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.
“Engelhardt says: “You promote the construction of new residential units that are going to be ADA compliant, that are going to have universal design”
Or maybe, government has no role is how housing happens. Every single problem in housing is because of government. From interest rates, to taxes, to making suburbs mandatory to avoid crime. Many old people would enjoy the smaller homes in the city with lots of cafes, entertainment and shopping nearby. But with government caused dope, crime, filth and black governments in the cities, you have to stay deep in the suburbs for safety.
WHOSE DAMNED BUSINESS IS IT TO DECIDE HOW LARGE A HOUSE I SHOULD HAVE???
NEW LAWS/STANDARDS/MANDATES ON Square Footage???
These jerks can KMA.
Why not portable mortgages also? If you move you get that 3% on your next house? How about outlaw HOAs? How about zero taxes on capitol gains and SS after age 62?
But everything that would actually fix things is bad for the banks and for the party.
Eff em all.
if they keep it until they die, the basis resets to its current value and their children can sell it and pay no taxes on the sale, because there would be no gains.
It’s hard to over estimate the amount of work we have put into our home, the amount of scrimping and saving and to finally have it paid off. I feel no guilt keeping my house for as long as I’m alive and then it will be up to my kids what happens to it next.
UNTIL 12 months later-—when they had TOTALLY TRASHED it all.
Our home is where everyone runs in an emergency. Our adult children have their own places, but they know there’s a place with a room for them in an emergency. They come over when their electric is out, when their appliances break, when their local water gets tainted, when they need to use our garage to repair their cars in winter, and they also lend the old folks their own youthful strength and energy when we need help. Since our government is determined to interfere with our freedom and prosperity, we are making our own plans to care for ours and us as best we can.
“Plenty of over 65 communities with nice apartments”
And have a manager who thinks they are the dorm mother? And a tenants committee who is always having new ideas? And a next door neighbor who resents you cooking or playing music after 6pm?
No thanks. I’ll skip the beehive.
Of course this is from NPR. AAARGH!
Good points. Maybe I run in different circles than others here, but don’t think I know a single multi-generational family where the oldest generation — typically retirees in their 70s and 80s — are NOT the ones who have the greatest need for income/revenue right now. I suspect it’s just a tiny fraction of Americans who find themselves sitting on a seven-figure pile of equity in their primary residence at the age of 75.
Correct. I bought a well built home in 1999. It is paid off.
It is too big for our needs now, but it is a paid off asset.
This is my home and I will stay as long as possible.
If my wife and I are dead, we will leave the house to our kids to sell off.
an article about this exact topic I read just the other day
The housing crisis - if real - is caused by elderly Baby Boomers who refuse to sell the large homes they no longer need.
The legislation to punish this extreme self-focused behavior is already being written.
“Average” doesn’t mean much to me in the context of residential real estate. I wonder what the MEDIAN home prices in those 550 cities are.
These aged the COVID scam didn’t work, so let’s find other ways to get rid of them, and their hard worked S Soc. and retirement benefits. Hitler would be proud to ditch them.
We’d better hurry cause won’t work if Trump gets in there and gets rid of their replacements across the border.
Signed Con-gress and Joe-Stalin Biden
match
If you’re over 50, there are no federal tax consequences for selling your principle residence.
When I see the Hollywood and Political class sell their 20,000 sq ft homes to illegals or Gen Z or whatever, I will let that fleeting thought to sell my paid off house and transition into the own nothing and be happy crowd ... not.
LOL, i sold mine, it’s now a parking lot...
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