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.
Are you of the age (40+) where you might move one more time? Here are my resources to assist you.
Reasons to move again:
Be closer to family (primarily to be near the grandkids).
Change from two-story to one-story home.
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 upload the best one-story homes for sale 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:
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 senior communities that have homes for sale and for rent. Some examples:
We had a fantastic experience with seniormovemasters.com in San Marcos. They moved the belongings for our seller and set them up in the new home for $1,000!
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:
Olga left for good yesterday, and was greatly assisted byseniormovemasters.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!
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.
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!
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%).
A two-year-old, Culver City, California-based startup calledUnited Dwellingaims 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.”
Matthew does a statistical comparison of today vs. 2008 in this video below. Important to note how his stats show how comfortable sellers are today, and I’ll add that even if homeowners lose their job and stop making payments, it would take a year or two before you’d see foreclosures:
Could the coronnavirus get so bad that it triggers the boomer liquidations? Maybe, and if so, the boomer sales would still be spread out over time because homeowners – especially the long-timers – will resist leaving the comforts of home for as long as possible, and they will hope that waiting out the virus will lead to a better market.
As people hunker down in quarantine throughout the state, many must be asking themselves if they are in the right house for them – and if it isn’t, then where to move.
Thankfully, most of the densely-populated parts of coastal California are more expensive than in San Diego County, which makes for a natural progression.
For downsizers who want to live in the same size or larger home, they can come to San Diego and make out nicely! Or get a smaller home AND pocket big profits from their previous sale.
San Diego County real estate should fare well in the coming years – we enjoy a natural housing demand from baby boomers who are looking for a less-costly coastal experience.
It’s good for the ego too – who would criticize them for wanting to move here!
There is no reason to transfer your house to your kids – use a family trust instead. If you need dough, then get a reverse mortgage. Hat tip to just some guy!
Adding an adult child to your house deed, or giving them the home outright, might seem like a smart thing to do. It usually isn’t.
Transferring your house to your kids while you’re alive may avoid probate, the court process that otherwise follows death. But gifting a home also can result in a big, unnecessary tax bill and put your house at risk if your kids get sued or file for bankruptcy. You also could be making a big mistake if you hope it will help keep the house from being consumed by nursing home bills.
There are better ways to transfer a house to your kids, as well as a little-known potential fix that may help even if the giver has since died.
WHY YOU SHOULDN’T GIFT A HOUSE
If you bequeath a house to your kids — which means they get it after your death — they also get what’s known as a “step-up in tax basis.” All the appreciation that happened while you owned the house is never taxed.
Certified financial planner Kenneth Robinson of Rocky River, Ohio, says last year he advised a client not to let his mom give him her house. The mother paid $16,000 for her home in 1976, while the current market value is close to $200,000. None of that gain would be taxable if the son inherited the house, Robinson told his client.
The mother signed a quit claim to give her son the house anyway and died shortly afterward. That potentially meant a tax bill of about $32,000 for Robinson’s client.
Families who realize the mistake in time can undo the damage by gifting the house back to the parent, says Jennifer Sawday, a partner at TLD Law in Long Beach, California.
“We do last-minute deeds to get that house back in place when we know someone is dying,” Sawday says.
OTHER REASONS NOT TO GIFT A HOUSE
Sometimes people transfer a home to try to qualify for Medicaid, the government program that pays health care and nursing home bills for the indigent. But gifts or transfers made within five years of applying for Medicaid can lead to a penalty period, when seniors are disqualified from receiving benefits.
Transferring your home to someone else also can expose you to their financial problems. Their creditors could file liens on your home and, depending on state law, get some or most of its value. In a divorce, the house could become an asset that must be divided.
A POTENTIAL ‘HAIL MARY’ FIX
Robinson consulted a certified public accountant and an estate planning attorney. Both said what Robinson feared was true: The client was stuck paying taxes on the $184,000 gain in value since his mother bought the property.
“They were as discouraged as I was,” Robinson says.
But then Robinson hired a tax research firm and learned of a workaround. Section 2036 of the Internal Revenue Code says that if the mother retained a “life interest” in the property, which includes the right to continue living there, the home would remain in her estate rather than be considered a completed gift.
“Many people do not know about this and are therefore losing out on the step-up and the lower taxes they would be entitled to,” says Michael Eisenberg, CPA financial planner with the American Institute of CPAs’ Financial Literacy Commission.
There are specific rules for what constitutes a life interest, including the power to determine what happens to the property and liability for its bills. To ensure that outcome, the son, as executor of his mother’s estate, filed a gift tax return on her behalf to show that he was given a “remainder interest,” or the right to inherit when his mother’s life interest expired at her death, Robinson says.
THERE ARE BETTER WAYS TO TRANSFER A HOUSE
There are other ways around probate. Many states and the District of Columbia allow “transfer on death” deeds that allow people to leave their beneficiaries their houses without having to go through probate. Another option is a living trust, which typically costs $1,500 to $3,000 to set up but can ensure all a person’s assets avoid probate.
And probate in many states is nothing to fear. Most states have simplified probate procedures for smaller estates. Only in a few, such as California and Florida, is probate so expensive and time-consuming that most people should try to avoid it.
“We see avoidance of probate as a big issue in people’s minds, sometimes bigger than it has to be,” Robinson says.
