Baby boomers are winning the housing market again with all-cash purchases

• Wealthy Americans have a bigger advantage than usual in today's housing market.
• All-cash purchases of homes is on the rise, especially among baby boomers.
• Cash purchases are a huge advantage, especially when home inventory is low.

With their $75 trillion nest egg, baby boomers have helped the US economy with their spending. And now they're using a portion of that wealth to exploit a struggling housing market.

During the early stages of the pandemic, boomers appeared to be content with "aging in place," staying in their homes and remodeling instead. However, recent research from the National Association of Realtors found that 39% of all home buyers now are boomers.

Additionally, boomers are circumventing high mortgage interest rates with all-cash purchases, pushing cash-poor buyers aside and jumping to the front of the line when buying a home.

Among younger boomers, aged 58 to 67, the number making all-cash home purchases in 2023 is 32%, up from 22% in 2022, according to the National Association of Realtors. The jump is even more pronounced for older boomers, aged 68 to 76, with 51% buying a home without a mortgage, up from 32% the year before.

Overall, 34.1% of US home purchases in September were made in cash, according to Redfin. That's up from 29.5% a year earlier and the highest rate since 2014.

Redfin noted that wealthier Americans have a bigger advantage than usual in today's housing market, and no generation is more affluent than boomers.

"Affluent Americans are the only ones who can avoid the sting of high mortgage rates," said Redfin senior economist Sheharyar Bokhari. "Plus, they're spending less on housing and keeping more money in the bank because they're avoiding interest payments."

Nearly 18% of the US population is 65 or older, the highest level since the Census Bureau began tracking the rate in 1920. However, boomers have about half of the combined net worth in the US, according to the Federal Reserve.

About 24% of that wealth ($19 trillion) is in real estate — more than the $16 trillion boomers have in pensions and just behind the $21 trillion they have in stocks. In addition, they have fewer financial burdens than younger generations, including less consumer debt, and are less likely to be impacted by student loan payments.

Owning a home makes it a lot easier to buy a home

The impact of using real estate wealth and equity to buy homes can also be seen in the decrease of first-time homebuyers.

According to an earlier National Association of Realtors report in November, repeat buyers — people who have previously purchased a home — now make up 68% of all purchases. Since 1981, the average for this group was 62%.

In addition, the average age for a repeat buyer this year was 58, right on the cusp of boomers, who are aged between 59 and 77.

"We are still talking about an incredibly difficult market for first-time buyers to enter, even if there's slightly less competition," National Association of Realtors' deputy chief economist Jessica Lautz wrote in the report. "If there's a multi-offer situation, an all-cash buyer or someone who has a lot of equity is likely to win. And that person is going to be older."

Boomers are more likely to own a home already, and 68% of adults 70 years and older are mortgage-free.

Even if boomers are not using all-cash offers, they can afford higher down payments, which can counteract some of the burden of higher mortgage interest rates.

According to Redfin, the median down payment for a house in September was $60,980, up about 15% from a year earlier and the biggest jump since June 2022.

What's more, the average down payment for a repeat buyer was 19%, compared to just 8% for first-timers, according to the National Association of Realtors.

Millennials are getting shoved aside

If the boomers are winning the housing market, there must be a loser. Increasingly, that looks to be millennials.

Millennials, who are aged 26 to 42, have been hit hard financially. Additionally, they are facing a market with high interest rates and low inventory.

In 2022, millennials were the largest generation of homebuyers, accounting for 43% of all purchases. But that number fell to 28% this year.

Millennials, who are typically first-time homebuyers, are also entering the market at an older age now. According to Bankrate, the average age of first-time homebuyers is now 36, up from 33 in 2022. This delays their opportunity to build home equity and grow their overall net worth.

On the other hand, buying real estate now puts boomers in a perfect place to build even more wealth the next time prices rise.

Assuming that demand and prices will rise again in the second half of 2024, when the Federal Reserve may begin to lower interest rates, now is the time to buy a house if interest rates are not a concern. And for many boomers, they are not.