ARI SHAPIRO, HOST:
Everywhere you turn, it feels like prices are rising and life is getting more expensive. So we're digging into why and how consumers are coping. It's part of NPR's series, Cost of Living: The Price We Pay. This week we're looking at the crisis in housing affordability. One idea floating around is that the silver-tsunami generation will come to the rescue. We're talking baby boomers and empty nesters putting their homes on the market, boosting supply and bringing home prices down. But as Wailin Wong and Darian Woods with our daily economics podcast The Indicator report, it's not that simple.
WAILIN WONG, BYLINE: I don't know what your weekend plans are, Darian, but I do know where you are likely to find Orphe Divounguy. He's a senior economist at Zillow.
ORPHE DIVOUNGUY: I personally look at the housing market all the time. I love housing. That's why I work at Zillow (laughter). And so I'm the kind of guy that takes my kids to look at housing on the weekends.
DARIAN WOODS, BYLINE: And over at Zillow, Orphe and his colleagues have been wrestling with a big topic.
DIVOUNGUY: We have a massive affordability challenge across the country, and so we're looking for solutions.
WONG: And there was one fix that Orphe kept hearing about from people in the housing industry - that silver tsunami.
DIVOUNGUY: Older individuals are expected to either downsize - right? - or when they move on and pass the home on to their kids, potentially, their kids would not want to live in these older, bigger homes, and actually put them on the market for sale. And so a lot of people have thought, maybe if we get the silver tsunami, maybe affordability could improve.
WOODS: Orphe says that as of 2022, about 16% of households in the U.S. were empty nests. This is defined as households where people are at least 55 years old, do not live with any children, have at least two extra bedrooms and have been living there for at least a decade.
WONG: Orphe also calculates that the number of empty-nest households in the U.S. is more than double the number of families that need housing.
WOODS: So just looking at the nationwide figures, you might think, great, these downsizing empty nesters can sell their homes to families that need housing. But Orphe says, not so fast.
DIVOUNGUY: Most of these empty-nest households are located in places that are relatively more affordable already.
WONG: Topping the list was Pittsburgh. Over 20% of households there are empty nesters. Others on the list include Buffalo, Cleveland, St. Louis and Detroit.
WOODS: These metro areas are already some of the most affordable in the country. Zillow Research shows that in those cities we mentioned, more than half of the homes listed for sale are considered affordable.
WONG: Orphe says cities that are considered unaffordable are places like San Jose, Denver and Portland. These cities are located pretty far away from where the empty-nest households are. They're also where younger people tend to move in search of job opportunities. As a result, a lot of coastal cities have a relatively high proportion of Gen Z or millennial households. That translates to fewer empty-nest households than the national average.
DIVOUNGUY: For now, I think most people prefer to be in New York, Seattle, Los Angeles, San Diego, San Jose, especially young workers in search of the highest-paying jobs, which are basically in the tech industry and the financial sector.
WOODS: So there's this geographical mismatch at play here. Even if downsizing empty nesters put their homes on the market, they'll be selling in cities that are already relatively affordable and where younger workers aren't choosing to move.
WONG: Orphe points out a couple other potential snags in the silver-tsunami solution.
WOODS: One is that many of these older homeowners either have a low mortgage rate or they already paid off their homes. Right now, mortgage rates are still over 6%, even with the Federal Reserve lowering interest rates. If these empty nesters sell, that could mean taking on higher mortgage costs for a new home.
WONG: Not a great financial move for a retiree who might be on a fixed income. Another issue is where empty nesters who do sell end up moving to.
DIVOUNGUY: A lot of these older folks, they probably would want to live closer to their grandchildren. Where? On the coasts.
WOODS: In other words, they could end up in expensive areas, and that could actually add to the upward pressure on housing prices.
WONG: Wailin Wong.
WOODS: Darian Woods, NPR News.
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