https://www.calculatedriskblog.com/2021/11/2nd-look-at-local-housing-markets-in.html
Our drop in inventory is the most pronounced of any area in the country.
During the previous peaks in pricing, more homeowners would gladly sell for a record price…..and parlay their gains into a bigger home down the street or around the corner. But that was when you could buy an upgrade for an extra $100,000 or $200,000 – now it takes a million!
What about the long-timers? Those who moved up a couple of times were able to achieve their so-called dream home, and have now become very comfortable. Even though Prop 9 was intended to encourage the seniors to take their ultra-low property tax basis with them when they downsize, it’s not enough of a benefit to change the trend.
The end result? You need to leave town to make moving worth it. But nobody wants to go!
Of all the towns in America, we probably have it better than anyone….which means we should have the fewest number of people who are willing to leave town.
The logjam in the market is caused by the seniors who are aging in place, instead of downsizing or moving to the retirement home. Those who are over 75 years old are probably staying their current home for the duration. We need more people who are ages 55-75 to pack it up!
The only hope is that the baby boomers who haven’t saved enough money for retirement are counting on their home equity to get them through. It doesn’t mean they have to move though – they can get a reverse mortgage to tap a decent chunk of their equity – without monthly payments!
But for those NSDCC locals who are willing to leave town in order to liberate their home equity, they will enjoy a hyper-frenzy in 2022.
I don’t think there will be enough of them for us to get back to normal inventory levels. It could actually get worse in 2022, and inventory go down. Can you imagine a market with less inventory?
Don’t be surprised if we have fewer homes for sale in 2022 – causing the frenzy to blast off:
- Virtually every house sells.
- Pricing goes ballistic.
- Homes are sold differently.
If we do have additional homes come to market, the existing demand will soak them all up. It will take a flood of inventory to cool off the demand – meaning more than twice the inventory we had this year.
One source of additional inventory might be the retiring realtors who can’t hang with the big dogs, and they turnover their client database to an agent before they leave town. If you are in that category, let’s talk!
Get Good Help!
> Prop 9 was intended to encourage the seniors to take their ultra-low property tax basis with them when they downsize…
The retirement home relocation plan doesn’t make sense. Technology makes age in place easier. 70 is the old 50. Uber/Lyft.
The ultra-low tax basis is almost myth by now. How many bought in 1975 and got their 1973 plus 2% per year are still around? Even then their 1975-2021 at +2% compounded means your original 1% tax rate is now 2.5%.
I know of several “public servants” who take their very generous California retirement checks in other states. Prop 9 was nothing compared to other taxes.
You forgot the capital gains tax they will have to pay on the profit. Some even have rolled over gains from a prior sale. That has to be weighed against the value of the property tax reduction. Likely better in most cases to stay and let the kids get the stepped up basis.
Speaking of the kids, at these prices how do they afford to buy a home and raise a family in SD close to their parents, who are aging in place? Coincidentally, I bought my last home from a couple who were leaving the area to live closer to their daughters, who left SD due to the high cost of housing, and that was 6 years ago. Can’t help but wonder what impact we will see on the next gen as to whether they will be sticking around the area or hitting eject due to housing costs, and whether parents will follow.
This is probably the #1 reason why seniors (55+) are leaving the state – to join their kids who have already left. Everybody was the grandparents to be close to the grandkids – especially for the free babysitting.
It’s either that or pay for the kids to come back to California, which is cost prohibitive.