especially for folks who can’t afford major weatherproofing projects and high insurance costs,” he added.

The silver tsunami comes with some caveats

Tucker also said that he’s not as enthusiastic about older homeowners being a viable source of housing supply because of where their homes are.

“Broadly, yes the silver tsunami is likely to help ease the inventory crunch, but with some big caveats: One is that the locations of homes likely to come to market in the silver tsunami are a bit out of sync with recent migration trends,” Tucker said. 

Many of the homes that boomers will leave are in “markets that have had weak or declining population growth for at least a generation,” such as the Northeast or the Midwest, he added. “That won’t help affordability in many of the major markets where affordability is the tightest.”

Nonetheless, if remote work persists, some affordable real-estate markets in those regions could become more attractive to home buyers, and so “demand and supply may be a closer match than it currently appears,” Tucker said.