**Don’t Count on “Inherited Homes” to Boost Housing Supply**
*Matt Delventhal*
The Great Financial Crisis left behind a landscape of vacant single-family homes and halted the construction of new housing—particularly entry-level options. Although housing supply has increased in recent years, it remains insufficient to meet demand.
Analysts once hoped that aging Baby Boomers would eventually offload their properties in a surge of listings referred to as the “Silver Tsunami.” This influx of homes was expected to help balance the market. However, that wave of supply has yet to materialize. Instead, according to Cotality Principal Economist Matt Delventhal, what the industry is experiencing is a rise in inherited homes—homes passed down to heirs when owners pass away.
“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,” noted a recent article by Delventhal published by Cotality. As a result, the homes that might have been sold on the open market are instead being inherited and remain within families.
**Inherited Homes and the Real Estate Market**
Delventhal explains that inherited homes have become a relatively stable source of housing supply, one that is less volatile than residential resales or new construction. This supply has grown steadily over the past decade, largely due to the sheer size of the Baby Boomer population—the largest senior generation in U.S. history.
But unlike the Silent Generation before them, many Baby Boomers are choosing to remain in their homes well past traditional retirement age. “Today’s seniors are holding on to their houses longer, effectively freezing the anticipated flow of supply,” the Cotality report stated.
There are several reasons behind this trend. For one, the Baby Boomer demographic is significantly larger than the Silent Generation. “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 noted. Over time, this adds up to a much larger group of homeowners.
Rising long-term care costs and state-specific policies also play a role. For example, in California, Proposition 13 limits property tax increases to 2% annually regardless of market value. This benefit can pass to children and grandchildren—up to $1 million in real estate value—if they use the property as their primary residence. Delventhal points out that this disincentivizes the sale of homes, making homeowners more likely to pass their property down rather than list it for sale.
**Looking Ahead: The Aging Population and Housing Supply**
While the Cotality report does not explore whether inherited homes are then sold, lived in, or retained by the heirs, it’s clear that inheritance does not immediately translate into greater market supply. Moreover, not all states have tax structures like California’s Proposition 13, and local laws can affect decisions on inheritance and property transfer.
Delventhal believes that many Baby Boomers and older members of Gen X are likely to hold onto their homes and eventually pass them to heirs. This aging-in-place trend means fewer homes entering the open market.
“I think that the potential for an aging population to change housing markets over the next few decades is poorly understood,” he said. “The rising share of inheritance in property transfers is an indicator that the landscape is changing, and I think it needs more study.”
In summary, the so-called “Silver Tsunami” may not provide the housing inventory relief many experts were expecting. Instead, inherited homes are becoming a long-term fixture—more a demographic shift than a market correction.
