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Headscratcher Of The Day

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!

What do you think?

Open House Report 2

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!

There’s Hope For Contingent Sales!

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!

 

Aging-In-Place & ADUs

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.

https://livablecommunities.aarpinternational.org/

Number of Seniors is Growing

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.

Boommates

Maybe this could free up some homes for sale. Move in with your friend or neighbor!

Excerpts from the wapo:

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.”

Read full article here:

Link to Article

Boomers and Their Kids

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:

  1. Those buying a one-story house.
  2. Those buying a multi-gen house so kids can help with senior care.
  3. Those moving to assisted living.
  4. 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!

CalExodus

In San Diego County, the excessive frenzy conditions have been driven by newcomers who don’t have a house here yet, and who figure that they just have to pay what it takes to get one.

It is those buyers that out-bid the locals. As those numbers dwindle, the frenzy will subside: 

News reports, anecdotes, and preliminary research have speculated about whether there has been an exodus from California during the COVID-19 pandemic. The implications of population changes, such as federal representation and federal funding allocations, are significant.

This policy brief uses the University of California Consumer Credit Panel (UC-CCP), a dataset containing residential locations for all Californians with credit history, to track domestic residential moves into and out of California at a quarterly frequency through the end of September 2021. This brief updates our spring 2021 analysis that used data through December 2020.

https://www.capolicylab.org/pandemic-patterns-california-is-seeing-fewer-entrances-and-more-exits/

Reverse Mortgage, Or Sell?

The less equity you have, the more likely you will move.

Q: I guess it may be too late, but figured I’d ask. We did a reverse mortgage. We got almost no cash out of it, but it is eating up whatever equity remains with our loan that has an effective interest rate of almost 5 percent. Is there anything we can do? Thank you.

A: Reverse mortgages have been around for more than 20 years. The concept is enticing: If you’re over age 62 and you have equity in your home, there are a number of lenders who will give you a loan for a certain percentage of available equity (often up to 85 percent, but sometimes quite a bit less). The loan provides you with cash and no requirement to repay the loan until the home is sold or the owners pass away.

If you’re house rich and cash poor, and want to stay in your home but perhaps need funds to make repairs, pay off the mortgage to lower your cash burn or even augment your retirement income, a reverse mortgage can help. But it comes at a fairly steep price: a higher interest rate plus higher fees.

The higher fees eat away at the amount of cash you’ll get. The higher interest rate eats away at your remaining equity. And you still have the requirement to pay your real estate property taxes and homeowners insurance premiums.

It sounds like you needed cash, maybe didn’t qualify for a home equity line of credit and turned to a reverse mortgage as a way to secure the funds you required. The problem is the one you now face: You had a home without much in the way of equity, took what you could, and now have run through the cash and are out of options to get more.

It’s an unfortunate position to be in if returning to work is no longer an option or a possibility. When we get asked about reverse mortgages, we’ll often recommend that homeowners sell the property, take whatever equity they can and rent something that’s affordable. Or, better yet, move in with family or into some sort of shared living arrangement to cut costs.

Link to full WaPo Article

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