When the baby boomers and Gen X sell their homes

Today's super-tight housing market might be masking an overabundance of homes on the horizon.

Driving the news: Demographic trends suggest we are in a "generational housing bubble," per research published by Indiana University's Phil Powell, a clinical associate professor, and Matt Kinghorn, a senior demographer.

Why it matters: Housing demand far outstrips supply, making it hard to find or afford a home, even in Central Indiana, which is known for affordability.

Yes, but: The pendulum will swing the other way "by the mid-2030s when the annual number of homes that seniors add back to the market is expected to be 40% higher than current levels," the authors write.

What they found: Demand for housing in Marion County has increased in recent years even as the population has ticked down.

• That's because new households — which can form when, for instance, roommates get their own homes or families separate — grew 2% per year between 2019 and 2021, more than double the rate of growth from 2013 to 2018.
• The housing crunch is "real and persistent," the authors write, yet the trend of households growing faster at a faster rate than the population "cannot be demographically sustained."
• As of 2021, half of Indianapolis-area homeowners were 55 or older, up 36% from 2001.

Meanwhile, millennials are entering the housing market with such vigor that the greatest short-term housing problem is affordability — as IU's Kinghorn recently wrote.

• Millennial homeowners, born from 1981 to 1996, outnumbered millennial renters for the first time last year, Axios' Kelly Tyko writes, despite creeping interest rates and a tight real estate market.

By the numbers: Millennial homeowners increased by 7.1 million between 2017 and 2022 to 18.2 million, a 64% increase, per a RentCafe report.

• Millennials make up the dominant renter generation, accounting for 17.2 million rentals.
• The average millennial bought their first home at 34, slightly older than the average age in past generations: boomers took the keys at 33 and Gen X at 32.

Reality check: Older generations still own more homes than millennials.

• Baby boomers, who were born from 1946 to 1964, own about 32.1 million homes as of 2022, but lost 354,000 homeowners in the past five years.
• Gen X, born from 1965 to 1980, own 24.4 million homes, an increase of 1.9 million.

The bottom line: Growing areas that attract young people — think Hamilton County — will be better positioned to sustain their housing markets in a decade than those with older, declining populations.