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Jim Klinge
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701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Boomer Liquidations’

One-Third of Boomers Don’t Have $25K

Will the day come when boomers need to sell their house to survive?  The reverse mortgages have offered a solution for some, but they are expensive and loan limits have been cut back recently.  The general real estate market may not feel the impact of boomers running out of money, but you could see flare-ups of more inventory in older areas.

Link to Article

The grim outlook for many Americans approaching retirement age has some new stark statistics: One-third of respondents in a recent survey said they’d saved less than $5,000 for retirement.

Among baby boomers, one third said they had $25,000 or less in retirement cash available, according to a new data release from life insurance provider Northwestern Mutual.

Looking at the wider pool of Americans in general, 21% reported that they had zero retirement savings, while exactly three quarters agreed that Social Security is unlikely to exist in its current form when they eventually retire. And just about half said they’d done nothing at all to prepare for a future in which they outlived their retirement savings — despite the fact that two-thirds said that scenario was at least somewhat likely.

“As financial implications of retirement become increasingly complex, inertia just isn’t an option,” Northwestern Mutual vice president of planning Rebekah Barsch said in a statement announcing the results. “The good news is that it’s rarely too late to start.”

The survey also revealed that many Americans have resigned themselves to the idea of working longer before retiring, a strategy that’s increasingly preached even by financial planners. Nearly 40% of respondents in the Northwestern Mutual poll said they would work until at least age 70, more than the 33% who said they were targeting a retirement date sometime between 65 and 69.

In addition, the desire for more disposable income slightly outweighed professional satisfaction when respondents were asked why they planned to work past 65. That’s a shift from 2015, when the same study determined that 66% of Americans simply wanted to continue working for the fulfillment of it — as opposed to 60% who cited income as a concern.

“Continuing to work later in life should be a personal choice and not a mandatory requirement for survival,” Barsch said. “Proactive financial planning can be the difference between a desired and a default retirement lifestyle.”

Posted by on May 16, 2018 in Boomer Liquidations, Boomers, Jim's Take on the Market | 2 comments

The Big Stagnation, Part 2

In September, I touched on the Big Stagnation:

http://www.bubbleinfo.com/2017/09/02/the-big-stagnation/

Just talking about the GOP tax changes could slow down the market.  Because the N.A.R. and others are suggesting publicly that home values could drop 5% to 10%, won’t potential home buyers wait to see if it happens?

The demand will still be there; it will just be more picky than it is today.

The move-up market is where we could see real impact from the proposed tax changes.  If potential move-uppers don’t move, they would keep their mortgage-interest deduction and lower property taxes.  If they do move and get a loan over $500,000, they’ll enjoy paying on a new mortgage for 30 years with no MID, and pay higher property taxes.

They won’t calculate the exact cost of losing the MID (it’s not that much) – and instead, it will be the last straw and they will just quit thinking about moving because they’re disgusted with politicians.

We will also lose a few who need to stick around longer to qualify for the tax-free gain on the sale of their house, due to the change of having to own/occupy the house for five out of the last eight years to qualify.

End result: Fewer people willing to move up, which would have a significant impact on the higher end market.   True, the move-up buyers won’t be listing their lower-priced house for sale either, which would create a net-zero change, and potentially make the inventory tighter, which would be better for the remaining sellers.

But there hasn’t been a shortage of homes for sale listed over $1,000,000 (there are 1,395 homes for sale today in San Diego County priced over $1,000,000, and 327 sold in October).

Higher-end sellers will have to wait even longer for the trickle of buyers to reach them.  Plus, if a neighboring seller or two dumps on price to unload theirs, the lower comps could add another six months to the selling timeline, or longer.  The sellers who claim to be in no rush will be tested!

The environment will be compounded by the lack of experience in dealing with this type of market by everyone involved. For the last seven years, if you wanted to buy a house, you had to pay the sellers’ price….or more.  Will that continue?  Yes, for those selling a perfect house at the perfect price.  But it will be too easy for buyers to pass on the clunkers or OPTs.

S-t-a-g-n-a-n-t  C-i-t-y.

The lower end should stay red hot, but it won’t be trickling up as much.

And that’s not considering the possibilities of higher interest rates, earthquake or other natural disaster, nuclear war, or recession!

Posted by on Nov 7, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Local Government, Market Buzz, Market Conditions, Tax Reform | 6 comments

Baby-Boomer Housing

These responses point to a massive downsizing trend!

From realtor.com:

LINK

It’s all about millennials these days. Everything seems to center around these special snowflakes. But what about the original “me” generation? We’re talking about baby boomers, of course. What do these roughly 76 million Americans want when it comes to housing?

Well, they want multicar garages, for one thing. According to a recent survey by national homebuilder PulteGroup, they were the top feature boomers were looking for in a new home, followed by open decks or patios; eat-in kitchens; and a private yard.

About 38% of boomers plan to buy a home within the next three years, according to the report. About 11% expect to purchase a residence within the year.

The survey was of 1,043 folks between the ages of 50 and 65 who plan to buy a home in the next decade.

“Retirement marks a new phase in a baby boomer’s life, and it only seems natural to relocate or move to a new home when transitioning away from their primary career, or from the day-to-day rearing of school-aged children,” Jay Mason, vice president of market intelligence for PulteGroup, said in a statement. “It’s not surprising that the 55+ buyer wants a variety of options and choices in their homes.”

According to the survey, 39% of respondents said the main reason they’re moving is because they want to retire, 33% want to downsize, and 30% want to move to a more desirable location.

“One thing we know about boomers is they are not done yet,” says Amy Lynch, president of Generational Edge, a Nashville, TN–based company that consults with companies on generational differences in employees. “As a group, they are starting encore careers and also going back to school. And they often move to be near their millennial kids, who are having kids.” They also start new families of their own, through divorce or remarriage.

All of these situations may require a move. About 26% of boomers plan to stay in their current cities, but just move to a different home, while 34% want to remain in the state, but in a different city or town. Also, 38% hope to cross state lines.

Their top retirement destination? You guessed it: Florida. It seems you just can’t beat all of that year-round sunshine. The state was followed by fellow warm-weather states Arizona, North Carolina, and South Carolina. The cost of living is lower in these states than on the pricier West Coast or in the Northeast.

About 82% of boomers wanted to be someplace affordable, and 74% want to be close to their preferred health care programs.

But boomers don’t want to just pack up and leave their grandchildren. Being close to kids was their top consideration when choosing a new community. They also want to be near the water and park or other green space.

“We are in a period in this country where family life and family connections are very strong,” says Lynch. “There’s a lot of regret among boomers because they worked so many long hours when their kids were young. With grandkids, there’s a chance to make up for that.”

Posted by on Oct 26, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Buzz, Market Conditions, The Future, Thinking of Buying?, Thinking of Selling?, This Is America | 11 comments

Update on Boomer Liquidations

Coming to a neighborhood near you….some day!  From cnbc.com:

LINK

Jeff Swaney is worried about selling his 5,600-square-foot home one day.

In his neighborhood south of Atlanta, demand and prices for large ranch houses like his have declined over the last decade, as more young professionals move to smaller abodes in hipper areas. He doesn’t expect that to change anytime soon.

The 51-year-old real estate investor and owner of Swaney Consulting Group has personal reasons to hold on, at least for now. He may eventually move to a condo at the beach, but wants his future grandchildren to enjoy his pool, yard and basement. For these amenities, he spends about $18,000 annually in lawn maintenance, taxes, insurance and utilities alone.

The housing market, on the rebound since the Great Recession, is increasingly being driven by millennials and first-time homebuyers who “are hungry for starter homes and efficient layouts,” said Javier Vivas, manager of economic research for realtor.com.

The trend may leave some older homeowners in a lurch if they want to retire, downsize and cash in their nest egg.

Large single family homes — defined as the largest 25 percent of all listings on realtor.com and about 2,900 square feet to 4,000 square feet — receive 12 percent to 45 percent less views on realtor.com than the typical home in each market.

This year so far, large, single family homes are selling up to 73 percent (or 50 days) slower on average than the typical home in each market.

The often hefty price tags for bigger homes contribute to their lengthier sale times because there is a smaller pool of buyers who can afford them, said Artur Miller, founder and CEO of Miami-based AMLUXE Realty.

Even Swaney, whose 1994 home appraised for $350,000, thinks he may have a tough time selling.

“The McMansions that soon-to-retire people purchased in the 80s and 90s are a very difficult sell right now,” said Melissa Rubenstein, a former real estate attorney who now sells luxury properties with Re/Max HomeTowne Realty in Bergen County, New Jersey. Many are outdated and may not include a first floor bedroom and bath suite for aging in place or in-laws.

Listings of large homes are also up two percent from last year, suggesting owners are dumping them faster, while listings of all homes are down 10 percent from last year, according to the realtor.com data.

“We’re finding these homes are an albatross for clients,” said Michael E. Chadwick, a financial planner and owner of Chadwick Financial Advisors in Unionville, Connecticut.

“We’ve got several right now who have been trying to sell them and move south, and they’ve cut the asking price by over 30 percent each and they’re still not going anywhere fast,” he said.

Read More

Posted by on Oct 14, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Thinking of Selling? | 5 comments

Surge in 65+ Population

A surge in the 65+ population will probably prolong the market conditions we’ve seen lately – those are the people who got in first, and are probably settled enough that they won’t be moving.

But those who are relying on pensions might get a surprise, and it would take an unusual monetary need like that to cause them to sell their house – or get a reverse mortgage. An interesting note – the number of HUD reverse mortgages funded in the 2017 fiscal year was the lowest since 2005.

Read full article here – thanks JB!

https://www.realestateconsulting.com/correcting-demographic-misperceptions/

Posted by on Sep 20, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market | 1 comment

Boomers Causing Gridlock

Hat tip to daytrip for sending this in!

LINK

An excerpt:

People 55 and older own 53 percent of U.S. owner-occupied houses, the biggest share since the government started collecting data in 1900, according to real estate website Trulia. That’s up from 43 percent a decade ago. Those ages 18 to 34 possess just 11 percent. When they were that age, baby boomers had homes at almost twice that level.

Public policy contributes to the generational standoff. Property-tax exemptions for longtime residents keep older Americans from moving. Zoning rules make it harder to build affordable apartments attractive to senior citizens.

“The system is gridlocked,” says Dowell Myers, a professor of urban planning and demography at the University of Southern California. “The seniors aren’t turning over homes as fast as they used to, so there are very few existing homes coming online. To turn it over, they’ll have to have a landing place.”

Read full article here:

https://www.bloomberg.com/news/articles/2017-08-08/baby-boomers-who-won-t-sell-are-dominating-the-housing-market

Posted by on Aug 9, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Listing Agent Practices | 5 comments

The Bubble, Ten Years Later

The real estate market in our neighboring Orange County has performed much like San Diego’s. Here, Jon outlines the 12 differences between the bubble days of 2007, and now:

http://www.ocregister.com/2017/08/06/orange-countys-housing-bubble-10-years-later/

These stats show how the game has changed forever – there is no down side if banks are so reluctant to foreclose:

10. Distressed property: Too much debt and too many layoffs pushed many homeowners to the financial brink. Owners rushed to sell as bankers hit the market with their repossessed properties. In June 2007, 13 percent of homes sales were either short sales — banks agreeing to take less than owed — or sales of foreclosed properties. That distressed share of selling would become roughly half of the market during the next five years. But by June 2017, that share settled back to just 7 percent. Fortunately, it’s only a history lesson today. The supply of foreclosures to buy has shrunk from 463 in late June a decade ago to only 27 as this year’s summer began.

11: Warning signs: Nothing screams “danger” more than owners skipping house payments. Ponder what lenders were doing in June 2007 vs. this past June. Default notices, a first step in foreclosure: 1,144 then, 310 today. Auction notices, the official threat to sell: 598 then, 213 today. Actual foreclosures: 281 then (and 1,084 in June 2008) vs. 21 today.

For the bubble to ‘pop’, and prices decline, we would need more than a trickle of distressed sellers who need to sell at whatever price the market would bear.  A rash of boomer liquidations might happen, but with reverse mortgages being available, they have other options too.

All ahead full!

Posted by on Aug 6, 2017 in Boomer Liquidations, Boomers, CA Homeowners Bill of Rights, Foreclosure Count, Jim's Take on the Market, No-Foreclosure as Banking Policy | 2 comments

Boomer Parents-to-Children Transfers

Daytrip sent in this article (link below) on baby boomer sales, and how the transfer of homes from parents to children are likely to dampen the supply of homes for sale – and somewhat limit the property-tax receipts:

LATimes.com

But then I went to the actual report for more info and graphs:

http://www.lao.ca.gov/Publications/Report/3693

They do expect more boomer sales – it looks like a growing trend as more boomers get into their mid-70s:

Home Sales Likely to Pick Up as Homeowners Get Older. Although the aging of California’s homeowners has depressed home sales in past years, this pattern is likely to reverse in the future.

As California’s homeowners continue to age—transitioning from the 55 to 75 age group to the over 75 age group—more and more will begin to downsize, move into assisted living or with family, or die. When this occurs, home sales are likely to rise.

Between 2003 and 2013, over two-thirds of homes in California with owners 75 or older were sold to a new owner, compared to less than one-third of homes with owners ages 55 to 75.

Different Rules Apply to Homes Passed From Parents to Children. In general, when a home is transferred to a new owner, its taxable value is reset to its purchase price.

California voters, however, passed Proposition 58 in 1986, which amended the California Constitution to exempt transfers between parents and children (and later grandparents and grandchildren under certain circumstances under Proposition 193 [1996]) from revaluation. This allows a child to inherit their parent’s lower taxable property value.

The report shows the parent-to-child transfers to be around 10% over the total homes sales over the last decade, but it should be going higher, especially in the higher-cost coastal counties!

Parent-to-Child Exclusions Have Had a Notable Impact on Revenues. Over the past decade, around 10 percent of property transfers have taken advantage of the parent-to-child exclusion to prevent an increase in property tax payments. Figure 6 shows how many of these exclusions have been used each year during the past decade.

JtR:

San Diego County is the second most populated county in the state, so no surprise we’re #2 on list at $133,000,000 in estimated reduced taxes.  Those are a substantial number of homes being transferred within the family!

If the average tax savings was $10,000 per house sold, it would mean 13,300 homes transferred from parent to child – and this is from 2014-2015.  We had 35,382 homes sold on the MLS in the same period.  Add the FSBOs and new-home sales and we might have had 40,000 to 45,000 total homes transferred in fiscal 2014-2015.

The parent-to-child transfers could be as many as 25% of the homes moved! (40,000+13,300 = 53,300.  13,300/53,300 = 25%)

Their $133,000,000 estimate could be a tad off, but we probably have 10% to 20% of the potential supply of homes for sale being transferred within the family.  No wonder the public supply is so limited.

It is a trend that probably started to increase in 2013 as prices took off.  Parents realized that with the low tax basis, a child would be better off moving into the family homestead, rather than buying a resale home and paying full boat on the property taxes!

Save

Posted by on Jul 10, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Prop 13, Property Tax Re-Assessment, The Future | 0 comments