Boomers Thrived with Homeownership, Their Kids Set to Prosper Too

Homeownership has traditionally been seen as a reliable way to accumulate wealth, and recent studies have further highlighted how beneficial this has been for the Baby Boomer generation.

A report unveiled on Thursday by mortgage backer Freddie Mac highlights the economic influence of the substantial post-war cohort. By 2024, the Baby Boomers—those born from 1946 to 1964—comprised 65 million people or 20% of the U.S. population. They represent 36% of all homeowner households in the nation.

As this group progresses in age and eventually passes away, the resulting “Silver Tsunami” is expected to generate what Freddie Mac analysts have termed a “Wave of Wealth” to their offspring and other beneficiaries.

Key insights from the report include:

Baby Boomers possess half of the home equity in the United States, which totals up to $17.3 trillion according to data from the Federal Reserve. A survey conducted by Freddie earlier in the year revealed that 75% of participants plan to bequeath their home or its sale proceeds to their descendants or relatives. Only a small fraction, 9%, plan to use their home equity to support their retirement.

There is a stark contrast in retirement confidence between homeowners and renters. About 70% of homeowners surveyed feel confident about enjoying a financially comfortable retirement, in contrast to just 42% of renters. Earlier research from the Aspen Institute indicated that renters’ median net worth is approximately $10,400, significantly lower than the $400,000 average net worth of homeowners.

The majority of survey participants also acknowledged the role of fixed-rate mortgages in wealth accumulation. Half of the respondents have already paid off their mortgage. Of those still making payments, over half—53%—benefit from an interest rate below 4%.

Some studies suggest that Baby Boomers may have had more favorable circumstances compared to current aspiring homeowners. Even though fixed-rate mortgages help stabilize principal and interest payments, the costs of property insurance and taxes are consuming a larger portion of monthly housing expenses, which continue to rise.

Industry innovations, including mortgage products developed by Freddie Mac, strive to assist Boomers and their heirs in managing various aspects of aging.

For instance, Freddie Mac’s CHOICERenovation and CHOICEReno eXPress mortgage options could be advantageous for elderly homeowners interested in staying in their primary residence with necessary modifications, or even adding an accessory dwelling unit, often referred to as a “granny flat” or “in-law unit.”