A frozen tsunami: why inherited homes won't solve the housing crisis

This trend is most pronounced in California, where the tax system rewards keeping homes in the family, easing the transfer from long-time owners to their heirs. There, property tax increases over 2% per year are prohibited, regardless of the change in the market value of the home. That tax exemption canbe inherited by children and grandchildren on the first $1M of inherited real estate value given that the property is used as a primary residence and continuously lived in.  

It's clear that these laws create a significant financial incentive for beneficiaries to hold onto the inherited home and use it as a primary residence, effectively locking potential supply out of the open market. Nearly 60,000 Golden State properties were inherited in 2025, accounting for 18% of all property transfers, another record-breaking number (see Chart 2). For the first time ever in California, that is more than twice the number of new homes sold.

California inheritance transfers

^{Data source: Cotality, 2025}

^{The bar height represents total property transfers observed from September of the previous year through August of the year indicated on the x-axis. Percentages within the bar indicate the share of a specific transfer type for that year.}

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At first glance, the increase in inheritances seems to validate the "Silver Tsunami" hypothesis. But Cotality's deeper analysis of U.S. Census data reveals that such optimism may be unfounded. Today's seniors are holding onto their houses longer, effectively freezing the anticipated flow of supply.

The U.S. Baby Boomer generation is the largest group of seniors in the United States on record, and they own a historic number of houses. At age 65, people born in 1948 owned 50% more houses than those born just ten years earlier at the same age (see Chart 3).  

Total houses owned (by birth cohort)

^{Data source: U.S. Census American Community Survey*}

^{The sample is the set of households where the younger of either the household head or their spouse was born in one of the four indicated years, and which are recorded as owning the home they live in. The line chart tracks the total number of households held as that cohort ages (smoothed by calculating a 5-year centered moving average).}

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Critically, they are also more likely to age in place. More than 22% of homeowners born in 1938 left their homes between the ages of 65 and 75. That rate drops sharply for homeowners born in 1946 — only 17% of whom left their homes during the same 10-year period of life (see Chart 4).

Share of age 65 homes still owned

^{Data source: U.S. Census American Community Survey*}

^{The sample is the set of households where the younger of either the household head or their spouse was born in one of the four indicated years, and which are recorded as owning the home they live in. The line chart tracks the ratio between the number of households at the current age, and the number of households at age 65 (smoothed by calculating a 5-year centered moving average).}

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Aging in place slows the natural cycle of downsizing, moving in with family, and ultimately passing homes to the next generation. This delays the long-predicted wave of housing supply from arriving on the open market, and in many cases, those homes will skip the open market entirely.

There will still be beneficiaries from the surplus of housing held by seniors. With homes being inherited during a low affordability era, compounded by policies such as California's tax incentives that encourage heirs to use an inherited property as their primary residence, more heirs will choose to keep and live in those homes.  

Policymakers hoping to improve affordability cannot count on demographic destiny to save the day. While inheritance can be a lifeline for some families coping with historically high housing costs, those waiting on inheritances to rebalance supply and demand are likely to be left out in the cold. If America wants supply, we must build it.