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Category Archive: ‘Boomers’

Estate Sales

We’ve explored a few of the alternative groups of potential sellers, but none are emerging as major contributors.  In a ‘normalizing’ market, it means we are back to the Big 3 sources of new listings; Death, Divorce, and Job Transfer.

Carmel Valley doesn’t have much to worry about here – the oldest CV homes were built in the mid-1980s.  But in the remaining areas of San Diego’s North County coastal region, where houses go back to the 1940s and 1950s, there are many long-time owners who will stay for the duration.

Back in the old days, it was routine to sell your parents’ home and split the proceeds with the siblings.

But that was when everyone could afford their own house.

Today, one of the siblings might want, or need, to take possession because they can’t afford these prices.  As a result, what used to be a steady flow of new listings may not be as fruitful as before.

It will be relative to the quality of the home.

Yesterday I was in Oceanside, where a past client had purchased in the 55+ community of Oceana.  I had sold her house about 10 years ago, and she moved there with her husband thinking it would be the final stop.  It was for her husband, but now she needs assisted living, so she is exploring those facilities.

Oceana is an average senior community – the homes are 1,000sf to 1,600sf and sell in the $200,000 and $300,000s.  Sales are increasing – here are the number of closed sales between Jan 1 and Sept 30:

2010: 57

2011: 57

2012: 50

2013: 69

2014: 66

There are 22 active listings today, which is no shortage of supply is you are thinking of living there, and it is an affordable option.

But in the swankier parts of town, when a homeowner dies, their home is more likely to stay in the family today just because the siblings having such a difficult time buying their own home.

The condition of these homes is usually less than spectacular, and those that do come up for sale will be great flipper food.  You’ll see more of them in areas where homes were built in the 1960s and 1970s, because those original owners have had no better place to live for the money!

Posted by on Oct 29, 2014 in Boomers, Jim's Take on the Market, Market Conditions | 15 comments

Boomers Not Saving

Though we have reverse mortgages available, you can’t help but think we’ll be enduring a baby-boomer housing liquidation sales event over the next 10-20 years.  I think it’s already underway, and disguised as those wanting to “downsize and travel a bit”. 

Hat tip to daytrip for sending this in from Wells:

https://www.wellsfargo.com/about/press/2014/middle-class-retirement-saving_1022.content

Saving for retirement is a formidable challenge for middle-class Americans, with 34% not currently contributing anything to a 401(k), an IRA or other retirement savings vehicle, according to the fifth annual Wells Fargo Middle-Class Retirement study.

Forty-one percent of middle-class Americans between the ages of 50 and 59 are not currently saving for retirement. Nearly a third (31%) of all respondents say they will not have enough money to “survive” on in retirement, and this increases to nearly half (48%) of middle-class Americans in their 50s.  Nineteen percent of all respondents have no retirement savings.

On behalf of Wells Fargo, Harris Poll conducted 1,001 telephone interviews from July 20 to August 25, 2014 of middle-class Americans between the ages of 25 and 75 with a median household income of $63,000.

Sixty-eight percent of all respondents affirm that saving for retirement is “harder than I anticipated.” Perhaps the difficulty has caused more than half (55%) to say they plan to save “later” for retirement in order to “make up for not saving enough now.”  For those between the ages of 30 and 49, 59% say they plan to save later to make up retirement savings, and 27% are not currently contributing savings to a retirement plan or account.

Sixty-one percent of all middle-class Americans, across all income levels included in the survey, admit they are not sacrificing “a lot” to save for retirement, whereas 38% say that they are sacrificing to save money for retirement.

While a majority of middle-class Americans say that they are not sacrificing a lot to save for retirement,  72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65%  in 2013.

When respondents were asked if they would cut spending “tomorrow” in certain areas in order to save for retirement, half said they would: 56% say they would give up treating themselves to indulgences like spa treatments, jewelry, or impulse purchases; 55% say they’d cut eating out at restaurants “as often”; and 51% say they would give up a major purchase like a car, a computer or a home renovation.  Notably, fewer people (38%) report that they would forgo a vacation to save for retirement.

Read full article here:

https://www.wellsfargo.com/about/press/2014/middle-class-retirement-saving_1022.content

Posted by on Oct 23, 2014 in Boomers, Jim's Take on the Market | 35 comments

Baby Boomers

From John Burns:

http://www.realestateconsulting.com/

It’s here. Every month, more than a quarter million Americans are turning 65.  Almost 80 million Baby Boomers, born over a span of 19 years, are shifting gears towards retirement…or whatever else is next.

Here are a few facts:

  1. The Boomers are the largest group of shoppers looking for a home today nationally, based on our Consumer Insights survey.
  2. They were waiting for their home equity to come back, based on our survey in 2012. Now, they have equity in their pockets and they are ready to move.
  3. More than 10,000 of these Boomers are turning 65 every day. This will continue well into the next decade.
  4. They are working longer and living longer.
  5. The Boomers are the most likely to report that they cannot find what they are looking for in today’s existing housing stock.

Of the 22,000 home shoppers who took our 2014 Consumer Insights survey, 42% of them are 55+ and shared with us that:

  • Home design will make them move (it is the third-most-important motivator for moving after location and price), but 55% say they can’t find what they are looking for.
  • 43% want to downsize, with most wanting 1,500–1,999 square feet.
  • Among those without children:
    • 46% want to live in a community that is more multigenerational
    • 33% want an age-restricted community
    • 21% want an age-targeted community

    (Preference for age-restricted and age-targeted communities varies widely by geography.)

The opportunities offered by the 55+ population are huge. They represent:

  • 25% of the total population
  • 50%+ of current homeowners (likely with plenty of equity) and have a homeownership rate in excess of 75%
  • 30%+ of total home transactions

All of these rates are only getting bigger.  The challenge is that the 55+ homeowner population tends to stay in place—less than 3% move per year, although it is higher for the younger portion of this cohort.

Posted by on Sep 26, 2014 in Boomers | 8 comments

73% Don’t Want to Move

Image

Hat tip to daytrip:

http://www.citylab.com/housing/2014/09/where-are-all-the-baby-boomers-going-to-live/379477/

An excerpt:

Where are all these old folks going to go? They’d like to stay at home. Today, most older residents live in single-family homes that they own: More than 70 percent of residents in their 50s own their homes, and homeownership figures rise for populations into their early 70s. A survey conducted by the AARP finds that 73 percent of respondents ages 45 and older would strongly prefer to stay in their homes.

They may not have much choice. As Emily Badger explained last year, senior Boomers looking to sell the detached single-family homes that characterized the overwhelming majority of housing construction between 1990 and 2010 may have a hard time selling to Millennials. Many young renters who can afford mortgages just can’t get them; others prefer new options in the city to single-family homes in the suburbs, including condos.

Increasingly, the housing stock built by and for Baby Boomers doesn’t meet anyone’s needs—neither a younger generation looking for starter homes that don’t exist, nor an older generation confronted by accessibility challenges. And a growing share of older households is struggling with high housing costs and mortgage debt, challenges usually associated with Millennials and Gen-Xers. More than twice as many seniors age 65 and older carried mortgage debt in 2010 than did in 1992. Some 21 million older adults are renters.

While affordability is a problem on the horizon for some older residents, accessibility challenges are virtually guaranteed for all. While increased life expectancy and a factor that the U.S. Department of Housing and Urban Development cites as “compression of morbidity” means that older generations (even beyond the Baby Boomers) are living actively later into life, disability eventually affects almost everyone. One of the great equalizers in life, disability arrives without any deference to income or race. (Privilege in these realms often makes it easier for people to adjust to disabilities, of course.)

The housing stock built for Baby Boomers largely wasn’t designed with accessibility in mind. There are five universal-design housing features that tend to address a variety of disabilities that residents face as they age: no-step entries; single-floor living; switches and outlets set at lower heights; extra-wide hallways and doors; and lever-style doors and faucets. Nearly 90 percent of existing homes have one of these features, according to the report—but just 57 percent have two.

Homes built more recently are more likely to accommodate all five universal-design features. Among these universal-design features, the one that’s most common in homes today is the single floor. More than 86 percent of homes in non-metro areas features single-floor living. These figures for cities and suburbs are high as well: 74 and 72 percent, respectively.

Yet these detached, single-floor, single-family homes—and the automobile-centric society that comes with them—are only going to fall further out of step with the needs of residents over time. And sooner rather than later. Homes can be retrofitted with lever-style handles and no-step entries (albeit at great expense). It’s much harder to turn exurban and rural communities where older Americans live into places that nurture seniors rather than isolate them.

Read full article with graphs here:

http://www.citylab.com/housing/2014/09/where-are-all-the-baby-boomers-going-to-live/379477/

Posted by on Sep 21, 2014 in Boomers | 2 comments

Bubble Or Sustainable?

The folks at www.1worldonline.com like to poll their audience, and last month they used a bubbleinfo.com blog post in one of their surveys.  Their readers voted on this question:

Is the increase in real estate value a sustainable trend?  Home prices have increased substantially in the last year compared to the previous seven years.  Is the increase a sustainable trend, or just a miniature housing bubble?

https://1worldonline.com/#!/poll/773

Chris says 55% of respondents believed another crash was going to come, with more Republicans strongly believing in a crash.

Those who voted for another crash may have been influenced by the opposing blog post to mine, which talked about the millenials facing a weak job market, and shrunken workforce in general.

This was his summary paragraph:

With investors fleeing the real estate market because of higher interest rates, with fewer people working and those that are working are earning and saving less, who is going to be able to buy houses in sufficient volumes to keep the real estate “recovery” going? It doesn’t matter how low interest rates are if people don’t have the incomes, savings or credit to buy homes. Rising interest rates can only make a bad situation worse.

My rebuttal, which, like my blog post, pertains to our local market:

  • Investors fleeing?  Supply evidence please, or is that just a guess?  I still get emailed every day by investment groups wanting me to send them deals.  If there are fewer investors buying, it’s because there are fewer deals, which would mean prices are holding up or going higher – too high to make sense for flippers.  Investors are supplying the floor to the market.
  • Unemployment has been terrible, with little or no improvement in the last few years - yet our real estate prices have gone up 20%.  Apparently, the local real estate market is NOT influenced by unemployment.
  • Savings or credit?  You can obtain an FHA loan up to $697,250 with 3.5% down payment and a FICO score as low as 580.  PacTrust Bank will give you a 30-year fixed rate around 5% even if you have had a short sale in the last year.  Most anyone can get a mortgage if they want it bad enough.

Even if it’s not as bad as he says, we keep hearing how ‘demand has been pulled forward’.  If so, it’s a good question - who will be the future buyers?

The future buyers will be the first-timers and others who want to finance their purchase, especially with a lower down payment, who have been shut out by the big-money investors and cash buyers in general.  This future-buyer pool will likely have a limit on their resources, so the appreciation trend will probably moderate, and prices will fluctuate from area to area.

But with a county population of 3.14 million people, we don’t need everyone in the pool – we only sold 3,466 homes in the county last month.  You could exclude 90% of the population from the market and we’d still have enough demand…at least until the baby-boomer liquidation sale starts around 2020.

Posted by on Sep 10, 2013 in Boomers, Bottom Talk, Double Dip, Forecasts, Jim's Take on the Market, Market Conditions | 15 comments

Boomers Downsizing

As the Colorado housing market rebounds, baby boomers are becoming a key player.

Housing prices are up, and interest rates are low which makes this the perfect time for many baby boomers to sell those big houses they raised their families in and downsize into much smaller homes. And in Denver, one new trend among baby boomers is moving downtown.

Cindy and her husband, Cisco Uribe are among those empty-nesters who are giving up life in the suburbs for a new lifestyle downtown.

“We went from a big kitchen to a little galley kitchen,” Cisco says as he shows CBS4 around the couple’s new condo in Brooks Tower in downtown Denver.

The condominium is 600 square feet, which is roughly one-sixth the size of the home they used to own in Thornton. Everything is smaller in the condo, including a cabin bedroom and closet space. They went from having three bathrooms to having just one.

The couple bought the condo fully furnished, so all they brought with them is some clothes and personal items. The rest of their stuff they sold or put into storage.

“It feels a lot lighter … and easier,” Cindy told CBS4.

“I feel younger,” Cisco added.

Read More

Posted by on Aug 10, 2013 in Boomers | 4 comments

Boomers Cause Next Crash in 2020?

Hat tip to Drum Bob for sending this in on boomers – an excerpt:

According to data from the American Housing Survey, from 1989 and 2009, 80 percent of new homes built in that era were detached single-family homes. A third of them were larger than 2,500 square feet. And most startling – “I checked my numbers over and over again,” a bemused Nelson says – 40 percent were built on lots of half an acre to 10 acres in size. Now, he says, 74 percent of new housing demand will come from the people who bought these homes, now empty-nesters, wanting to downsize.

A vast majority of today’s households with children still want such houses, Nelson says. But about a quarter of them want something else, like condos and urban townhouses. That demand “used to be almost zero percent, and if it’s now 25 percent,” Nelson says, “that’s a small share of the market but a huge shift in the market.” And this is half of the reason why many baby boomers may not find buyers for their homes. “Even if the numbers matched,” Nelson says, “the preferences don’t.”

boomerhouseDemographics will further complicate this picture. We’re moving toward a future in America when minorities will become the majority. But given entrenched educational achievement gaps, particularly for the fast-growing Hispanic population, Nelson fears that the U.S. is not doing a good job educating the “new majority” to make the kinds of incomes that will be required to buy the homes we’ve already built.

As the Hispanic population expands, and more baby boomers retire, the gap between the two groups in the housing market – expressed in unsellable houses – will only widen.

“That’s going to hit us,” Nelson says. “Not right now. But my guess is that about the turn of the decade, that number will become a real number. It’s only a few percentage points now, but it’s like a glacier, and if it keeps moving and building and growing, it’s going to be a big number in about 2020.”

Roughly 7 percent of over-65 households move each year, and as people get older, their likelihood of moving from owning to renting gets higher and higher (it’s about 79 percent for households over 85). By 2020, there were will be around 35 million over-65 households in the U.S. That year, Nelson calculates, seniors who would like to become renters will be trying to sell about 200,000 more owner-occupied homes than there will be new households entering the market to buy them. By 2030, that figure could rise to half a million housing units a year.

“Between changing preferences and declining median household income because of poor education – because we’re not willing to spend money on education,” Nelson says, “that means we can predict the next housing crash, and that’ll be in about 2020.”

In that environment, he says, there will be two classes of seniors in America: those “aging in place” voluntarily, and those “aging in place” involuntarily because they can’t sell their homes. Nelson is critical that “aging in place” will really be feasible for many seniors.

“It’s romantic for the first 15 years when you’re turning 65 and retired,” he says. “But aging in place among 90-year-olds? 95-year-olds?” Many of these people, he predicts, won’t realize that they can’t mow the lawn or pay for repairs until they’re really elderly, and the market for the their homes has collapsed even further. “My suspicion,” Nelson says, “is that many hundreds of thousands, maybe millions of those households in the 2020s to 2030 and beyond will simply give up the house and walk away.”

http://www.theatlanticcities.com/housing/2013/03/aging-baby-boomers-and-next-housing-crisis/4863/#

Posted by on Mar 5, 2013 in Boomers | 5 comments

Housing-Inventory Shortage: Boomers

Many of the ivory-tower types are hoping to make sense of the now nationwide housing-inventory shortage, and predict the next tsunami.

http://www.businessinsider.com/us-housing-inventory-shortage-2013-2

The housing inventory is at, or below, where it was in 2003-2005, the peak of the boom era.  Around here, the prices are at, or above, what they were during the same period.

Yet people don’t want to sell.  Why not? A simple explanation:

The housing needs of baby-boomers have peaked.

In the mid-1990s, boomers were 30 to 50 years old, and coming into their best income-producing years as the previous housing bust was bottoming.

Then we hit the jackpot with the Taxpayer Relief Act of 1997, which allowed those who had lived in their house for two out of the last five years to sell and pocket their gains tax-free (up to $500,000 per couple).

Combine that generous tax relief with baby boomers hitting their peak consuming age, and you have the greatest real-estate boom in history between 1997 and 2005 – this graph shows how tight the inventory was then:

housingsupply

But in spite of the mortgage industry goosing the market with exotic financing, the boom couldn’t last forever at those prices/monthly payments.

Some of the drop-off was caused by baby-boomers already being satisfied.  By 2013, boomers are settling down at 50-70 years old:

  • The kids are gone or close.
  • Job advancement is unlikely.
  • Have enough money for now.
  • No need to move.
  • Where are you going to go?

We will probably see the inventory shortage last another 5-10 years, until the elderly or their families start the Baby-Boomer Liquidation sales.

There are 77 million boomers working through the cycle, which will likely be strung out for as long as possible – when was the last time you saw a baby-boomer jump up and say, “I feel like moving today!”?  Instead, baby-boomers will age-in-place while enjoying their golden years.

For many the golden years won’t be as golden as they thought, but they will delay selling the family home as the last resort.

It will probably be a fortunate thing that the lenders/government allowed defaults to drag out – we will need their REO and short-sale listings now!

Expect the tight inventory to continue until the voracious housing demand is curbed by mortgage rates rising sharply, or by the next recession.

babyboomerspendinggraph

Posted by on Feb 24, 2013 in Boomers, Graphs of Market Indicators, North County Coastal | 7 comments

Will Boomers Add To Inventory?

What will slow or stop our current frenzy?

The demand is so deep that it appears that buyers will be gobbling up the usual springtime surge of new inventory…..if there is a surge.

Who will be listing?

We can’t expect much from the banks, they quit foreclosing and will drip out whatever they have left.

Because the large investment firms got in so cheap and are enjoying the rising rents, they will be happy to hold long-term, rather than to cash out and pay capitals-gains tax (a big stumbling block for all investors).

The homeowners who are underwater will want to hold out and see if their previous equity might re-appear.

There are 77 million baby boomers, the oldest of which are heading into their retirement years.  Can we expect more inventory from them?

From the AARP video below:

  • Only 9% of boomers are affluent (making over $150,000/year pre-tax)
  • 25% of boomers have no savings
  • 33% of boomers don’t have a retirement account
  • Only 11% plan to stop working

Won’t there be an exodus of baby boomers who are down-sizing, or have to cash out their equity to pay for living expenses for them and their kids/parents?

According to the survey:

  • Only 6% of boomers plan to downsize
  • 76% of boomers plan to “age in place” (not move), or buy a larger home.

Will the only relief to this frenzy be affordability, or lack thereof?

Posted by on Feb 18, 2013 in Boomers, Inventory, Thinking of Buying?, Thinking of Selling?, This Is America | 3 comments

Staying Put

A friend who lives in La Costa Valley called, and demanded an answer.

Why is no one moving?

We had discussed previously why the long-time owners in La Costa Valley (built in the late-1990s) aren’t moving.  They are busy raising families and enjoying low property taxes – plus, where else is any better?

But she drove through old La Costa, which was mostly built in the 1970s, and could only find two for-sale signs there.  What gives?

I think there has been a transformation about how we view our housing.

Primarily it’s because we are older, and have experienced the first big real estate depression in American history.

1.  Older

During the Big Boom of 1997-2004, baby boomers were in their 40s and 50s, and in the prime of their lives.  Not only was employment fantastic, but everyone was getting rich on real estate.  The ambitious folks cashed in their gains every two years and moved up, while others were content knowing that their equity build-up would someday be their retirement nest-egg.

But now the baby boomers are much older – in their 50s and 60s.  Employment is uncertain at best, and the kids are leaving or have left.  There isn’t the want or need for a bigger house.

If there was a reason to move, does anyone over age 50 want to take on a new 30-year mortgage?  Not unless it is a fairly small loan, which means either draining the bank account, or leaving town – neither of which is very comfortable for long-timers.

Though it was in our DNA to constantly be moving, we have gotten to the age where it isn’t easy to move, and rarely makes sense.

2.  First Real Estate Depression

Our belief that “real estate always goes up” has been shattered.

People never thought much about prices going down (the early-1990s are forgotten), but now we have been rattled by the reality.  With all of the other uncertainty in the world, we have come to appreciate what we have, and are satisfied that it is enough.

Those who are ‘underwater’ and other debt slaves aren’t beholden to their home – for the last 5+ years they have had a free pass to walk scot-free, and not many have done it (there were 356 short sales last year in NSDCC, or 11% of the total sales).

The same prognosticators who predicted that there would be a tsunami of underwater liquidations now believe there will be a new flood of sales by the same underwater folks once they regain some equity.  No way.

They have endured the toughest financial battle of their lives by waiting it out, and now they are going to bail?  Besides, where are they going to move?

They are staying put, and appreciating what they have even more.

With Prop 13 providing the benefit of passing down the old property-tax basis from parents to kids, the lack of inventory should continue.  Home sellers will be those who NEED to sell, and apparently there aren’t many of those today.

Posted by on Feb 6, 2013 in Boomers, Market Conditions | 10 comments