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.
Well, there you are. Slick Willy wanted to milk the peasants some more. So 1997 would be the year.
81 million Americans allegedly voted for pedojoe, so there is strong evidence that they are correct in their thinking.
"But I'm six foot."
"Not a problem, we will cut the top two feet off."
I’m stuck in that boat. Bought my house at 70k back in 88 and now it’s worth $500k. Anything more that 320 I’m gonna have to pay tax on. I wouldn’t mind do much of they spent it wisely.
If you have made renovations, new roof, new HVAC, etc that should increase your cost basis..
Lotta AirBNB owners live out of the area of their vacation homes - if you can’t defend it, you don’t own it.
Enticed, yeah, good one.
Biden and his goons are worried illegals and cartel members need nicer homes.
We know it’s illegals the goons and thugs care about because we see how we’re treated and we see how ‘they’re’ treated.
House is in perpetual upgrade. Asking 450 now, after I put in a pantry and remodel kitchen price goes up to 500. If if I turn my shop into the 4th bedroom price goes to 600.
For San Francisco, average home price is $1,290,678, while the median sales price is $1,266,667.
San Diego shows an average of $1,021,655 and a median of $875,833.
Bellaire in Texas shows an average of $1,049,450, but lacks sufficient historical inventory information to give a median sales price.
Aspen in Colorado has an average of $3,473,259, but insufficient information for a median sales price.
Manhattan has an average sales price and a median sales price both just over a million dollars.
Sagaponack, NY has an average of $6MM+, but has no median information whatsoever, given such low inventory.
My sneaking suspicion is that the vast majority of cities on the "million dollar 550" list are tied to resort locations or extremely posh or uppity areas that would have been out of most Americans' price range even before the turn of the millennium.
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