Longer Homeownership Impacts Housing Market

A recent report from real estate brokerage Redfin sheds light on a significant trend: older Americans are increasingly choosing to age in place, significantly impacting the housing market dynamics and making it challenging for prospective buyers to find affordable homes.

According to the analysis, the average homeowner tenure has doubled over the past two decades, with U.S. homeowners now spending an average of nearly 12 years in their homes, up from 6.5 years twenty years ago. Notably, approximately 40% of baby boomers have resided in their homes for over two decades, while another 16% have stayed for 10-19 years.

Financial incentives play a crucial role in motivating older homeowners to remain in their residences. Over half of baby boomers (54%) own their homes outright, with no outstanding mortgage, leading to a median monthly homeownership cost of just over $600. Moreover, those with mortgages typically benefit from significantly lower interest rates compared to current market rates.

Certain state tax policies further encourage homeowners to stay put, with measures such as property tax deferrals for seniors in Texas and property tax limitations under California’s Proposition 13. Consequently, Californian homeowners, in particular, tend to stay in their homes the longest, with Los Angeles and San Jose residents averaging nearly two decades of tenure.

However, the trend of extended homeowner tenure has contributed to a shortage of housing inventory, driving prices higher and creating challenges for first-time buyers. In 2023, existing home sales hit a 28-year low, while median prices reached record highs.

Looking ahead, Redfin anticipates homeowner tenure to remain relatively stable or experience slight increases in the coming years. While home sales may see a modest uptick, the overall pace is expected to be gradual, posing continued challenges for prospective buyers navigating a competitive and inventory-constrained market.