Will there be fewer sales in California due to kids moving into inherited homes? Or could there be more sales, due to the high home values and the difficulty of paying off the other siblings? Hat tip to the WSJ!
One of the first things people do when they inherit their parents’ home these days is put up a for-sale sign.
Deciding what to do with a family property is often both an emotional and financial decision, but the rising costs of renovations, property taxes and utilities are making it harder for adult children to hold on to the real estate, financial advisers say. Higher home prices and mortgage rates have often also made it impractical for heirs to buy out their siblings, said Dick Stoner, a Realtor in Rockville, Md.
The high home prices of the past few years have made the decision to sell even more attractive. If inheritors can unload a house in a hot location for a high price, the proceeds from the home’s sale can help secure their finances and fund goals such as retirement, advisers say.
“For inheritors, cash is king,” said Paige Wilbur, Wells Fargo’s head of estate services.
Leaving a home to children remains a common way to transfer wealth, according to financial advisers and estate planners. There is no recent data that tracks home inheritance nationally.
More than three-quarters of parents plan to leave a home to their children when they die, according to a 2023 Charles Schwab survey of more than 700 American investors between the ages of 27 and 95. Some children may be reluctant to sell for sentimental reasons, but finances and simplicity of unloading a property often win out. Nearly 70% of those who expect to inherit a home from their parents plan to sell it, the survey found.
The doomers will love this article but no mention of heirs living in their inherited family home, instead of selling it – which around here should be a significant group:
Millennials are fueling a generational housing bubble that’s set to burst over the next decade as demand for homes falls off, according to researchers.
In a recent report from the Indiana University Center for Real Estate Studies and the Indiana Business Research Center, researchers said Millennials — who are between their mid-20s and early-40s, are in the prime-homebuying age — have pushed up home prices in recent years as demand outweighs supply.
But the situation will start to reverse over the next decade, as Baby Boomers begin age out of the housing market. Meanwhile, post-Millennial generations will be smaller as population growth slows.
That could lead to an excess of housing, potentially pushing down prices and sparking a crash in the real estate sector.
“Plainly put – a generational housing bubble is on the horizon. New housing built now to meet strong demand may sit vacant in a decade. Demand reversal will intensify by the mid-2030s, when the annual number of homes that seniors add back to the market is expected to be 40% higher than current levels,” researchers said.
The could be offset by policies that encourage seniors to age at home instead of nursing facilities, ease first-time home purchases, or boost immigration, the report added.
But population trends indicate that many housing markets will peak in the next decade, it cautioned.
“As Millennials pass through their first-home buying years and Baby Boomers through their last stages of life, the current period of strong demand will transition into a period of slowly declining demand,” the report said. “The industry must adjust current business decisions to this eventual changeover in market conditions or risk substantial oversupply and value loss in the housing market of the future.”
In the short term, industry experts have floated the possibility of a housing rebound over the coming year.
Home prices climbed month-per-month in February for the first time in seven months, according to the Case-Shiller data, and Goldman Sachs predicted prices could stop crashing as soon as mid-2023.
The market could deteriorate into a cash-only environment, where the buyers and sellers who can avoid mortgages altogether are the only players left. If mortgage rates get into the 7s and 8s, the temptation for financed buyers and sellers to wait it out will be overwhelming.
Sellers who are downsizing/leaving town are home buyers who won’t care much about mortgage rates because the only way it makes sense for them to move is to pay cash for their next home. Especially those who are older.
There are plenty in this category, thankfully!
From FATCO:
Of those who owned their home free and clear, nearly 78 percent were owned by homeowners aged 55 or older. Not surprisingly, older homeowners are more likely to own their homes free and clear. As the Baby Boomer generation, which is larger than any generation before it, has aged, the share of homes owned free and clear has increased. This gives some hope that while many existing homeowners remain rate locked-in, there is a large cohort of older homeowners who are not. However, older households are typically less likely to move than younger ones, which is especially true as seniors today increasingly age in place. So, while some portion of the free-and-clear inventory will come to market in the next decade, it will likely trickle in slowly.
Free-and-Clear Homeowners May Hold the Key
As demand for homes starts to inch up as we approach spring home-buying season, a key question is, will there be more inventory for those potential home buyers to buy? Existing-home inventory makes up the bulk of available home inventory, and many existing homeowners refinanced into sub-3 percent mortgage rates over the course of the pandemic. But there’s a large group of homeowners who are not deterred by higher mortgage rates—those without a mortgage on their existing home or those with a small remaining balance. These homeowners may hold the key to unlocking more supply and, in turn, more home sales.
Local sales recently have been purchased all-cash about a third of the time. As sales drop further, the percentage of all-cash sales should end up at half or more of the total sales – and help to provide a floor.
Ok, ok you want to downsize but you don’t want to bake in the desert – plus you like living in San Diego. Aren’t there any newer, smaller choices around here?
Lennar has purchased three local golf courses and are on their way to building them out. The development of the Carmel Mountain Ranch golf course off the I-15 freeway (above) faced some resistance from the locals, but they beat that back and a gated senior community is now underway.
The Junipers is a senior community (55+) in Rancho Penasquitos and will include a mix of 455 single-family detached-homes and townhouses for sale. There will also be 81 attached homes for rent for low-income seniors households. It will include a 2.87-acre public park and a 2.82-acre loop trail.
Pricing isn’t out in the open but I’m guessing it starts just under a million.
Another new-home development is called the Farm, and it’s right off Rancho Bernardo Road. It isn’t solely for seniors, but they have a couple of one-story plans. Here’s a quick tour of their 2,500sf one-story home under construction:
The #1 reason that the real estate market has been in the doldrums over the last few months is because of the inept response from realtors on how to handle it. There hasn’t been ANY real guidance or advice coming from NAR and other industry leaders on what to do, which gives the appearance that they probably don’t have a clue.
But the least they can do is respond to doomers leaving unsubstantiated teasers on your twitter account. This guy is begging you to respond, and you just let it go? Have some guts and reply with something that forwards the conversation…..please!
I’d respond with this:
The baby boomers own most of the homes, and 91% of them aren’t interested in accessing their equity, let alone moving! There isn’t going to be a flood of boomer liquidations, though I hope it comes some day. While there might be some minor outbreaks in 2023, for the most part, seniors are going to age in place and chuckle at the real estate mailers that promise instant riches.
No surprise that our new listing found a buyer already. The one-story homes with all the extras are probably the most attractive buys in the marketplace, and anyone can sell these – it’s just a matter of who can get what price.
I had 200+ people attend the open houses last weekend – and at least 90% of the people were seniors. Yet,NONE of them submitted an offer.
Think about that!
I thought this home would be a perfect match for those who are getting older and want to get out of their two-story home. Those looking to retire here and want a pool for the grandkids. Anyone fitting the typical downsizer profile.
While there were plenty of lookers, none of the seniors made an offer. Why?
Are there hundreds of seniors just beginning their search?
Are there seniors who thought they were legitimate buyers but couldn’t pull the trigger fast enough?
Are there hundreds of seniors passing on the third one-story offering in this tract this year because of price? Anyone who lives nearby can sell theirs for a similar price and take their property-tax basis with them, so it’s just a swap of equity so why would price be a mental barrier?
Is it the perceived difficulty of selling one and buying another?
Are they just happy enough in their two-story home, but have a natural curiosity about living in a one-story? Is moving to a single-level just a nice idea?
Most of the attendees were getting around fine – there were just a couple of old guys limping around. My theory is that living in a two-story will be tolerated until the very end, and if it gets bad enough, you can always sleep on the couch downstairs!
I had another 80+ people attend my open house on Sunday, and a total of more than 200 people for the weekend. Virtually everyone who came was older, and the overwhelming message was that the buyer pool for one-story homes is large and they are hungry for product.
We have received one full-price cash offer so far, and there should be 2-3 more coming in today.
This smaller tract was built by Davidson in 1996, and sold in the $300,000s originally. Only 12 of the 82 homes are the one-story floor plan – which is typical (some newer tracts don’t have ANY one-story plans). Of the 82 homes, 57 of them, or 70% were purchased for less than $1,000,000.
I sure get the feeling that there are boomers occupying most of the newer tract homes in North San Diego County’s coastal region, and they aren’t going anywhere – unless they can buy a single-story home.
The most interesting part is that my listing will be the third sale of this floor plan in 2022, in a neighborhood where there hasn’t been a sale of this model since June, 2018. It could be another few years before the next one sells, because those who have a single-story home tend to hang onto them.
The doomers want to blame higher rates for the slowdown in sales, but unless we get a flood of one-story homes for sale, the inventory will probably keep shrinking – and be mostly made up of the two-story homes where boomers have gotten lucky and snagged one of the few single-story homes coming to market, or where they gave up and left town. It makes it tough on those buyers who are coming here to retire!
We opened escrow today on my first contingent sale in 2+ years – where my buyer has to sell their home to purchase the subject property.
There were two offers submitted – and BOTH were contingent upon selling another property!
Thankfully, the house we’re going to sell is a single-level home in Aviara, which was well-known to the listing agent – plus I submitted my price, a thorough set of comps, and photos to help him with the decision.
It means we’ll have an open-house extravaganza coming this weekend, and get to test the demand for a prime one-story home with all the extras….including an attractive price! Stay tuned for more on Thursday!
