US Homeowners Reap Rewards Amidst Downscaling Trends
Despite a notable decline in US home sales, homeowners contemplating downsizing may find themselves benefiting from robust price gains, as highlighted by Skylar Olsen, the Chief Economist at Zillow. Olsen characterized these homeowners as “lucky” due to the substantial appreciation in their property values, drawing a parallel to winning a lottery.
To provide context, the US housing market has experienced a remarkable surge, with its value increasing by approximately 50% since January 2020, reaching nearly $52 trillion today, according to Zillow’s recent report.
California leads as the most valuable housing market in the US, boasting a market worth over $10 trillion, constituting nearly 20% of the national total. Other top-ranking US housing markets in terms of value, as identified by Zillow, include Florida, New York, Texas, and New Jersey.
The median price of an existing home in the US has risen by nearly 53% since January 2020, climbing from $266,300 to $407,100 in August 2023, according to the National Association of Realtors (NAR). However, higher home prices and mortgage rates have resulted in a decline in home sales, plummeting from about 6.6 million homes per year in late 2020 to approximately 4 million homes per year, as reported by the NAR.
Nonetheless, the remarkable price appreciation has created an opportunity for some homeowners to downsize without incurring additional debt. Olsen further emphasized that the “luckiest” home sellers would be those who can comfortably purchase their next home without the need for a mortgage.
It’s worth noting that older homeowners are more likely to own their homes mortgage-free. In 2021, nearly 78% of individuals who owned their homes without a mortgage were aged 55 and older, according to the most recent data from the US Census Bureau. Additionally, research conducted by the NAR in March revealed that baby boomers aged 58 to 76 played a significant role in both selling and buying homes.
In 2022, 52% of home sellers belonged to the baby boomer generation, marking an increase from 42% in 2021. Furthermore, they were the largest group of homebuyers, accounting for 39% of all home purchases in 2022, compared to 29% in the previous year.
The surge in home prices and strong demand from baby boomers had the unintended consequence of limiting access to the housing market for many millennials. In 2022, only 28% of homebuyers were millennials, a significant decrease from 43% in the preceding year, as reported by Insider in April.