In spite of a WFB survey showing that a third of Americans will not have enough money on which to survive during retirement – and me providing some recent sales data that might back it up – readers here were having nothing to do with the notion that we’d see an exodus of baby boomers. We live in an affluent area, and certainly most homeowners are probably flush.
Let’s keep exploring who the future sellers might be. If we can identify a source that might boost the inventory counts, then sellers and buyers can adjust accordingly.
Another category is the waiting-for-the-top-to-sell folks.
These come in all shapes and sizes, young and old. Here are a few of the groups that could be potential sellers lurking – and just waiting for (more) signs that we’ve squeezed all the price we can out of this low-rate environment:
1. Formerly underwater and now positive enough to at least pay costs.
Roughly one out of eight homeowners in SD County are underwater, which is about half of what it was at the bottom a few years ago. Those who have reclaimed some equity will need to move up, down, or out of town, because a lateral move doesn’t do any good – they’ve survived the current payment this long (loan mod or not) and are tempted to stay put. If some can get their price now and need to move, they just might.
2. The unsuitables.
Those who own a house that is unsuitable – too big, too small, or too much maintenance – might sell if they get their price and move to a better fit.
3. ‘Downsize and travel’ folks, usually baby-boomers.
Probably not desperate, but if they got their price, they’d be on their way. They are more motivated by moving closer to grandkids than anything else.
These are lukewarm sellers compared to the previous discussion where I suggested that some baby-boomers would need to sell to survive. There is crossover between the groups, and a common thread is that they are only motivated by a price – theirs. Any new listings will attempt to push prices higher, and we’ll see if buyers are willing to step up. These sellers aren’t necessarily going to buy another home locally, which could help balance the supply and demand.
Because these sellers have suspicious motivation, we can probably expect that “The Great Wait”, as Shadash called it, will be with us for a long time to come.
Stay tuned for tomorrow’s Case-Shiller report!
It’s not so much that I think boomers will be forced to sell (which yes I think is a little overstated in CA from my observations) but that I think we will see more well to do boomers looking for a retirement home in SD than boomers forced to sell.
Also that and the area is forecast to be adding more population than housing over the next 10-20 years.
I think we will see more well to do boomers looking for a retirement home in SD than boomers forced to sell.
They need to have the grandkids here though, unless they already have a home near the ‘kids and this would be a second or third home.
The growing population should push new housing to the limits (outward to Temecula, Ramona, Valley Center, Otay, etc.) and put a lot of upward pressure on rents. With nobody selling, where are the newcomers going to go?
maybe they are trying to get away from the kids LOL.
Or they will be bring them with them.
I was looking at a few new developments in the Temecula area, there seem to be a lot of new-home housing being built.
We are selling homes, just not as many as before in an area of 300,000 people. These are closed sales of NSDCC detached-homes between Jan 1 and Sept 30:
2003 = 2,993 (highest)
2011 = 1,980
2012 = 2,322
2013 = 2,554
2014 = 2,176 / 9mo = 242 sales per month.
I meant to say
There seems to be a lot of home in home being built.
Seems City of SD has been pushing those high density developments along the transportation corridors despite of local resistance. Newcomers have to settle for condos if they want to live close to work?
There seems to be a lot of home in home being built.
It is a terrific product type – if they can just build them where people want to live. Temecula has to be red hot as a SD alternative for those who want to stay under $500,000.
If I recall correctly, 2003 was the peak of the new construction around here. Could the peak in resales be related to people moving up to new homes? If so, will more people simply stay put and remodel without as many new home opportunities?
Also for L.A. expats who want to stay in driving distance to kids, beach etc..
Yea I was also surprised to hear the other day how inland empire is now the fastest growing economic area in California,
They got amazon setting up shop and a few other large companies building facilities.
Newcomers have to settle for condos if they want to live close to work?
That’ll sting for those who grew up on the idyllic all-American culdesac and was hoping for the same for their kids. But with parks and recreation nearby, maybe they can adjust?
This post leads up to the final group, and maybe the only group left of potential sellers – the Big Three; death, divorce, and job transfer.
The group that seems to get smaller every day are those who want to – and can afford to move up.
Of those who bought a house in the last ten years, only those with superior firepower can move up.
1. The anti-buy-and-bail mortgage guideline is still in place, which means you have to qualify for both houses without applying the rental amount expected to be received on the old house.
2. If you bought in 2005-2008, you haven’t gained enough equity to make a bigger down payment on a more-expensive house.
3. If you bought a house in 2009-2012, prices have gone up too fast. My rule of thumb is that you have to spend 50% more on the next house to make it worth moving, because 10% or 20% only gets you an extra bedroom or slightly better location.
But if the price you paid was 20% ago (2009-2011) the 50% feels like 70%. Sure, you pick up the extra 20% when you sell the old house, but you have to pay property taxes on the +70% house, and to re-invest all the proceeds to keep the payment down to +50%, it would require a double move or fantastic timing of concurrent closings. Not many can do that – or are willing to do that.
Jim not sure where you live but if not in the tract communites full of families in NCC there is another big group I see around here. Longtime owners raising their kids and committed to local schools. Once the kids are out they want to move to the beach or else where. Their careers have soared but they stayed put for the kids. One of my neighbors sold a nondescript tract house when their kids graduated for $800K and bought a $2.5M house in RSF
We live in an affluent area, and certainly most homeowners are probably flush.
Yes, NCSD prices have never declined and never will… right?
San Jose is trying to shove all that high density garbage down buyers’ throats. High density near light rail stations when light rail does not go anywhere useful. The trouble is that no one is buying the $750-$1,000,000 townhomes and “houses” with no yards and no one wants to rent the “luxury apartments” with multi-story garages instead of convenient parking outside the door. The high income high tech working folks will take less space and lower quality finish to live close to work in Mountain View or Sunnyvale. No one with kids would even consider these new products – no yards and steep stairs.
Meanwhile San Jose is preserving “the land for future jobs” in Coyote Valley. Been doing that for 40 years with no interest. Development up north is going vertical to avoid the move south. San Jose leaders never got the memo.
The move up market will really slow down if interest rates start rising and don’t come back down. Nobody is going to want to trade $500K @ 4% for 800K @ 6% even if they are doing well. The problem is where do you find the all cash or first time home owner that’s willing and able to purchase that million dollar property you want to sell.
The other issue I see is while people might like to retire in San Diego they probably don’t want that retirement house to be a 3500 SF McMansion in CV. They don’t care about the schools or want the huge 2 story house. Now maybe the doctors that serve them will buy those houses. UCSD does have that brand new hospital going up.
Two things retiree’s don’t need.
1) High MR
2) High HOA that only provides a green belt and a kiddie park.
The problem is where do you find the all cash or first time home owner that’s willing and able to purchase that million dollar property you want to sell.
Agreed, and older rich people prefer a newer single level house. Those who own those aren’t giving them up – which could stall the retiree inflow! They’ll stay in a hotel before buying a two-story McMansion.
You would think there would be more building of single level retirement communities, maybe away from current Job centers.
At the same time I could see a market for renovators for older one story homes and residential elevators.
Most of the newer high end coastal multistory homes I have seen lately have elevators.
It will be hilarious if in 10-20 years if people look at 30-40 year old McMansion in CV and say, “It’s a tear down”. I’ll buy it for the land value.
They do. It’s just not here in San Diego. You’ll find that everywhere you look in Florida or Arizona.
or sun city.
I was thinking there is a market for those who need to stay in SoCal would be willing to spend a bit more for a place in east north county or east county etc…
Kind of thought Temecula would be that but it seem to be turning into more of a job center.
I think we’ll see tent cities or communes in Hemet or El Centro eventually – or out Borrego way.
I think the tent cities are going to be in Salton Sea, but maybe smaller versions just outside current cities just about everywhere is possible (take south america as an example).
Hope it does not come to that but I could see it happening.
@livinincali
I think you tend to look at things too B&W. A good example is, “Nobody is going to want to trade $500K @ 4% for 800K @ 6% even if they are doing well.”
While you wouldn’t there are plenty of people that would. They are just different than you and don’t make decisions like you do. You may think they are stupid but they have their reasons and the ability to do what they do so. On one hand you say everything happens at the margins but then you disregard it with statements like that. Things happen at the margin but the people at those margins are constantly shifting.
Jiji Said:
“I think the tent cities are going to be in Salton Sea, but maybe smaller versions just outside current cities just about everywhere is possible (take south america as an example).
Hope it does not come to that but I could see it happening.”
Why does it have to be tents like northern cali in the ’30’s? Doesn’t have to be that grim. We have 3d laser printers now. You can “print” your own house now, jiji. The technology will figure into the future of the housing needs of non-saving boomers. Instead of tents stuffed with embittered Oakies in a dustbowl community, we’ll have affordable 125 sq ft homes in gated communities with block presidents and weekly activities.
Maybe the “ihouse” will be the next hot thing.
http://www.clickorlando.com/news/tiny-houses-save-orlando-owners-space-money/29374240
Perhaps nobody is too strong of a word.
The equation at the margin is simple, motivated sellers vs motivated buyers. It always has been and always will be. Are you suggesting that higher interest rates have no impact on the pool of motivated buyers? Hey you get a 50% increase in income, you go out looking for a 50% more expensive house but if interest rates are 6 instead of 4 you pay double the mortgage payment you had before. I think that will have an impact on the move up market, you seem to disagree.
The boomer impact to the economy has always been noticeable. Interest rates were sky high (1980’s) when boomers started entering the workforce and wanted loans for houses and cars. The stock market went sky high as boomers poured money into the stock market via 401Ks (1990’s). When boomers shift from the asset collection phase of their life to asset liquidation/rent collection guess where that impact is likely to be? I think it’s really that simple, although not fun to think about.
I like it livinincali. A more measured and reasonable view this time but perhaps still too B&W. The economy in our country is still a mess and I dont deny that for a second. We have years of repair work ahead. The Fed has no choice but to keep rates low for years to come so they can service their own debt. While the country is a Sea of Turmoil we live on an Island of Prosperity in NCC. When rates rise materially it will be because of prosperity not suffering in this country. That rising tide will lift us even further.
And while you may scoff at this notion, it is different here than most places in this country and the data bears that out. Their efforts to keep the rest of the country a float will support our prices until enough time passes and wage inflation comes.
On your last point, the world can only end once. It makes a great story to predict that over and over. But its only a story not reality. In my 50 some odd laps around the Sun I’ve learned the universe always moves toward balance. A good friend shared something with me a few years ago when we were falling over the precipice of the housing melt down that I will share with you.
“What looks like optimism is merely observations from my life, your results may vary. I’ve spent probably more than half of my scheduled time on the planet and what I’ve learned makes me understand that balance will find me, I don’t need to seek it. When things look like they are great and will only get better, they won’t, conversely when things look like they can only get worse, they wont. Pendulums swing and they always swing back, if there are too many rabbits in my yard, soon there will be coyotes, balance is the most reliable thing in our world. The study of nature and business has amazing similarities. This country has all the needed elements, it just needs to organize them. It is a healthy thing to go through something like this current crisis every decade or two.”
Words to live by.