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**Don’t Count on “Inherited Homes” to Boost Housing Supply**
The aftermath of the Great Financial Crisis left behind a significant number of vacant single-family homes across the United States. Simultaneously, new home construction—particularly entry-level homes—came to a virtual halt. Although housing inventory has increased in recent years, market analysts note that a notable shortage persists.
Economists have speculated that aging Baby Boomers might eventually flood the market with homes as they downsize or pass away, a phenomenon coined the “Silver Tsunami.” Yet, this predicted wave of housing supply has yet to materialize. According to Cotality Principal Economist Matt Delventhal, it appears that rather than selling, many Boomers are holding onto their homes longer—or bequeathing them to their heirs. These “inherited homes,” passed from deceased homeowners to their family members, are now playing a growing role in the housing market.
“The anticipated ‘Silver Tsunami’ of housing supply will be delayed as seniors age in place and hold on to their historic volume of homes for longer periods,” Delventhal explained. Rather than freeing up inventory, these properties are often inherited and removed from the traditional resale cycle.
**Inherited Homes and Their Market Impact**
Delventhal noted that inherited homes represent a “relatively steady source of supply” that is less susceptible to the fluctuations in construction and resale activity. This trend has been increasing over the past several years, primarily due to the size of the Baby Boomer generation—the largest senior age cohort in U.S. history.
Unlike the Silent Generation, which typically transferred homeownership between the ages of 65 and 75, Baby Boomers are increasingly choosing to remain in place. “Today’s seniors are holding on to their houses longer, effectively freezing the anticipated flow of supply,” a recent Cotality report states.
Several reasons are behind this generational trend. For one, there are simply more Boomers than Silents. “People born in 1948 have approximately the same homeownership rate as those born in 1938, but over 50% more babies were born in 1948 than ten years earlier,” Delventhal pointed out. Over time, the cumulative effect of larger birth cohorts results in a significantly higher number of homes held by older Americans.
There are also financial and policy-based incentives to retain property. The high cost of long-term care makes staying in one’s home a financially strategic decision for many seniors. Additionally, state-specific tax structures play a role. For instance, California’s Proposition 13 limits property tax increases to 2% annually, regardless of market value. This property tax cap can even be passed to children or grandchildren, provided the home is their primary residence and falls under certain valuation limits.
“The proposition tends to disincentivize owners of all ages from selling,” Delventhal added.
**The Takeaway and Outlook**
While Cotality’s data does not detail whether heirs occupy, rent, or sell inherited homes, Delventhal believes the trend is clear: Baby Boomers and older Gen-Xers are holding onto homes—and intend to pass them down, not sell them. This aging-in-place phenomenon eliminates a once-anticipated source of market supply.
“I think that the potential for an aging population to change housing markets over the next few decades is poorly understood,” Delventhal stated. “The rising share of inheritance in property transfers is an indicator that the landscape is changing, and I think it needs more study.”
In conclusion, anyone expecting a boost in housing supply from inherited homes may need to adjust their outlook. The shift in generational behavior, policy incentives, and demographic trends suggest that the housing market will have to look elsewhere to resolve its inventory challenges.
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