Boomers Can't Take Their Houses With Them
- Adam Kirby
- Aug 15
- 4 min read
Updated: 7 days ago
(and their heirs can't afford to live in them)
by Adam Kirby
Is the United States on the precipice of a real estate collapse? Let's walk through a brief analysis of demographics and economic reality.
It is both widely circulated and accepted that Generation X is the first generation of Americans to fare worse over all than their immediate predecessors, the Baby Boomer generation. Who are the Boomers? If we accept the Strauss/Howe demarcation of the beginning of the Baby Boom generation at V-J Day, September, 1945 (the end of WWII), and ending in January 1964 (post-JFK assassination), then by this convention, the oldest Boomers started turning 79 in September, 2024.
Why is this date important to our analysis? According to the National Center for Health Statistics [NCHS], the average life expectancy in the United States is 79 years, as of 2024. The World Health Organization has published similar numbers.
So, given the Strauss/Howe convention, the end of Q4 2022 to the beginning of Q1 2023 is right around when Baby Boomers began hitting average life expectancy. This correlates with what may be the beginning of a long-term downward trend in median house prices (See below).
Median sales price of a single family dwelling sold in the U.S. peaked in Q4, 2022, at approximately $430,000. Q1 2023 is where the downward fluctuation in U.S. housing began.
The Generational Income Gap
How does this all tie into a potential real estate collapse? In August 1971, then-President Nixon severed the dollar from the gold standard, thus terminating the last vestiges of sound money policy in the U.S. During the previous year (1970), the median home price was at an all-time low at around $25,000 (nominal dollars), with median household income marked at around $11,000.
At the end of the sound money era, Baby Boomers entered their mid-twenties, their prime home-buying age, at a time when houses were at their most affordable relative to their income - at a home-price ratio of approximately 2.3. Boomers only had to borrow a little more than twice their annual income on average in order to become first-time home owners.
Baby Boomers had the great fortune of being able to ride a fifty-year bull market in housing to soaring highs, extracting equity, buying second, even third homes, and enjoying the fruits of a very prosperous half-century run. Over that period, the median home price of a single-family dwelling skyrocketed from the 1970 all-time low of $25,000 to an all-time high of $430,000 in 2024 - an increase of over 17x. During that same time frame, wages only increased approximately 9x. (See: The Visual Capitalist)
The 2024 home-price ratio exploded to 5.1, meaning, a Gen-X or Millennial first-time home buyer in 2024 would have to borrow over 5x their annual income in order to become a home owner.
As a tail-end Gen-Xer myself, I find it highly irrational to pursue ownership in the United States. I don't cling to the belief that doing so is still the most ideal path to building - or maintaining - wealth, given these dismal numbers. But markets always find creative ways to redirect capital when points of friction emerge.
The Impending Sell-Off
As Baby Boomers reach the end of their lives and begin passing away, their progeny face a serious economic dilemma - would they rather 1.) assume direct ownership of their childhood homes and pay the rising annual property tax, assuming they want the legal hassle of converting those properties into rentals and then finding decent tenants; 2.) just put the houses on the market and sell as quickly as possible.
It's not unreasonable to assume that option 2 would be overwhelmingly preferred, considering the enormous and worsening income disparity - the more risk-averse younger generations are struggling hard enough to cover expenses and have few viable options for investing slim surpluses that have a net return above the rate of inflation. Neither do they have a large enough bundle of cash to make a down payment on a home more affordable than simply renting.
As the infographic below demonstrates, the highest income quintile has benefited the most over the last fifty years, and for everyone else, it looks and feels like the ladder has been pulled up.
The Time to Pivot Out is Now
It's impossible to predict how deep and long the incoming housing bear market will be, but for those Boomers, and to a lesser extent, the most affluent Gen-Xers and Millennials who see the writing on the wall, there is an opportunity to be first movers into foreign real estate markets that have the jurisdictional, cultural and economic robustness to help inoculate their wealth from the deflationary effects of this pending recession.
Of those foreign markets, Costa Rica is particularly attractive. The crown jewel of Central America, Costa Rica is a peaceful, stable democracy with 25% of their land mass under permanent environmental protection - meaning the government's conservationist policy has created an artificial scarcity in land suitable for development. As a result, clear-titled land for building and private ownership is at a premium, creating price support for the local real estate market over the long-term. Given Costa Rica's openness to foreign investment, demand from multiple foreign markets including China, Germany, the Netherlands, Spain, and others, remains strong.
If building something new is an attractive hedging prospect for you, one such locale to consider is the Maitri Park development, nestled in the Caribbean chocolate forests of Puerto Viejo:
For more information about this unique building opportunity in Costa Rica, contact Tejanos Properties.
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