Redfin: The demographic 'landscape has transformed' in the housing market as young families own less of the nation's 'large' housing stock

According to a report just published by Redfin, empty-nest baby boomers own 28% of the nation’s “large” homes, while millennials with kids own 14% of the nation’s “large” homes.

Large homes, as defined by Redfin, means homes with at least 3 bedrooms.

“The landscape has transformed over the last decade: 10 years ago, young families were just as likely as empty nesters to own large homes,” wrote researchers at Redfin. “Empty nesters take up a lot of large homes because affordability was better when they were young, and there’s no financial incentive to sell now: Most boomers own their homes free and clear, and most who have a mortgage have a low rate.”

In my view, three factors are at play.

1. America is getting older as the nation’s giant baby boomer generation ages, resulting in older Americans owning a larger share of the housing stock.

2. Societal changes have led younger Americans to do everything later, such as entering the workforce, getting married, having children, and buying homes.

3. This demographic shift is further influenced by strained housing affordability, as discussed below.

What caught my eye was the regional breakdown.

Among the 50 largest housing markets, millennials with kids own the highest share of “large homes” in markets like Indianapolis (17.6%), Minneapolis (17.4%), and Cincinnati (17.0%). While millennials with kids own the smallest share of “large homes” in markets like San Francisco (10.9%), San Jose (10.4%), and Los Angeles (9.4%).

The underlying reason for the regional variation, in my eyes, is pretty straightforward: housing affordability.

It's hard for most young adults to afford a big family, let alone a big house, in supply-constrained West Coast markets like Los Angeles and San Jose. That's less of a problem in more affordable Midwest markets like Indianapolis and Cincinnati.

Just look at the math.

In Indianapolis, it would’ve taken 28.9% of the median Indianapolis household income to cover the monthly principal and interest payment for a median-priced Indianapolis home in September.

In Los Angeles, it would’ve taken 76.5% of the median Los Angeles household income to cover the monthly principal and interest payment for a median-priced Los Angeles home in September.

Big picture: Millennials will remain one of the largest groups of homebuyers for years to come; however, with affordability strained, many young families are having to adjust their expectations. For some, that means delaying dreams of a bigger home and opting for something smaller.