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!
Around the coast, the housing stock is finite – there isn’t any more room to build new houses. Whether they knew it or not at the time, everyone has bought their ‘forever’ home and aging-in-place has become the natural trend. The higher prices and rates have locked out the majority of possible home buyers, but there still aren’t enough homes to sell – evidenced by the relatively low inventory.
A month ago, there were 466 houses for sale between Carlsbad and La Jolla, and today we’re down to 422 active listings – in an era where other areas are reporting a surge in inventory. There is a real push to build granny flats to create more housing, but that isn’t going to help the resale market. In fact, the building of ADUs will actually make the real estate market WORSE by keeping more seniors aging-in-place, and limiting the resale inventory.
Higher rates and prices will only continue the shift of homeownership being for the elite – only.
From the AARP:
The COVID-19 pandemic has altered how people think about their lives and homes – which has collided with exponential growth in the number of older heads of households and renters. These trends highlight the urgent need to rapidly increase and improve age-friendly and affordable community and housing options.
AARP’s 2021 Home and Community Preferences survey found that over three-quarters (77%) of adults age 50 and older want to remain in their homes as they age. This desire is consistent across the lifespan with 63% of adults overall saying the same. The numbers of older adults wanting to remain in their homes as they age has remained relatively consistent for more than a decade and was not impacted by the pandemic.
Increasing the number of multigenerational households, providing more options like accessory dwelling units (ADUs) or “in-law units”, and encouraging renovations that support aging-in-place are all critical to support this desire.
It’s probably true that seniors are leading healthier, longer lives and will prefer to age-in-place – which will keep a limit on the number of homes for sale and temper any downdraft in pricing. What is worse is that the resulting back-up will cause others to stay in their current home forever too!
It was asked on Twitter, ‘how could homes prices get cut in half?’ I said, “Boomers die 10x faster”, which got my Twitter account suspended temporarily. Let’s see if they do it again!
Reader ‘just some guy’ sent in this UT article – an excerpt:
On Thursday, county officials announced that San Diego County has become the first county in the nation to have all 18 of its eligible hospitals receive the Geriatric Emergency Department (GED) Accreditation.
San Diego County is home to a large population of people age 60 and older, and that demographic is projected to continue growing over the next decade. Today, there are approximately 670,000 county residents in this age group, and by 2030, they are expected to surpass 900,000, said Nick Macchione, director of the county’s Health & Human Services Agency.
Seniors are more likely than almost any other age group to visit the emergency room. The county reports that each year, about 275,000 county seniors make ER visits, which leads to about one-third of all hospital admissions. “That is why it’s critically important to have all our hospitals that are eligible be geriatric certified,” Macchione said.
Faced with escalating home prices and rents in tight housing markets, as well as careers or earnings curtailed by age or the pandemic, some boomers are looking to share their homes. Enter the boommates.
“With the boomers aging, you see higher and higher numbers in shared housing,” said Rodney Harrell, vice president of family, home and community at AARP, pointing out that boomers are more open than previous generations to trying alternative solutions to the traditional aging trajectory.
In an 1987 interview with NPR, the late Betty White noted that the four women who lived together in “The Golden Girls” did so for social reasons rather than financial necessity. “All that I think we have accomplished is to show that there is an alternative lifestyle,” White told “Fresh Air” about the success of the show. “If you notice, ‘The Golden Girls’ are not together for economic reasons. They’re together for sociological reasons. It combats the loneliness.”
Four decades later, the idea of housemates late into adulthood is experiencing a revival, but with financial factors front and center. As boomers live longer and retire without the financial safety net of employer-sponsored pensions, covering the rising costs of food, housing and insurance become major considerations. Linda Hoffman, president and CEO of the New York Foundation for Senior Citizens, which runs a home-sharing program, noted an increasing number of applications as finances become more of a stressor.
“When we started the home-sharing program in 1981, relieving feelings of isolation and loneliness was the primary need,” Hoffman said. “Now, an affordable place to live is the number one need. Hosts need help in meeting their housing expenses.” Even for housemates who entered into the arrangement for social reasons, the extra money has become more important as their financial picture changed with the pandemic.
“The majority of people considering home sharing with a friend or family member tells me that there’s an opportunity there for more people to take advantage of that excess housing stock that we already have within our own homes, and that perhaps meet your needs, and those of a friend or neighbor,” Harrell said. “Or maybe companionship that may help with costs, such as caregiving. There’s just so much advantage there. And we’re just not necessarily taking advantage of it. It’s nowhere near its potential.”
One of the primary questions? How are the kids going to be able to buy a home?
If prices just stay at this level, it will be near impossible for local kids to save the down payment and afford the monthly nut when starter homes are selling for around $1,200,000.
Plus, there is the incentive now for seniors to hang onto the family homestead and then let one of the kids live there so they can keep the old property-tax basis. For kids who never left, they will live in the same home their whole life!
But if you have more than one kid, then what? It used to mean selling the family homestead and dividing up the loot, but today’s heirs probably own their current home too. Tomorrow’s heirs? Not so sure, which means more homes will stay in the family when the parents die, and fewer homes will be coming to market.
The tight inventory could get worse.
Because the majority of homes being purchased today are ‘forever’ homes and will be owner-occupied for generations, it narrows down the list of probable sellers to those who have owned their home for longer than 12 years, AND are selling for one of the Big Three reasons (death, divorce, and job transfer).
And the baby boomers are going to decide the outcome.
Baby boomers are:
Still relatively young, and living longer than ever.
Aging-in-Place, rather than pay the imposing tax penalty for selling before you die.
Hoping a kid will inherit the house and live in it.
There may be a boomer-liquidation surge in the future, but it will be at least 5-10 years before it could happen on a larger scale. In the meantime, seniors will live comfortably in their old family homesteads, and probably be joined by as many kids as can fit.
The seniors who do move will be from these categories:
Those buying a one-story house.
Those buying a multi-gen house so kids can help with senior care.
Those moving to assisted living.
Those who will rent, at least for now.
Some may have to move out-of-town, but at least their pockets will be full of cash.
Once they take care of themselves, boomers are going to focus on their kids – many of whom are still hanging around the house!
It means the entry-level markets will be full of younger buyers backed by affluent parents and grandparents – and they are loaded. There is also the multi-gen buyers who are looking for larger homes that will suit the whole family – or they will buy the one-story home for the folks, and then leave the old house for the kids.
There really should be an extra premium available for those home types when they sell, given the demand. If you are going to sell one of those (entry-level, multi-gen, or one-story), then list your home with me, and I’ll make sure you get all you deserve!
The rapidly-increasing home prices are exacerbating the problem too – especially for existing homeowners who had hoped to move up. If you paid $500,000 for your house and now it’s worth $1,000,000, you need to spend $1,500,000 on the upgrade just to make it worth it. But the gap isn’t between $1.0 and $1.5, it’s the whopping million dollars between the previously-comfortable $500,000 and the new price of $1,500,000. Even if you are over 55 and can take your old property taxes with you, the new mortgage amount will be double the previous amount AND last for another 30 years. It’s why more and more of the current homeowners are staying put, which is limiting the inventory now, and in the future.
It’s why I said on the TV show that the current market insanity is likely to continue.
With a finite number of homes and 1,700 new millionaires being created every day in America (we are now up to 18,000,000 millionaires!), the affluent have commandeered the local market. Apparently, they don’t mind paying these prices, and will throw in another $100,000 or so to win the home, if needed.
We hear regular calls for government to ease up on zoning requirements, but more action is needed because we are out of land. Bill Davidson, the most prolific home builder in the history of San Diego County, talked about the shortage back in 2012:
On the TV show, I suggested redeveloping the MCAS Miramar or getting the City of Carlsbad to free up some of the dedicated open space to create larger opportunities for builders, because we need thousands of more homes, not dozens, to balance the market and slow down the pricing.
But those ideas have no chance of happening.
It would take a monumental shift in priorities for our society to consider those. If the government were to propose redevelopment on a grand scale, it would take dozens of years to come to fruition. The Kearny Mesa project is a good example, but it will only add 26,000 homes over the next 30 years which probably won’t be enough to slow down pricing – and no single-family residences are planned there.
Any other new projects will face intense opposition.
The NAVWAR site off the I-5 freeway would seem like an ideal redevelopment project, and it could provide housing right where it’s needed. But the opposition is fierce – consider this attorney’s opinion:
Unless we have a game-changing shift in our community’s mindset about redeveloping the infill sites, the hordes of affluent people will dominate the home-buying – and keep pricing at these levels or higher.
Oh but wait Jim, how about those boomers – half of which haven’t retired yet? Will the boomers who are still working be more likely to need the dough, AND be young enough to endure a move out-of-state?
Maybe, but their kids and grandkids will be lined up to inherit the house, and with that being the only feasible way for them to stay in San Diego, the boomers will find a way to age-in-place instead.
For months the talking heads have cited the ultra-low rates, the shortage of new homes being built, stock market, millennials, covid, etc. as reasons why the real estate market has exploded.
Let’s add a few no-so-obvious reasons.
Did we fully recover from the last downturn? We know that because Bernanke and the banks unilaterally changed the rules to rescue the MBS investors, we never hit the true bottom. The short-sales muddied the water further because there were so many that were never exposed to the open market and sold instead at artificially-low prices by unscrupulous realtors. In 2010-2014, we saw it here on the blog where many commenters expected the downturn to last for at least a few more years, and even the Frenzy of 2013 didn’t convince everyone we were out of the woods. Low (but not ultra-low) rates made it interesting, but there wasn’t enough confidence for buyers to flood the streets desperating seeking a home to buy – though in hindsight, they probably wish they did.
The lower-end inventory has been decimated by rental conversions and aging-in-place. Because the rents have exploded, any of those homeowners who didn’t have to sell their existing home had to consider hoarding their prized possession that was probably the best investment they ever made and turn it into a rental instead. The high costs of senior care is causing many if not most to age-in-place, and besides, one of the kids or grandkids can take over and assume the low tax basis. While pricing is flying on the lower-end today, it’s a recent occurrence that the appreciation has been 2% to 3% per month. If there had been more listings in recent years, we would have had prices rising faster, sooner. In the chart above, the rest of the categories look fairly uniform – it’s the lower-end that has changed drastically and having the most impact on the frenzy upstream.
The builders never got the memo about open bidding. Still to this day, it is first-come, first serve. Pardee is down to their last 20-30 houses ever in Carmel Valley, they were taken over by Tri-Pointe, and they have nothing left to lose. You know there has to be 50-100 people waiting on their buyers’ list yet they only release 2-4 homes per phase. Toll Brothers sold two of their models for $4,000,000+, yet Pardee is keeping their production homes attractive priced in the mid-$2,000,000s. If they just opened up the bidding at each release to ALL the buyers on the list, they would pick up an extra $500,000 easily – just because if you are number 50+ on the list, you’re not going to get another chance. But they don’t do it, which is keeping a lid on pricing. Because most everyone is buying their forever home, there won’t be enough turnover in the next few years to generate the momentum needed to find the real top-dollar value.
There are three examples of what has been undercutting the trajectory of home pricing.
When we have BOTH sales and pricing on the rise exponentially like we do now, it demonstrates what is possible when you take off the inhibitors. We are probably running a little hot today – can we be so undervalued that this frenzy could keep going for months or years?
Perhaps – especially if there are new market factors we haven’t considered before!
The U-T asked their twelve real estate experts about the effects of Prop 19:
Q: Will Prop. 19 substantially increase home inventory in California?
Of the local experts, 11 out of 12 said NO, and the justification for the one YES answer could have been just as easily been reasons to say NO. Gary’s answer above was the best and most-accurate. See the rest here:
The boomer sales spree is inevitable, it’s just a matter of when. But if it’s a slow methodical process over the next two decades, will we even notice? Let’s say the 100,112 homes turn over in the next 25 years (and only 1/3 are inherited by the kids), we’d average 223 more sales per month. There were 3,827 residential sales in the county in September. Results may vary!
Homeownership has long been considered part of the American dream. But first-time homebuyers — especially millennials and Gen Xers — are facing an uphill battle when it comes to house hunting.
This is in part because of a growing trend in which baby boomers, the generation that owns the largest share of American homes, are planning to stay put. In fact, a 2018 survey conducted by AARP found that 76 percent of Americans over the age of 50 would prefer to remain in their current home — rather than move in with family, to a nursing home, or to an assisted living facility. That is leading to less inventory for new buyers.
According to the U.S. Census Bureau, the share of homeowners over the age of 55 has been steadily increasing. In 2008, at the onset of the Great Recession, Americans over the age of 55 owned 44.3 percent of homes. By 2019, that percentage had increased to 53.8 percent. While the share of homeowners under the age of 35 remained fairly steady within the same time span, the share of homeowners between the ages of 35 and 54 decreased from 42.3 percent to 34.1 percent.
While baby boomers — defined here as Americans between the ages of 55 and 74 — comprise just over 22 percent of the U.S. population, they account for nearly 42 percent of homeowners nationwide.