Why older Americans are ‘aging in place’
According to Redfin, more than a quarter (27%) of baby boomers who aren’t planning to sell their home anytime soon said it’s because their home is completely or almost paid off, and roughly one in five (21%) said they are staying put because home prices are now too high.
In 1970, you could buy a house for $23,900, which was the median sales price at the start of the year. Even once that number is adjusted for inflation — which would be around $192,390 — that’s a lot less than the median sales price of a home in Q4 2023, which was $417,700. So, for baby boomers who’ve already paid off their home, there isn’t much financial incentive to sell.
Even if they want to downsize, they might be concerned about rising inflation and mortgage rates. Over the past few years, mortgage rates have been ticking up, with the average 30-year fixed mortgage now over the 7% mark. For someone heading into retirement, a higher mortgage rate could offset the returns on their retirement investments.
But finances aren’t the only reason baby boomers are staying put. More than half (51%) of those who aren’t planning to sell their home anytime soon say it’s because they like their home and have no reason to move. The fear of change can be a powerful force. A home is full of memories, so maybe they simply don’t want to move — even if they’re empty nesters in a three-bedroom house that’s too big for them. And they may not want to move away from their friends or neighborhood.
Even if they’d prefer the social aspect of a retirement community, that option can be expensive. The average cost of an independent living community ranges from $1,500 to $4,000 a month, depending on your state and region, per AssistedLiving.org. And an assisted living facility can cost even more, from $3,500 to $10,500 a month. If you’re planning to retire for 30+ years, that might not be an affordable option.
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Read MoreHow this impacts the US housing market
While aging in place has some benefits — after all, there’s currently serious staffing shortages in senior care centers — it’s also contributing to the current housing shortage in the U.S. There simply isn’t enough supply to meet the demand, which in turn negatively impacts affordability
The number of homes available for sale remained near historic lows in early 2023, according to Harvard's State of the Nation’s Housing 2023 report. A Redfin analysis found that empty-nest baby boomers own 28% of large homes (three bedrooms or more). Fourteen percent are owned by millennials with kids. And Gen Z with kids? Only 0.3% of large homes belong to this group.
It wasn’t always this way. Redfin says that young families were “just as likely as empty nesters to own large homes” just 10 years ago.
More than a decade of under-building has resulted in a growing shortage of new homes in U.S. housing markets, according to Realtor.com. The gap between single-family home constructions and household formations grew to 7.2 million homes between 2012 and 2023.
While baby boomers may have few financial incentives to move, they also don’t have a lot of safe, accessible and affordable options, other than moving in with friends or family members.There are calls to build more affordable homes in the U.S., and senior housing could be part of that mix. That, in turn, could free up large family homes for younger generations.
“In reality, many homeowners and renters will need to move somewhere that better meets their needs as they age, like a senior-living community or a one-story home in an accessible neighborhood. But the government isn’t prioritizing building housing for seniors, which is further encouraging older Americans to stay put, exacerbating the inventory shortage. Politicians should focus on expanding housing stock that meets the needs of older Americans, which could help with housing affordability and availability for all," said Redfin Chief Economist Daryl Fairweather.
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