Older Homeowners Hold Record Equity, but Rising Bills Could Leave Less for Their Heirs

Older Americans are expected to pass down trillions in housing wealth, but new data shows that the rising costs of homeownership may be threatening that inheritance.

Homeowners aged 65 and older had the highest cost-burden rate of any age group in 2024, with 28% spending more than 30% of their income on housing and utilities, according to the Harvard Joint Center for Housing Studies’ State of the Nation’s Housing 2026 report.

It’s the hidden tension behind the roughly $19 trillion in equity held by baby boomers alone: A home can be worth hundreds of thousands of dollars even while its owner lacks the income needed to keep up with the bills that come with holding it.

“Incomes are certainly constrained for this group, which is mostly why the cost-burdened rate is so high," explains Joel Berner, senior economist at Realtor.com®. "But it is true that the cost of ownership is increasing for older homeowners in a disproportionate way."

Already, there are signs that some owners are turning to their equity to make up the difference. Nearly 28,000 homeowners took out an FHA-insured reverse mortgage in fiscal year 2025, up from about 26,500 a year earlier, according to the Department of Housing and Urban Development.

For heirs, the complication is what those choices leave behind. Every dollar borrowed against the house (along with interest and fees) reduces the equity available when the home is eventually sold or transferred.

That's why Bruce Ailion, a real estate agent with more than four decades of experience, says inheritances may be smaller than younger generations are anticipating.

“The Great Wealth Transfer is not going to be as you would think," he says. "So most heirs, don’t hold your breath."

Why older homeowners are especially exposed

The number of cost-burdened homeowner households rose by 4 million from 2019 to 2024, reaching 20.7 million, the report found.

Older owners face a particularly punishing version of that squeeze. Many paid off their mortgages or locked in low payments years ago, but their everyday bills have kept rising as their incomes stay fixed.

“Though many of these older owners have paid off their homes, the costs that remain (insurance, utilities, property taxes, maintenance) are growing quickly,” says Berner.

To his point, the report found that property taxes rose 31% nationally between 2019 and 2025, while average monthly homeowners insurance premiums jumped 72%. And residential electricity costs rose more than 30% from 2020 to 2025.

That creates a perverse dynamic for longtime owners, says Berner.

“Home appreciation made them wealthy on paper, but without the additional liquidity to cover the expenses of homeownership,” he explains. “A geographic mix is in play as well, as insurance rates have been growing fastest in climate-exposed places like Florida, where older Americans are likely to live.”

And the data may understate where those expenses are headed. Berner says tax assessments are still catching up to the price gains of 2021 and 2022, while a shortage of skilled labor is pushing up repair and replacement costs.

Why selling may not preserve the nest egg

In the past, downsizing might have offered a way to cut those costs. But Berner argues that selling may also threaten the wealth that many older owners hoped to preserve.

“Rising carrying costs should be pushing older homeowners to downsize, but many are locked in by the looming threat of a capital gains tax liability,” he says. “Many are in a 'damned if you do, damned if you don't' position, where affording to keep the home is stretching them thin, but the large tax bill from selling keeps them from doing so.”

About 13.1 million homeowner households have unrealized gains above the federal home-sale capital-gains exclusion, according to research from the National Association of Realtors®. That means a sale could trigger a punishing tax bill on home equity, even before owners pay for moving costs or other retirement needs.

“This is why capital gains reform could have a major impact on unlocking supply for the market at large,” Berner adds.

Older sellers may also get less when they cash out

But the risks extend to the family members banking on that inheritance, too.

“It is an obstacle to have older Americans stay in their homes for longer and face budget challenges. It increases the likelihood that what is being passed down is a property rather than cash and that the property has some condition issues that make it costlier to sell,” Berner explains.

And even when an owner does sell, the home’s headline value may not be the amount the family ultimately realizes.

An 80-year-old seller earns about 0.5 percentage points less per year on a home sale than a 45-year-old seller, according to a working paper from the National Bureau of Economic Research. Over the study’s average 11-year holding period, that translates to a sale price more than 5% lower—roughly $20,000 on a $400,000 home, $25,000 on a $500,000 home, or $50,000 on a $1 million home.

Part of the issue, researchers found, is that homes sold by older owners were less likely to have undergone major renovations and more likely to show signs of poor upkeep. They were also more likely to sell through private, off-market “pocket listings” or directly to investors—both of which can result in a lower offer price.

And that has implications for the next generation, as Berner explains: "The paper wealth in the home being passed down is diminished."

The families most likely to need home equity may be least able to preserve it

The report also found that the rate of cost-burdened households rose sharply among different demographics.

Three-quarters of homeowners earning less than $30,000 spent more than 30% of their income on housing and utilities. While the burden rate was 45% for owners earning $30,000 to $44,999, 31% for those earning $45,000 to $74,999, and just 10% among owners earning at least $75,000.

The differences are just as stark by race: 32% of Black homeowner households were cost-burdened, compared with 29% of Hispanic homeowners, 27% of Asian homeowners, 25% of Native American homeowners, and 22% of white homeowners.

The gaps are especially important to consider for the next generation. Housing wealth can change the timing of a child’s entry into homeownership—but only if enough reaches them, and at the right time.

Buying a first home by age 32 is associated with a 22.5% higher net worth by age 50 than buying in one’s 40s, a difference of roughly $119,000 for a typical midlife household, according to research from Realtor.com. Parental transfers, meanwhile, account for about 13 percentage points of the homeownership rate among young households—roughly 27% of their homeownership rates.

It's a telling reflection of how the family home can become a bridge: a down payment gift, a co-signed loan, a temporary place to live while saving, or an inheritance that lets a younger buyer enter the market earlier and bank the difference.

The next generation may need that wealth sooner

The pressure on older homeowners arrives at a moment when younger adults need family housing wealth more than they have in decades.

The total monthly cost of owning the median-priced home reached $3,120 at the end of 2025, once mortgage insurance, property taxes, and homeowners insurance were included. That was up sharply from just five years earlier, when the income needed to afford a median-priced home was $68,700. By 2025, a household needed to earn $120,800.

Only 16% of renter households met that income threshold, and homeownership rates among younger generations are lagging as a result.

And so, the family home remains under competing demands. Older homeowners may need to draw on it for retirement or the rising cost of staying put, while their children and grandchildren may be counting on it to buy a home or retire themselves—as many as 69% of millennials say they can't retire or buy a house without an inheritance.

In earlier generations, a home might have been able to serve both generations. But today, the math is much tighter. The house may be the retirement plan, the emergency fund, the source of a down payment, and the inheritance—all at once.