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Active Adult Buyers Are Back

My friend Ken Perlman at JBREC consults with new-home builders primarily, but these thoughts apply to the resale market too – notably, the 65+ generation growing by 17 million people in the next ten years!

With the national housing market surging, active adults have decided it is time to participate again. As discretionary buyers, they’ve had time to “restart” their purchasing process, and many of our developer and builder clients report that with proper health precautions in place, they’ve been willing to do so. In many age-qualified communities across the nation, home sales were particularly strong in August and September.

The pandemic hasn’t changed the size of the active adult population or its motivations. The active adult buyers are a key component of housing demand, as the 65+ population will grow by a net 17 million people over the next ten years. We know one of the highest priorities for this buyer set is being close to children and grandchildren. This means that as the Great American Move takes place in hot markets from Phoenix to Southern California’s Inland Empire to Sarasota, Florida, active adult buyers are following.

They are wealthy with large homes they can sell. Our active adult developer and builder clients told us one of the biggest fears their buyers had heading into the pandemic was the negative impact on their stock portfolios and on the homes they had to sell. Those fears have largely subsided with a rising stock market where the S&P 500 is up 10% year over year (YOY) and existing home Google searches up 30% YOY, as well as the Burns Home Value Index (BHVI) up 5.5% YOY.

4 Keys to Success

Active adult buyers are ready to buy now, so make sure you have inventory. Builders we spoke with in the active adult space told us standing inventory numbers are low, and some are tripling the number of standing inventory homes they produce to satisfy demand. Some are also simplifying what they offer in their homes, a process that streamlines housing production and keeps new home prices more attainable. Despite their wealth, these buyers are still prudent about how they spend their money.

Design elements that appeal to primary buyers also appeal to active adults. Per JBREC’s Consumer Products and Insights survey, more than 70% of new home shoppers between the ages of 55 and 69 included a member who worked at least part time. Work-from-home spaces were always critical to this buyer and are even more so today. Indoor/outdoor spaces are top of mind for active adult buyers, particularly those who live in warmer climates. Opportunities to live in the “healthy” outside while still maintaining cover is a big reason why open corner sliders and outdoor living rooms are immensely popular among this buyer set.

A strong virtual presence is essential. Active adult buyers are not afraid to use technology to search for a home; they rely on it. Active adult developers and builders around the country reinforce that their buyers are doing extensive research online before ever coming to the sales office, and we’ve heard reports of conversion rates among prospects in this space tripling post-pandemic. With travel more restricted and the market expanding rapidly, some active adult buyers are tying up their lots and homes efficiently via builder websites before ever visiting the neighborhood. Empire Communities in Atlanta told us, “We leveraged our virtual platforms, created new virtual platforms, optimized our online campaigns and online sales consultant initiatives, coached the sales teams to get out of their comfort zones, and shifted into a ‘we got this’ attitude.”

Active adult buyers still want to visit sales offices before they buy. While technology is helping buyers become educated, developers were universal in their opinion that this buyer cohort still want to make its final purchase in person. This means that an on-site sales office, decorated models, and well-organized system for coordinating appointments are still critical for selling homes to this buyer profile. Our clients across the country told us that with proper safety precautions in place, active adult buyers prefer visiting sales offices or models in person.

While the first-time and move-up buyers have clearly been the headlines of the housing market resurgence, the active adult buyer is starting to reemerge. We are assessing active adult housing across the country and watching product trends and buyer preferences. Let us know how we can be a resource for you. kperlman@realestateconsulting.com

Who Is Selling?

Who is selling? The chart below tracks when the home was purchased by the sellers. Today’s numbers are from those sales closed between Aug 21-31 of this year:

Year Purchased
12/13/16
4/3/17
6/30/17
12/4/17
2/16/20
9/28/20
0 – 2003
57%
48%
32%
47%
34%
29%
2004 – 2008
19%
15%
12%
15%
18%
15%
2009 – 2011
6%
7%
14%
10%
4%
9%
2012 – 2020
13%
25%
34%
24%
35%
44%
New Home
4%
4%
7%
4%
9%
3%

So much for my theory about boomers leaving town! Today’s percentage of long-time owners sellers was the lowest yet…..but we know that over 50% of boomers delayed selling their home due to covid.

The chart at the top (click to enlarge) shows the California migration, and it’s a money thing.

People who leave the state find it too expensive here, and can do better elsewhere – and are willing to go for it! Younger people are probably more inclined to leave, at least at first. Grandparents to follow!

Of course, even the recent purchasers have no problem selling for a decent-to-huge gain, and more of them have been taking their profits – and hopefully buying another home, either here or elsewhere. Though the 2012-2020 group is the only one that grows just because we’re adding years over time.

More stats:

Other
12/13/16
4/3/17
6/30/17
12/4/17
2/16/20
9/28/20
# of Sales
144
112
99
99
116
130
Avg. $$/sf
$550/sf
$529/sf
$481/sf
$532/sf
$523/sf
$612/sf
Median SP
$1.291M
$1.274M
$1.11M
$1.25M
$1.18M
$1.46M
Avg DOM
42
54
43
52
47
39
0-10 DOM
35%
28%
45%
42%
28%
45%
Lost $$
7
7
0
1
2
0
DOM = 0
7
2
4
3
4
2

There were four flippers in today’s group, same as last time.

Proposition 19 and Market Surge

Proposition 19 is on the ballot, and the California Association of Realtors wants you to believe that if it passes, there will be a surge of new inventory from seniors finally being able to sell their homes and take their ultra-low property-tax basis with them to a new home in a county not previously available.

They have deftly orchestrated a campaign that touches on all the hot buttons too. Just look at the title – who doesn’t want to protect the homes of seniors, severely-disabled, families, and victims of wildfire or natural disasters?

But they ignore that seniors have been able to sell and take their ultra-low property-tax basis with them for years – but only if they move to one of the 10 counties in California (out of 58) who have previously approved the benefit.

The ten counties are the major population centers; Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura. So they want us to believe that seniors have always wanted to move to the sticks – and if passed, the taking of their property-tax basis is the game-changer that gets them to finally move?

Other thoughts:

  • How much do seniors need to spend on a replacement home in the sticks? Half a million should do it, so without Prop 19, the regular tax basis would be around $5,000 per year.  If a senior pays less than $2,000 annually on their old home….the actual savings isn’t a large amount ($1,000 to $3,000 annually) but yes, every little bit helps.
  • Did the grandkids already move to the same town? Probably a more-important ingredient than saving $1,000 to $3,000 per year.
  • It only benefits seniors leaving the big cities for small towns. Are they going to live without their modern conveniences like doctors (a big issue), shopping, entertainment, and a way of life to which they’ve become accustomed to for decades, just to save $1,000 to $3,000 per year?
  • Prop 19 protects the ability of kids and grandkids to inherit the ultra-low tax basis from the parents and grandparents.  How does that create more homes on the market?

But the Association is throwing their full weight behind Prop 19, have gotten the firefighters on board in order to play the wildfire card, and they are advertising on TV:

To me, the thought of Prop 19 creating “tens of thousands of housing opportunities” is preposterous.  But seniors are overdue, and maybe it will be the final reason that gets them to move.  For that reason, let’s add the passing of Prop 19 to our list of reasons why the 2021 selling season will be like no other!

Check out their impressive website:

https://www.carhomecoalition.com/

Future of San Diego Real Estate 2

The turnover and upgrading of neighborhoods is commonly called gentrification, and what it means around here is that the affluent buyers (many, if not most, from outside the county) take over the real estate market, one house at a time.

Their money does the talking – they pay more for houses because they can.

Those with the most horsepower tend to gravitate towards the coast, and once they arrive, they stay – heck, it’s paradise!  This has been happening for the last 100 years.

As a result, the North San Diego County coastal region is comprised of older homes, and homeowners who have lived here for 20, 30 or 40 years.  We are overdue for more turnover!

Who will be selling in the next 1-2 years?

Homeowners used to be more mobile when real estate was civil.  There were up & down cycles that kept a throttle on pricing, and moving up was more feasible. For example, you could have bought a home in the mid-to-late 1980s, had a kid or two, and then in the mid-to-late 1990s move up to a bigger home without too much financial strain because the market took a dip in between.  But if you bought anytime before 2015, it is extremely tough now to justify a move-up today due to the much-higher home prices and property taxes – unless you really need it.

Once the covid & politics simmer down (i.e., Spring, 2021), we should have more boomer liquidations.

We have to – they own all the houses around here, and they will be the only ones moving – they are the market.  We will be dependent upon how many of them will be clearing out.

Oh, you say, “Boomers are settled in, and they’re not moving!”

It certainly has been the trend for the last ten years, but we’re all much older now.  Isn’t it inevitable that more boomers – or their kids – will be selling?  Each day, 12,000 Americans celebrate their 60th birthday – look how it’s stacking up:

Even if the vast majority of boomers don’t sell in the next 1-2 years, there will be more selling than we’ve had recently.  Covid-19 has added a new dimension that held back the majority of boomers – 57% are waiting to put their home on the market, which means a potential surge next spring:

The number of boomers selling will be different in each neighborhood, and they will be selling for different reasons besides just being old:

  • Be closer to grandkids.
  • They need the money.
  • Kids need the money.
  • Neighborhood has changed.
  • Tired of the maintenance.
  • Politics.

We’ll have the usual number of home sales due to death, divorce, and job transfers (The Big Three).  It will be the number of younger boomers, ages 60-75, that move for the reasons above that will supplement the supply and create more balance between sellers and buyers than we’ve had in recent years.

More balance = more sales, and less pressure on prices.

It’s a fine line though. A few more sales would build more comps to keep prices rising faster. But if we get 57% more listings in one spring, the competition will settle down and pricing will do the same.

Results will vary in each neighborhood.  Just do a count – how many homeowners around you are 60+ years old? Don’t be surprised if you see more of them move in the next 1-2 years than ever before.

The Last Move

Are you of the age (40+) where you might move one more time?  Here are my resources to assist you.

Reasons to move again:

  1. Be closer to family (primarily to be near the grandkids).
  2. Change from two-story to one-story home.
  3. Better neighborhood for you.

Being closer to family, and especially to be near the grandkids, is high up the list of reasons for seniors to move. Not only will it be easier for you to get some help from them as you grow older, but they will appreciate the free babysitting and help around the house!

If that means you will be leaving San Diego County, then Donna is the best at finding a quality agent in your new neighborhood.  We are part of two different agent networks, and she will screen agents from those and make a recommendation. Cut & paste her email: donna@klingerealty.com

Are you thinking about buying a single-level home around here?

I input the best one-story homes from the MLS into my public collection here – it might ask you to sign-in but I promise I won’t call you every day until you buy or die:

Link to Jim’s Favorite One-Story Homes For Sale

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If you want to buy and wouldn’t mind getting a reverse mortgage with no monthly payments, then Dean Jones is your guy. There are other private lenders that can do larger amounts but they cost more and the lenders want a piece of the equity – Dean only does government-backed FHA reverse mortgages:


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You may already be in a terrific neighborhood, but it may not be the best for you at this age.  There are several active communities for those who are 55 and older – both for sale and for rent. Some examples:

https://www.oceanhillscountryclub.com/

https://aubergecommunity.org/

https://www.portolaseniorapts.com/

I can help you with the ones that are for sale.

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If time got away from you, and now a senior facility is needed, then one of the most popular websites to search for alternatives around the country is A Place For Mom.

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We just had a fantastic experience with seniormovemasters.com in San Marcos. They moved the belongings and set them up in the new home for $1,000!

If you need senior-moving help in other areas of the country, then check the website of the National Association of Senior Move Managers:

Link to NASMM website

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If you need to donate stuff to a good cause, rather than move it to your next home, then Rancho Coastal Humane Society is a good option because they take most everything.

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Hauling the remainder, including mattresses, can be done by Junk King in Carlsbad.

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One more thing – if you are thinking about giving your house to your kids, read this:

House Gift To Kids

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Here is a resource for checking the costs of assisted living in each area:

https://www.seniorcare.com/assisted-living/resources/assisted-living-costs/

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This is my first draft, and I’ll add more as time goes on. I’d love to hear your suggestions!

Seniors Moving

The final move-out is underway at Picadilly.

Olga left for good yesterday, and was greatly assisted by seniormovemasters.com, who provided an invaluable service in helping set up the new home with all of her prized possessions.

The Rancho Coastal Humane Society was also very helpful today with clearing out the stuff not worth keeping, which ended up being a larger pile than when we first started – as it is for most sellers:

I have many pieces now for my seminar on seniors moving. Stay tuned!

Boomers In Control

This article is written by a professor at the Wharton School who has a book coming out this week. It appears we have a glut of boomers – will we stay put, or sell the family homestead (once the covid is solved) and explore the world during retirement?

Population aging is a powerful force. By 2030 the population above age 60 will have grown so much that other generations like millennials and Gen-Z will be outnumbered by them in Europe, China, Japan and the United States.

Each day, 12,000 Americans celebrate their 60th birthday; in China, 54,000; and in the world, about 210,000, according to the United Nations Population Division. The pandemic will only accelerate this trend given the predictable decline in fertility — which tends to occur whenever unemployment is high — and the shifting demographics of cases and deaths, which are trending younger as time goes by.

The 60+ crowd will become very important economically for three reasons.

First, they own more than half of the net worth around the world, a proportion that reaches 80 percent in the United States, according to a study by the Federal Reserve. Second, the same study concluded that the net worth of seniors is more evenly distributed than among younger age groups, and poverty rates are also lower. And third, their incomes tend to be more resilient because many of them depend on pensions or investment income, and they can do some work on the side to cover potential shortfalls.

Not all seniors are financially secure, but they tend to be less exposed to large-scale financial disruption during episodes of crisis. Moreover, there are 25 percent more women above the age of 60 than men, they tend to be much better at managing their money and making it last, and they account for a smaller percentage of COVID-related health problems and hospitalizations, mainly because they heed the advice of health authorities and they have more robust anti-viral immune responses to begin with.

The gray market is quickly becoming in vogue because ever larger proportions of seniors are enjoying life by using their income and wealth wisely to procure goods and services that enhance their experiences.

Moreover, a 70-year-old nowadays lives the life of a 50-year-old in the 1980s.

The pandemic has also accelerated the technological savviness of this group, and not just in the area of e-commerce. In fact, a study in the Journal of Gerontology found that use of the Internet increases cognitive functioning rather than vice versa. Myriad new applications in virtual reality, robotics, and artificial intelligence are seeking to capture a rapidly growing market.

Other areas of technology will help seniors live longer and more fulfilling lives. Virtual reality can stimulate motor functions and the overall performance of the nervous system, and it can help reduce loneliness, a key problem afflicting large numbers of people at advanced ages. Artificial intelligence and robotics will also contribute to quality of life. Over the last decade, Japanese companies have invested heavily in robotics to aid with daily tasks like lifting weights, conduct physiotherapy sessions, and provide for companionship.

Read full article here:

https://nypost.com/2020/08/22/coronavirus-will-make-baby-boomers-more-powerful-than-ever/

Move While You Can

Our sale on Picadilly is wrapping up this week.

It’s the one in Carlsbad where water damage caused the owners to vacate while remediation took place, and then rather reconstructing most of the house, we just sold it as-is.

I sold the house to the owners for $179,000 in December, 1996 when they retired here from Redondo Beach, and we’ve stayed in touch ever since.  We knew the day would come when they wouldn’t want to live there on their own, but it’s always easier to delay the sorting of the family stuff until then.

The day has come….without notice.

As seniors age, they typically lose some of their physical and mental capacities, and going through their stuff becomes onerous.  Just like with moving, don’t wait too long to sort through your family memories.

Thankfully in this case, Olga is still on top of her game and is whipping through the stuff quickly – she said it’s like having her life flash before her eyes!

Start sorting and moving today while you can still enjoy it!

Frenzy to Continue

Because baby boomers tend to own in the best locations (they got there first), we should have an extended frenzy, and maybe an occasional glut of older and dated 2-story homes in some areas:

Nearly a third (31%) of home sellers are “extremely anxious” about selling their home in 2020. The percentage of sellers in each age group who feel this way are:

  • 37% of millennials
  • 35% of Gen Xers
  • 20% of baby boomers

Another 46% of sellers are “somewhat anxious” about a home sale this year, while 6% have no anxiety at all.

While 32% of home sellers already have their home listed for sale, more than 6 in 10 sellers (62%) haven’t put their home on the market yet. Another 6% previously listed their home, but have since taken it off the market.

More baby boomers (57%) plan on waiting to put their home on the market, due to the COVID-19 pandemic, than Gen Xers (41%) and millennials (42%).

Link to Full Article

ADU As Investment Property

A two-year-old, Culver City, California-based startup called United Dwelling aims to tackle the affordable housing problem using data, creativity, and underutilized garages and backyards.

United Dwelling plans to eventually build thousands of Accessory Dwelling Units, which are basically 369-square-foot studio homes. The company said its units benefit homeowners who are looking for ways to supplement their income as well as tenants looking for low-cost housing options.

United Dwelling uses data to identify potential lots that would be suitable for its units. It targets mostly low-and middle-income neighborhoods, with some exceptions for workforce housing. The company at first was going to just remodel garages but discovered quickly it’s much easier to tear down old ones and start fresh. So that’s what it does. It replaces those garages with small, affordable and zero net carbon homes in low-density neighborhoods with no out-of-pocket costs to property owners.

It then sets a rental price for the newly built unit and manages the property on the homeowner’s behalf, keeping a share of the rental income. Upon completion of construction, United Dwelling gives the homeowner the option to buy the unit back from the company for just under $88,000. To keep the costs of construction down, United Dwelling aims to build at least five units within a two-mile radius in the same time frame. Its initial focus is on the Los Angeles region with plans to eventually expand to the Bay Area and other locations once its solidifies its process, according to Dietz.

Specifically, the company plans to build over 150 of its detached studio homes in Southern California in 2020 and over 1,500 in 2021 (assuming construction can continue moving forward as an essential function per Los Angeles COVID-19 policy).

“Affordable housing is one of the most daunting challenges facing California and other parts of the county that is both entirely man-made and completely solvable,” Dietz said. “Here, we can do something that’s incredibly relevant. The opportunity is truly immense. Affordable housing is pretty easy. All you need is inexpensive land and construction, and capital.”

Link to Article

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