Millennials may be the real winners of baby boomers’ pandemic wealth accumulation
Millennials own a small fraction of America’s real estate wealth, but that could change in the coming decade as they inherit trillions of dollars in property from their boomer parents.
This so-called “great wealth transfer” is expected to transfer more than $53 trillion in boomer assets to younger generations, according to Cerulli Associates, a Boston-based research firm.
Cerulli Associates estimates that a huge chunk of that transfer will be real estate and millennials will likely be the biggest beneficiaries.
Baby boomers today account for 41.5% of America’s real estate wealth. That’s nearly $19 trillion worth of property at today’s prices, according to Fed data analyzed by Creditnews Research.
A big part of that wealth was accumulated during the pandemic when demand for housing pushed up real estate prices to all-time highs.
Between 2020 and 2023, boomers saw their real estate wealth increase by 42% or $5.6 trillion. That's more than what millennials accumulated over the same period despite them being in their prime homebuying age.
Baby boomers have been snatching up homes since their mid-20s when mortgage rates were much higher. But even at higher rates, financing a home back then was much more affordable than it is today.
According to the Berkeley Economic Review, 45% of boomers purchased their first home between the ages of 25 and 34. That’s a big headstart compared to their millennial children.
“Millennials are buying houses seven to 10 years later in life than previous generations, therefore owning homes and gaining equity seven to 10 years less,” said Matt Walsh, a Virginia-based realtor.
Because of that, “millennials, on average, will never achieve the same housing wealth as the boomers.” Unless they inherit it.
Owning real estate is a lot harder these days
Despite lurking at the bottom of the real estate totem pole, millennials have consistently grown their real estate wealth over the years. Between 2020 and 2023, the value of their assets jumped from $3.69 trillion to $8.28 trillion.
But even after that rise, millennials account for just 18% of the country’s real estate wealth despite comprising more than one-third of the workforce.
According to Creditnews Research, younger generations like millennials and Gen Zers are having a much harder time buying real estate because of elevated mortgage rates, sky-high property values, and stagnant real wages.
Because of these factors, only 28% of homebuyers in 2023 were millennials—down from 43% the year before. Only 4% of the home purchases in 2023 came from Gen Zers.
And while mortgage rates are expected to decline in 2023, home prices probably won’t budge, analysts say. That’s because housing supply still remains critically low, according to the National Association of Realtors (NAR).
According to NAR data, housing inventory is currently at the lowest level since 1999. Real estate brokerage Redfin also reported just 5.4 million new listings in 2023—the lowest level on record and a 16.4% decline from 2022.
It’s not just real estate
The wealth gap between boomers and millennials isn’t limited to real estate. According to Fed data, boomers have accumulated a staggering $77.55 trillion in wealth as of the third quarter of 2023.
Perhaps surprisingly, real estate isn’t even their largest holding; it's stocks and mutual funds, constituting $20.18 trillion of boomers' wealth. Baby boomers also amassed $8.72 trillion in pension benefits and $8.05 trillion in business assets.
In comparison, the millennial generation has just over $20 trillion in assets, of which only $0.4 trillion is held in stocks. That could soon change as millennials inherit $53 trillion worth of boomers' nest eggs over the next decade.