Posted on 04/18/2024 12:31:09 PM PDT by TigerClaws
Among the many hard truths for those trying to enter America's brutal housing market, here's one: Baby boomers continue to own many of the country's large houses, even after their households have shrunk to one or two people.
Baby boomer empty nesters own twice as many of the country's three-bedroom-or-larger homes, compared with millennials with kids, according to a recent analysis from Redfin. That means those larger homes aren't hitting the market, one factor limiting the supply for the younger generations who could use those extra bedrooms.
Some baby boomers, the generation now between the ages of 60 and 78, are happy in their large homes, using the extra bedrooms for hobbies and visiting family. Others say they want to downsize, but it just doesn't make sense financially.
Some want to downsize, but the numbers don't add up
Sherry Murray, 73, and her husband, 80, bought their house in the North Hills of Pittsburgh in 1991, for $240,000. It's got four bedrooms, including some they don't use anymore. Many of her friends are in the same boat.
"What a lot of us have done is not walled off the extra bedrooms, but closed the doors, and you try not to have to maintain them," she says. "It's just too much house at this point."
The house is paid off, and Murray has wanted to downsize for a while, but she says homes that fit what she's looking for – 2,000 square feet, all on one level, in the same suburban area – sell quickly and for a lot of money.
So they've stayed put.
"You don't want to be economically stupid. If my house is worth even $650,000, I don't want to spend $1.1 million to downsize substantially, knowing that on top of that, I'm probably going to have to pay some [homeowner association] fees," she says.
Smaller homes can cost more if they're newer, or are part of a community that provides extra services. Some metro areas have few one-story homes, making them hot commodities.
Some homeowners are also affected by what's known as the mortgage lock-in effect. While 54% of baby boomer homeowners own their homes free and clear, according to Redfin, most of those with mortgages have low rates. So it doesn't make much sense to take out a new mortgage, with rates now around 7%.
"It just is a dumb economic decision to spend that much extra money for getting so much less," Murray says.
Across the country, many baby boomers are facing their own version of this calculus: It can be cheaper — and more appealing — to stay in their current, large house, than to sell it and move to something smaller.
This doesn't only affect younger buyers.
"You've got a pure housing mismatch for older homeowners. They are mismatched physically or functionally with the house that they're in," says Gary Engelhardt, an economist at Syracuse University who studies aging and housing markets. "That's because it's multifloor living. It's stairs. It's also other upkeep."
Engelhardt says that's a serious concern because it can can lead to things like falls. "And falls can be very devastating, could have very devastating health consequences, especially for the oldest old," he says. "In general, we would like to have older homeowners ... matched with their housing in a much better way than we currently have."
So what could be done?
Engelhardt says there are basically two policy approaches to deal with what's happening.
First, he says, is to provide subsidies or tax credits for home modifications that allow older adults to age in the homes they have. While that could make seniors' current housing safer, it doesn't put those houses back into the market.
Second, encourage building housing that's well suited to older Americans, Engelhardt says: "You promote the construction of new residential units that are going to be ADA compliant, that are going to have universal design and all the types of features that lend themselves to a better match of functionality at older ages."
For instance, the government could create a tax credit to encourage developers to build accessible housing, akin to the Low Income Housing Tax Credit that incentivizes building affordable housing.
Jenny Schuetz, a housing policy expert at the Brookings Institution, says in trying to incentivize older adults to move out of homes that are now too large for them, different tools are needed depending on their geography and financial resources. For instance, a lower-income homeowner of a deteriorating row house might be willing to a swap for a newer, smaller apartment in an elevator building, if there was a program for that.
But longtime California homeowners who've seen their property values skyrocket would likely require a different approach, Schuetz says. There, Proposition 13 strictly limits increases in property taxes – so that many longtime homeowners pay taxes on a small fraction of their home's value. That created its own lock-in effect, though a recent rule change allows those over age 55 to keep their lower tax rate if they buy and move into a home of equal or lesser value.
Building more housing that's attractive to seniors
There are other policy changes that could make it easier to build housing for different life stages and thereby entice boomers to downsize.
"I think one of the things that we know to be true is that older adults want to be able to age in their communities," says Danielle Arigoni, managing director for Policy and Solutions at National Housing Trust. That's where they already have friends and neighbors, doctors and bus routes they know — familiarity that makes aging in their community possible.
“Can old folks even get a mortgage?”
probably not ... little AGI and no debt, even if net-worth wealthy ...
new dwellings would probably have to be paid with cash from a previous sale ...
i bought my current house expecting to be carried out of it with my boots on ... single story, 4-on-12 roof, brick veneer, steel roof, etc.
“How can the Collective force the Boomers to vacate their homes for the Greater Good?a’
kill us with toxic fake vaccines?
Is it science or a government agency that tells you that your home is now too big for you?
If a house is too big for a couple and their overnight guests and holiday family get togethers then how many people have to be in the group that it is supposed to be sold to, 3, 6, 9?
Here’s the perfect NPR/Democrat solution: Pay China to create a deadly virus, import it, and murder all the old rich white people via medical malpractice. Then New Americans can have their houses and belongings. I’m not claiming it’s an original idea...
If I had a house that large, I’d pray for rain. Then I’d explore the parts of my home that I normally don’t see. I would take a lunch and sleeping bag with me…
The end goal here is that NPR is advocating getting older Americans out of those big houses to people who couldn’t possibly qualify for a loan for them, maintain them or even pay the taxes and insurance for them. Force them out, then seize them to GIVE to newcomers.
One shudders to think about just how NPR envisions "enticing" them. To the Gulag or the Graveyard most probably.
There is also the stress of selling one home, buying another, and the whole get everything packed and moved. Just not worth it in many cases.
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That $3000/mo is bargain basement, AND it’s an INDEPENDENT situation; if you develop any medical needs requiring in-home care — especially after hours — you’re moving, whether you like it or not. And it won’t be $3000; it’ll be $5,000+ fees for every next level of elevated care.
Relatives found a development with individual town homes and on-call medical staff in the immediate neighborhood ready to provide various levels of care 24/7. There was a minimum Net Worth to move in, and they had to sign over all their assets to the company as the resource pool that would pay for it all. If there’s anything left at all, their kids will get it and go out for McDonald’s.
Not selling. I need the big lot and garage and it is paid for.
I was thinking about the ones in my area for healthy upper 60s folks.
I’ll be glad to sell mine for about $300K more than it’s worth!
Where did you find this whopper of a tale?
No. 1 by taking courses in college on taxation. No. 2 by selling my principle residence and having no tax consequences. The age might be 55, though.
There isn’t a week that goes by that I don’t get a solicitation for my house. It’s always CASH, AS IS, SIGHT UNSEEN, etc., etc., etc. I toss them in the recycle can. Also strangely enough, I get similar solicitations for my 8 year old car. Go figure.
My house has three bedrooms, two bathrooms and a large two car garage. At a little under 1600 sq ft I would hardly consider that too big. I consider 1600 sq ft to 1900 sq ft to be the ideal size for a retired couple. Enough room for a couple and not too big when one of you is the surviving spouse.
Your situation sounds IDEAL to me!
I am with you.
Why in hell should I give up my ocean and sunset view to the generation that gave us Øbowel and Bidet* ?
And, I like my little free state getaway in Arizona.
Nope, they cannot have either one.
Cold dead hands and all.
Yes they can. For some strange reason, they will even give 70 year old people 30-year mortgages if their credit scores are good.
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