The baby boomer liquidation sale has failed to materialize….so far. Boomers are holding onto their old homes longer, and living the good life instead:
Baby boomers are not leaving the homes they own to settle into apartments, as housing economists had predicted.
A new edition of Fannie Mae Housing Insights says that boomers are not responsible for a recent surge in the apartment market. But when they do finally downsize, the very size of the generation will be enough to “move markets.”
Predictions were that boomers, the generation born between 1946 and 1965 (some sources say 1964), would begin downsizing naturally as they became older and more frail. “The research showed that the likelihood of Baby Boomers occupying single-family homes has changed little in recent years, despite the factor that boomers are experiencing major life changes that might be expected to cause a downshift in their housing consumption,” the Fannie Mae article said.
Instead, through 2013, boomers had not significantly reduced the rate at which they live in single-family, detached houses, the agency said. And although the number of rooms in those houses has decreased in recent years, “boomer home size has increased since then, suggesting the boomers are not trading down to smaller single-family homes, either.”
The article added that the “number of boomer apartment dwellers has not budged in recent years, whereas the number of millennials in multifamily rental units has grown by nearly half a million annually.”
That’s a significant finding with big implications for the housing market, because “boomers have an enormous residential footprint.” Some 40 percent of the nation’s homes are occupied by boomers, who have “half of the nation’s housing wealth,” Fannie Mae said.
As baby boomers move into their retirement years, they’re having a major impact in other ways, too.
“After working most of their lives, Baby Boomers want it all in retirement: travel, dining out, owning two cars and multiple homes. And they want to do this off of income generated by their investments,” said a recent article in Wall Street Daily. “Yet you’d be amazed how many people go to see an advisor with far too little in savings or investments to enjoy that sort of retirement. Even those people who have enough assets often have them allocated extremely poorly.”
Some boomers have accumulated no savings for retirement, the article said.
Read full article here:
The Biggest bulge in boomers has not even reached 60 yet(they are about 58).
So it is too early to tell IMO. But that said the SoCal boomers I have talked to don’t really have big plans, they are just not planning to move to a retirement condo (at least not as long as they don’t have too).
For California, I think that Prop 13 just makes it too enticing to stay put and keep paying 1970’s era property tax rates!
I would agree with this, Most boomers bought between 1975 and 1990.
If they resisted the urge to buy when the prices reached 2004-6 highs and avoided the new homes with large MR and HOA fees they have a very low carrying cost in most cases.
I would say about 75% of the boomers I know are in this category.
I’d amend eddie’s comment to say FAIR property rates. Prop 13 is one of the only laws that have kept California from turning into a complete socio-economic madhouse. It’s like “the forbidden zone” in planet of the apes. We need it there to keep the apes somewhat in check.
After age 55, you can bring your property tax base with you to a new house if you are downsizing and if you sell the old house and you stay within the same county or move to a county that allows transfers in… Haven’t looked at the specifics in a while, so details may be changed….
Should we talk capital gains taxes? Especially coastal, anyone that bought 30 years ago WILL pay taxes on exit. I’ve haven’t met many that like to pay taxes. If they keep the house, the kids eventually get stepped up basis and can sell tax free. Why sell now?
For most that have stayed in a house for 20+ years, it seems that they probably like living there…. and the prospect of that 30 year mortgage finally going away and living payment free is a pretty nice idea. My mom is still in the family house she bought in 1977, paid it off 10 years ago, put solar in recently. Her only bill is water, trash, insurance and $1300/year property taxes. When the time comes, she has extra bedrooms and bathrooms for live-in care. I can see not wanting to leave that.
Reasons for Boomers to Move:
1. Be closer to grandkids
2. Need money to live
3. Bad knees
Reasons for Boomers Not to Move:
1. Have to sort through the junk
2. Have to find a better place to go (women don’t go backwards)
3. Sleeping in the barcalounger ain’t that bad.
4. Can remodel downstairs into bedroom if it gets too bad.
5. Reverse mortgages can provide funds if needed.
6. Buying down in same neighborhood means major sacrifice.
7. Have to leave town to make it worth it.
8. Comfort level of staying put is high.
9. The older, the more risk-adverse.
I’m no boomer, but according to your list, 2 out of 3 says I have to move. I don’t have grandkids.
Haha – If I had your money, I’d burn mine!
Reverse mortgage can be used to pay off an existing loan as well (if you have ~50% equity or more).
That will add one to the list.
“After age 55, you can bring your property tax base with you to a new house if you are downsizing and if you sell the old house and you stay within the same county or move to a county that allows transfers in… Haven’t looked at the specifics in a while, so details may be changed….”
Last I heard, you have 90 days to get into a new house to keep your tax rate. Does being over 55 give you more time to find a new house? That would be great to know. 90 days is like threading a needle, and an incompetent broker could wind up leaving you to twist in the wind.
I think they give you 2 years. But as always, Get Good Help. If you want to leave the county, there are only a handful of counties that allow the inter-county transfer. GGH.