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The National Association of Realtors recently published its annual Home Buyers and Sellers Generational Trends Report for 2023.

The report provides insights into generational trends as well as characteristics of home buyers and sellers over the survey period. Our team at Zonda dove into the 137-page report to identify the most salient takeaways for the home building industry.

Shifting Buyers

The primary motivating factors for home buyers included equity transfer, life stage changes, and migration.

  • The barbell of demographics led buying activity. Millennials may be the largest living generation, but baby boomers accounted for the greatest share of purchases in the report (millennials ranked second). Boomers bought nearly 40% of all homes during the survey period. The cohort was split between younger boomers, aged 58 to 67, and older boomers, aged 68 to76, with the former representing 23% of transactions and the latter 16%.
  • The true value of equity. Accrual of equity since the Great Financial Crisis has proven to be a boon for older generations. By having purchased homes earlier, homeowners were able to enjoy the run-up in home prices. While it is true that move-up/move-down options got more expensive as well, many older homeowners have paid off their homes entirely and were able to roll those gains into an all-cash or high down payment purchase, avoiding or mitigating the negative impacts of rising mortgage rates.
  • Baby chaser migration. The large equity accumulated has motivated many boomers to sell their long-tenured homes to relocate to where their millennial children have started families, a concept Zonda has coined as “baby chasing.” The move is supported by a key life stage catalyst boomers are experiencing—retirement.
  • The conversion to home ownership has slowed for many millennials. Millennials accounted for the second largest share of buyers in the latest report. Formerly, the No. 1 buying cohort from 2014 to 2021, millennials have been disproportionately impacted by the affordability crunch relative to their older counterparts. Potential first-time buyers faced headwinds in both down payment and monthly mortgage payments, with mortgage rates remaining above 7%.

Importance of Nontraditional Buyers

The housing market over the past year was largely driven by repeat buyers but also drew strength from nontraditional buyer groups.

The 2023 survey saw the lowest share of married couples purchasing homes since 2010, highlighting the shifting cultural norms. However, the necessity of dual incomes remains.

  • Younger millennial buyers, those aged 24 to 32, were most likely to be living together unmarried, a group that made up 12% of home buyers.
  • Single females also accounted for a notable share of buyers, ranking second overall in home buyer distribution only behind married couples. Single females were the largest buyer group among 18- to 23-year-olds and made up over 20% of the older boomer cohort.
  • Multigenerational homeownership accounted for 14% of purchases. Owners of multigenerational homes often purchase this product to support aging parents, to allow space for adult children to return, and/or to provide some affordability relief with more people chipping into the mortgage. The last point is especially true for those born outside the United States where co-housing is more culturally common.

All three groups (unmarried couples, single females, and multigenerational households) can continue to positively impact 2024 home sales, and builders should be attentive to their significance as we move into the new year.

Pride of Ownership Helps Drive Sales

The American dream of homeownership was still alive and well among 2023 respondents. The top answer among those surveyed for the primary reason to purchase a home for all buyers was “desire to own a home” at 22%. The answer was most common among the younger cohorts sampled, remaining the top answer up to Gen X. The largest share was seen among younger millennials at 47%. For the older generations, the largest driver was moving closer to family and friends (baby chasing) as well as life stage changes like retirement allowing for freedom to move elsewhere.

1,500 to 2,000 Square Feet Is the Sweet Spot

As prices appreciated over the last several years, many buyers needed to adjust their expectations in their purchase to afford a home. One place that we saw this was with home size. According to the NAR survey, the median square footage of homes sold was 1,800, with the most common range of homes purchased between 1,501 and 2,000 square feet. For context, the median square footage of homes sold in the 2019 survey was 1,900.

The size of homes purchased varied by age group as young buyers looked for smaller, more affordable properties, while Gen X bought the largest homes. These move-up buyers have benefited from equity accumulation and more flexibility brought on by hybrid work. The median square foot of a home purchased for Gen X was 1,970. Boomers and the silent generation ticked down from their Gen X counterparts as they sought smaller homes in better locations that suit their move-down lifestyle, at 1,800 and 1,600, respectively.

Zonda's data illustrated a similar trend in the new-home market. Average new square footage has shrunk nearly 10% since 2018, with the declines seen in the vast majority of top markets over that period. In 2023, 70% of the 50 biggest new-home markets had an average minimum unit size falling into the 1,501- to 2,000-square-foot range.

Selling for Life Stage and Lifestyle Reasons

Baby boomers not only accounted for the biggest buying group but also made up the majority of sellers. Young boomers were the largest sellers at 30%. When combined with older boomers, the total cohort share surpassed 50%.

Both boomer cohorts shared similar reasons for selling—the desire to move closer to their families and the freedom to relocate due to retirement. Another common reason cited was their previous neighborhood had become less desirable, which ranked in the top three for every age group.

Importantly, the younger generations cite “home is too small” as their key reason to sell. While the lock-in effect inhibits transactions in the market, a new baby and/or a marriage can sometimes be enough of a push to get a homeowner to sell and move.