How Much Boomers Paid for Their First Homes vs. Home Prices Now
The dream of homeownership is now out of reach for many Americans, with the average home value at over $361,000, according to Zillow. Things were much different when baby boomers were buying homes, and most members of this generation (61%) are currently homeowners, a recent Clever Real Estate survey found.
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Here’s a look at how much boomers paid for their first homes.
Nearly 2 in 3 Boomers Paid Less Than $100,000 for Their First Homes
The amount boomers paid for their first homes is a steal compared to what homes cost today. According to the Clever survey, here’s how much boomer homeowners paid for their first homes:
34% paid less than $50,000
30% paid $50,000 to $99,999
23% paid $100,000 to $199,999
12% paid $200,000 or more
“Though there’s a lot at play in the housing market, one thing I see as a big potential culprit for housing prices spiking so much since the days boomers first bought homes is the rate of housing construction,” said Nick Pisano, data writer for Clever Real Estate.
“Throughout the 1970s and 1980s, America was building a tremendous amount of new homes compared to the last 15 years, post-Great Recession. Only briefly in 2021 and 2022 did we reach the level of housing starts that was common throughout the 1970s and 1980s, while most of the 2010s saw just a fraction of that amount. As America’s population has continued to grow, it forced a larger and larger pool of potential homebuyers to compete for a relatively smaller group of homes.”
Another factor that drove up prices was the comparably low interest rates that extended from the Great Recession through 2020.
“The long period of low interest rates helped reduce borrowing costs for buyers, increasing demand for homes and pushing up prices,” Pisano said.
Read More: These 5 Cities Are Becoming Unpopular With Baby Boomers
A final factor is the lack of housing supply, particularly in in-demand areas.
“We’ve seen a pretty dramatic change in where people are choosing to live since the time boomers were buying their first homes,” Pisano said. “Especially in fast-growing cities, there’s a big mismatch between the housing available and the demand for homes from new residents.”
Inflation has also played a role in the rise of housing prices, but home prices have far outpaced the inflation rate.
“Prices of most things have increased significantly since the 1970s and 1980s, though there’s no denying the cost of housing has grown faster than average,” Pisano said.
Why Homes Have Become Unaffordable Since Boomers’ Buying Era
The majority of boomers were earning less than $40,000 at the time they bought their first homes, the study found — 23% earned less than $20,000, 20% earned between $20,000 and $29,999, and 18% earned between $30,000 and $39,999. Still, homes were relatively affordable in relation to salaries for some boomers.
There are other factors that also have contributed to housing becoming less affordable since the time boomers were buying their first homes.
“One thing that may be at play in the wake of the COVID-19 pandemic is the number of households,” Pisano said. “More adults are living alone compared to roommates or family, and more households forming at the same time inventory is relatively low will naturally push up prices.
“In addition, as rent prices have spiked in many markets, would-be buyers may be having a tougher time saving up the money for down payments and closing costs,” he continued. “However, it’s important to note that ‘unaffordable’ can be a bit subjective. Other research has suggested that, as a percentage of the typical income, boomers actually paid more than millennials and Gen Zers, due to lower salaries and often higher interest rates.”
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