7 ms·

Baby Boomers Who Won't Sell Are Dominating the Housing Market

59 points by SQL2219 9y ago

11thEarlOfMar 9y ago
Anecdotally, my neighborhood has 115 homes. No sales in 2 years. No homes listed at the moment. Average age of owners is about 55.
- kylestlb 9y ago
  Which neighborhood, or at least, which region of the US?
  - 11thEarlOfMar 9y ago
    Silicon Valley.
nmeofthestate 9y ago
The population is ageing, so it would be surprising if the share of houses owned by older people wasn't rising. The population has risen by a hundred million since the seventies, which may well have increased competition for houses. It's possible owner-occupiers refuse to sell because they enjoy having somewhere to live.
- tomswartz07 9y ago
  That's fine if they refuse to sell, but as the article points out, there's an enormous demand for homes. Several of the people mentioned in the article own more than one property and are entirely unwilling to sell.
  - richardknop 9y ago
    Would you sell in their place? They have no reason to sell. They are acting as rational participants of the market.
    - nkassis 9y ago
      The market is also skewed in their favor as the article point out by keeping property taxes really low for long time owners: "Property-tax exemptions for longtime residents keep older Americans from moving. Zoning rules make it harder to build affordable apartments attractive to senior citizens." Ex: "Under the almost-40-year-old ballot measure Proposition 13, they are tied to the property’s value when the house was purchased in the 1970s." It's debatable if they should be pushed out of their homes due to property taxes but probably needs to be balanced with the impact on the overall market and availability of housing.
    - tomswartz07 9y ago
      It's my personal opinion, but if I had 6 properties, I'd sell them. Why would I need more than one place to live?
      - richardknop 9y ago
        Because you can live in 1 house and rent out other 5 for a lot of stress free passive income. Plus houses are a very safe investment, the price will go up over time. There is no reason to sell unless you need cash for something else (startup, for example). What would you do with cash after selling those extra 5 houses? Put it into stock market? Right now when it's mega inflated from cheap money? Too risky, safer to keep those houses.
    - lmm 9y ago
      I'd have a price I'd sell at - maybe a high price, but a price. "If you gave me a bag of money, I wouldn't sell" speaks to some deeper market disfunction.
      - richardknop 9y ago
        But those millennials don't have bags of money. So you would just sell to some foreign investor or domestic wealthy person who probably already owns dozens of properties. "If you gave me a bag of money, I wouldn't sell" shouldn't be taken literally. If you offered 10 million dollars for 1 million dollar property I'm sure many of those baby boomers would sell.
  - nmeofthestate 9y ago
    Yes, but framing the problem as a clash of demographics with derogatory terms for entire age-groups of people is lazy crap IMO.
pjc50 9y ago
How can people who aren't participating in a market be said to be "dominating" it?
- richardknop 9y ago
  I think they meant baby boomers own majority of prime real estate. Bunch of old people sitting in big family houses with 5 bedrooms. That's the problem. So yes, technically they are not participating in the market.
  - Gargoyle 9y ago
    Why are people living in their homes a 'problem'?
    - richardknop 9y ago
      Because there isn't enough real estate for millennials so they stay living with their parents until 35. I agree with you, there's nothing wrong with people living in houses they purchased decades ago. It's their private property. So it's a problem for young people. Nothing they can do to change that easily though.
      - pjc50 9y ago
        Upthread someone has the right answer to the "real problem": https://news.ycombinator.com/item?id=14958382 https://news.ycombinator.com/item?id=14958382 - zoning.
      - cesarb 9y ago
        Why are people living with their parents a 'problem'?
        richardknop 9y ago
        Main reason would be that for most people it would be difficult to start a family like that. If both parents and their millennial children are living together the house must be packed, no more space for new generation.
Rotten194 9y ago
stop stirring the generational warfare pot. boomers didnt ruin the economy, the banking class did. the solution to fixing it isn't kicking working-class people out of their homes. why should they sell if they enjoy where they live? and even if they did sell, where would they go? if there's a housing shortage, they'll have just as much trouble as everyone else buying a house -- if not more, because of ageism. we need to fix the perverse incentives capitalism provides that discourage building enough housing. blaming old people accomplishes nothing.
- richardknop 9y ago
  Agreed. Nobody should be forced to sell their property. You bought it and you can live their your whole life.
  - lmm 9y ago
    The population keeps getting bigger, the amount of land stays the same. Something has to give or it's unfair to people who were unlucky enough to be born later. I'm all for having an absolute right to property you can carry, but land is different.
    - richardknop 9y ago
      Overpopulation is a problem which needs to be taken seriously but it's mostly a problem in developing world (Africa, Asia etc). US / Europe don't have overpopulation problems. I think "Something has to give" is a little bit dangerous thing to say as private property ownership is one of main pillars of western free market societies. Why would land be different to property?
      - theEXTORTCIST 9y ago
        Forcefully taking private property from individuals to later sell to other private parties for private use sounds like the nightmare version of eminent domain.
      - 9y ago
Gargoyle 9y ago
I'm at a loss why anyone is expected to sell their home.
- pmiller2 9y ago
  The expectation is more that there should be a functioning residential real estate market. There isn't in many locations due to lack of supply.
  - mitchdoogle 9y ago
    The focus of the article is still strange though - who knocks on doors to try to convince someone to sell their home? I just took a look at Trulia at the neighborhood the man in the article was looking at - plenty of homes in the $200k - $300k range, a few even less. Seems he is just a bargain hunter who is trying to beat the real estate market rather than participate in it. If he wants to buy a home he should pay the market price for where he wants to live or find a cheaper place to live, of which there are many within just a few miles of his desired location.
    - pmiller2 9y ago
      I guess a guy going door to door is more "interesting" than someone saying "we've been looking at Zillow and Trulia for 6 months and not finding anything."
- kylestlb 9y ago
  I don't think the article is making that point. It is illustrating how difficult it is for people to both buy and sell homes when the overall supply in some impacted areas is down. It would be interesting to see data on how many people are moving out to rural areas for retirement now vs a few decades ago. I would bet it has been trending down.
Shivetya 9y ago
There are other reasons as well not mentioned in the article but perhaps more troublesome. Occupational licensing for those who have not retired may mean picking and moving to another locale would incur costs of obtaining new licensing to practice their trade. This can differ even on a county by county basis. The other is government aid, think Medicaid an similar. This can vary by state and even at the city level benefits can change so the risk could be a lower standard of living even after being flush with funds from a good sale. So young people are not only up against regressive regulation preventing some from moving but the abuse of land-use regulation which blocks more people from coming in.
deleted 9y ago
[deleted]
joshuaheard 9y ago
Interesting. I'm 56 years old and cashed out some tech equities to buy 6 rental properties with low interest rate mortgages.
- Fifer82 9y ago
  I personally have a problem with this. Sure sitting on your arse and enjoying the income is a good thing, but in a situation where there is a housing shortage, it is definitely a scummy thing to do. Each to their own of course. I am so tired of seeing the government line "supply and demand". Maybe if people weren't allowed to own 30 homes simply because they existed before an incredible housing boom there wouldn't be so much of a problem.
  - richardknop 9y ago
    It's not scummy at all. I would do the same thing if I had the capital. And logically, older people will have access to more capital than young people so they will scoop up houses and rent them out. It's rational in current market and conditions. To make this less appealing you need to change legislature, increase interest rates etc.
  - sidlls 9y ago
    I'm somewhat sympathetic, but it's only scummy if he or she lives in an area with a housing shortage and doesn't actively push for more development. The owner is one person and it isn't necessarily their fault the locals have a NIMBY problem. I'd certainly be in favor of adding a surtax proportional to the rent of residential properties.
  - smcdow 9y ago
    Yeah, well... we all make our choices. We, as Americans, have made the choice to live in a market economy, replete with all its pros and cons.
  - joshuaheard 9y ago
    I rent to young families who cannot afford the cost of owning a house themselves yet. Once the mortgages are paid off, the rent will be our retirement income so we don't have to depend on Social Security.
sbjustin 9y ago
I'm not sure how this is even a real problem. Try a different neighborhood. I've never had a problem finding a house to buy and I've never heard anyone say that's an issue. Everything has a price, I guarantee one of those people would sell, given the right offer. There are many homes for sale in that area also, just not the less than 200k he wants to pay: https://www.zillow.com/homes/Brewerytown,-Philadelphia_rb/ https://www.zillow.com/homes/Brewerytown,-Philadelphia_rb/
JakeWesorick 9y ago
Come to Detroit! I'm sure we can find a house for you.
- TACIXAT 9y ago
  Baltimore too. Housing is affordable and there are a good number of tech jobs due to the government presence.
k3oni 9y ago
And why would they participate in the market and sell? Most of my older neighbors have paid off their house and are retired so now they have where to live without paying a mortgage every month so no extra expense for that. Isn't this the general idea of some people thinking ahead? What would they do if they sold? Go to a nursing home? I was talking with one of them a couple years ago about the idea of downsizing. They couldn't find anything that meet their requirements so they didn't.
- pizzetta 9y ago
  I mean, the argument is ridiculous. They are blaming people who own houses for not selling houses. Build more houses --simple. Allow development. What's the next headline? Young people without real-estate holdings are first time buyers.
  - kmix27 9y ago
    I think that's over simplifying it, that's certainly one dimension, but the need of the article explores a different angle entirely. I think it's getting at the more complex problem of how public policy coupled with longer life expectancy has housing markets in something of a strangle hold. It's a really difficult problem.
- Bartweiss 9y ago
  The tone of the whole thing is quite odd. It's like saying "Boomers who won't cash in their IRAs distort stock market", but houses are not just an investment mechanism! Everyone starts out house-negative, so the assumption that people are going to sell down from 1 house to 0 is a bit bizarre. Sure, some might eventually downsize, rent, or move to shared living, but not everyone will. I'm not sure why this is a surprise.
  - k3oni 9y ago
    I agree hence my comment. For me personally i'm looking at paying our main property off and call it a day. No more mortgage, no more bank that can get my house in case something happens etc etc. Plus with no more mortgage and other bank payments your life becomes a bit simpler. The market is sill there for housing, if the market supports new housing they will be built.
0xB31B1B 9y ago
The real problem, and the article alludes to this, isn't just that the boomers aren't moving, it's that they aren't moving AND they're preventing more and denser housing from being constructed in their neighborhoods. Many of these boomers live in single family zoned neighborhoods and fight tooth and nail against allowing any multi family developement around them (i.e. Duplexes or 4 plexes). This chokes of supply, raises land prices, and makes living unaffordable for younger folks who do not yet own.
- rayuela 9y ago
  This hits the nail right on the head! Current home owners are very clearly incentivized to restrict housing supply. Zoning reforms should be at the forefront of discussions on how to address the current housing crisis.
- dmoy 9y ago
  My neighborhood is like that, and they have a hilariously contradictory slogan. "Keep Seattle Livable", by apparently opposing higher building zoning laws so that only short single family homes can be built. They have it in their head somehow that the current housing stock is affordable, despite the fact that a small 3br single family here sells for like a million, and rent is like >$2k/month. Keep Seattle Livable for people who already own their homes in the area, so other people can't move in.
- rch 9y ago
  My armchair opinion on this position is that it tends to serve developers and employers more than the 'younger folks' you mention. Employers in particular need to start increasing wages, opening satellite offices, and encouraging remote work whenever possible.
  - tmh79 9y ago
    World leading professional economists tend to disagree with you [0], and our government sponsored research groups tasked with addressing livability also disagree with you [1] but you are free to keep your opinion. [0] http://faculty.chicagobooth.edu/chang-tai.hsieh/research/growth.pdf http://faculty.chicagobooth.edu/chang-tai.hsieh/research/gro... [1] http://www.lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.pdf http://www.lao.ca.gov/reports/2015/finance/housing-costs/hou...
tannerbrockwell 9y ago
REO or real estate owned is the term for a bank holding a property. A bank is exempt from paying municipal property taxes so they try to hold them until the market rises. If a bank ever sells a foreclosed property they must recognize the difference between the original loan and the sale. A loss factors in to how they must calculate the banks solvency. They have no incentive to put property on the market other than the maintenance fees. This article seems to be trying to stir the pot of generational warfare. A better Target would be empty houses that banks won't sell at market prices. http://www.realtytrac.com/statsandtrends/foreclosuretrends/ http://www.realtytrac.com/statsandtrends/foreclosuretrends/
- nradov 9y ago
  False. Once a bank acquires title to a property they are legally liable for the property tax. Local governments can (and have) foreclose on REO properties for failure to pay property tax.
  - pmiller2 9y ago
    That's right. Bank-foreclosed properties are big old liabilities that they want off their balance sheets ASAP. Unless the mortgages were extremely underwater, there's no real incentive for the bank to hold on to them.
    - tannerbrockwell 9y ago
      It's called marked to market. They will hold properties rather than recognize the loss when it sells for less than the original loan. This article proves that banks used the homestead exemption to avoid property tax: http://jacksonville.com/business/real-estate/2011-01-30/story/how-banks-are-enjoying-homestead-exemption http://jacksonville.com/business/real-estate/2011-01-30/stor...
      - nradov 9y ago
        Using the homestead exemption isn't avoiding property tax. It's legally allowed for any owner who meets the criteria. The banks do still have to pay the property tax; the exemption only lowers the taxable value.
smaili 9y ago
At the heart of the problem: > Public policy contributes to the generational standoff. Property-tax exemptions for longtime residents keep older Americans from moving. Zoning rules make it harder to build affordable apartments attractive to senior citizens. It's moreso about gov policies than it is about generational differences.
- 40acres 9y ago
  You also have to consider the fact that the older generation will lobby against government policies that would weaker their position.
- jartelt 9y ago
  Yep, the market is skewed by policy. You get to buy a house using the mortgage interest deduction and then you get artificially low property taxes as your property value increases over time (in CA). Meanwhile renters don't get any sort of "rent deduction" and get stuck paying higher rent when property values go up even though the landlord's property taxes don't go up much.
  - votepaunchy 9y ago
    The landlord deducts mortgage interest as a business expense, a cost savings which is passed on to renters.
    - jartelt 9y ago
      Landlords are going to charge market rate for rent. They won't charge a lower rent if their property taxes are lower than they should be due to prop 13 and won't charge a lower rent if they are deducting mortgage interest.
- collyw 9y ago
  Its the same in many countries.
alistproducer2 9y ago
The tone of this article is terrible. It's blaming old people for not wanting to sell their homes they've paid off. The whole point of mortgaging a home purchase is the hopes that one day, when you're old, you'll have it paid off and you can chill. I'm sad I gave this piece a click. It may encourage the author to keep doing journalism.
gmarx 9y ago
I wonder if longer term this current trend of "desirable" places becoming more and more expensive will ruin them and currently cheaper places will become desirable? What made those areas desirable in the first place? Can those places stay desirable if they contain only old rich people? What's fun about a NYC without kookie artists?
squozzer 9y ago
It's more than just stubborness. 1) As others have mentioned, many people look forward to paying off their mortgage and gaining an instant monthly cash benefit from that. 2) Those who sell into an up market will probably have to buy into an up market. This causes problems with more than just money -- imagine a situation where a seller is a week from closing their house without a contract on a new house. They've become a landlord's wet dream. 3) Property tax relief for older people isn't just an expression of political might / parasitism -- it's a reasonable accommodation to the reality of fixed incomes. But we might have some opportunities here. Maybe more building designed for older people might break the housing logjam. 1) Older people, retirees more accurately, don't NEED to live close to jobs. Close to hospitals, maybe, or family, but not jobs. 2) Older people probably don't drive as much, so the need to upgrade road capacity isn't as pressing. 3) Older people frequently have needs that require extensive rework of their current homes.
- richardknop 9y ago
  Why would old people voluntarily move out of their nice old houses and move to some remote lower quality house?
  - squozzer 9y ago
    Excellent question. The product would have to be compelling to entice older people to move. And generally speaking, what we have come to know as "the projects" have a reputation for as petri dishes for crime and other social ills. I'm guessing a "project" inhabited with older people might avoid that stigma. Moreover, it might thwart the NIMBYs who protest every proposed development in ways that ordinary projects wouldn't (what, you don't like old people??? AARP, aux barracades!) So at least it stands a better chance of being built. Not claiming that personal experience is data, but I live in a neighboorhood that emails everyone every time city hall has a proposed project on their docket. And those who show up voice the usual objections - traffic, other infrastructure concerns, "quality of life" issues -- essentially telling potential newcomers to move somewhere else. Having said all that, I myself am a couple of decades from official retirement age, but my GF and I wanted to move to a house that had no stairs. Talk about a housing shortage! That requirement alone filtered out about 90% of the available housing in my target area. So there might be an opportunity, though what form it would take, who knows?
shawnee_ 9y ago
There's a huge logical fallacy in this debate that is constantly overlooked (or suppressed) ... it's that the older houses owned by these boomers tend to get converted into rentals. When they do get sold, the amount of work needed to get them livable is just too much. So they go to local "Property Management Companies (PMCs) looking to up their rental income portfolio while simultaneously making the supply artificially scarce. Here's their typical MO: 1) Buy the house from the boomer. 2) Put the cheapest shiny sheen over the decrepit and crumbling bones of an aging house, hiding as best as possible infrastructure problems. 3) Put the house back on the market as a "remodel". Use a realtor or some other salesperson to create a false sense of scarcity and urgency related to the perception of "supply / demand", thus increasing the "market value" of the house. Create bidding wars among individuals and private REITs/landlord companies. 4) End up selling it to another private REIT (whose pocketbooks are bottomless) and set the base rent of the hyperinflated value of the house accordingly, thus increasing market rents. In reality, of course, the house is actually crap, needs tons of work, is constantly experiencing electrical or plumbing issues. The renters, though, have no recourse as they've already signed a year-long lease trapping them in the company's investment. Sometimes a family does end up buying the "remodel" only to discover that the work has been done shoddily and to hide flaws rather than to extend longevity. It sucks and is evil on about every level. But nobody is reporting it: regional news stations and newspapers won't let investigative journalists expose the fraud either... because the "real estate" section is their lifeblood in terms of ad revenue.
- jbob2000 9y ago
  > 2) Put the cheapest shiny sheen over the decrepit and crumbling bones of an aging house, hiding as best as possible infrastructure problems There is a good reason for this, we deal with it in Toronto. The permit you need to do a tear-down and rebuild will cost you as much as the materials for the house and there will be huge delays in acquiring the permit. If the red tape wasn't so burdensome, we could rip down these garbage, post-WW2 matchboxes and build modern housing.

59 points by SQL2219 9y ago

Anecdotally, my neighborhood has 115 homes. No sales in 2 years. No homes listed at the moment. Average age of owners is about 55.

kylestlb 9y ago
Which neighborhood, or at least, which region of the US?
- 11thEarlOfMar 9y ago
  Silicon Valley.

nmeofthestate 9y ago

The population is ageing, so it would be surprising if the share of houses owned by older people wasn't rising. The population has risen by a hundred million since the seventies, which may well have increased competition for houses. It's possible owner-occupiers refuse to sell because they enjoy having somewhere to live.

tomswartz07 9y ago
That's fine if they refuse to sell, but as the article points out, there's an enormous demand for homes. Several of the people mentioned in the article own more than one property and are entirely unwilling to sell.
- richardknop 9y ago
  Would you sell in their place? They have no reason to sell. They are acting as rational participants of the market.
  - nkassis 9y ago
    The market is also skewed in their favor as the article point out by keeping property taxes really low for long time owners: "Property-tax exemptions for longtime residents keep older Americans from moving. Zoning rules make it harder to build affordable apartments attractive to senior citizens." Ex: "Under the almost-40-year-old ballot measure Proposition 13, they are tied to the property’s value when the house was purchased in the 1970s." It's debatable if they should be pushed out of their homes due to property taxes but probably needs to be balanced with the impact on the overall market and availability of housing.
  - tomswartz07 9y ago
    It's my personal opinion, but if I had 6 properties, I'd sell them. Why would I need more than one place to live?
    - richardknop 9y ago
      Because you can live in 1 house and rent out other 5 for a lot of stress free passive income. Plus houses are a very safe investment, the price will go up over time. There is no reason to sell unless you need cash for something else (startup, for example). What would you do with cash after selling those extra 5 houses? Put it into stock market? Right now when it's mega inflated from cheap money? Too risky, safer to keep those houses.
  - lmm 9y ago
    I'd have a price I'd sell at - maybe a high price, but a price. "If you gave me a bag of money, I wouldn't sell" speaks to some deeper market disfunction.
    - richardknop 9y ago
      But those millennials don't have bags of money. So you would just sell to some foreign investor or domestic wealthy person who probably already owns dozens of properties. "If you gave me a bag of money, I wouldn't sell" shouldn't be taken literally. If you offered 10 million dollars for 1 million dollar property I'm sure many of those baby boomers would sell.
- nmeofthestate 9y ago
  Yes, but framing the problem as a clash of demographics with derogatory terms for entire age-groups of people is lazy crap IMO.

pjc50 9y ago

How can people who aren't participating in a market be said to be "dominating" it?

richardknop 9y ago
I think they meant baby boomers own majority of prime real estate. Bunch of old people sitting in big family houses with 5 bedrooms. That's the problem. So yes, technically they are not participating in the market.
- Gargoyle 9y ago
  Why are people living in their homes a 'problem'?
  - richardknop 9y ago
    Because there isn't enough real estate for millennials so they stay living with their parents until 35. I agree with you, there's nothing wrong with people living in houses they purchased decades ago. It's their private property. So it's a problem for young people. Nothing they can do to change that easily though.
    - pjc50 9y ago
      Upthread someone has the right answer to the "real problem": https://news.ycombinator.com/item?id=14958382 https://news.ycombinator.com/item?id=14958382 - zoning.
    - cesarb 9y ago
      Why are people living with their parents a 'problem'?
      - richardknop 9y ago
        Main reason would be that for most people it would be difficult to start a family like that. If both parents and their millennial children are living together the house must be packed, no more space for new generation.

Rotten194 9y ago

stop stirring the generational warfare pot. boomers didnt ruin the economy, the banking class did. the solution to fixing it isn't kicking working-class people out of their homes. why should they sell if they enjoy where they live? and even if they did sell, where would they go? if there's a housing shortage, they'll have just as much trouble as everyone else buying a house -- if not more, because of ageism. we need to fix the perverse incentives capitalism provides that discourage building enough housing. blaming old people accomplishes nothing.

richardknop 9y ago
Agreed. Nobody should be forced to sell their property. You bought it and you can live their your whole life.
- lmm 9y ago
  The population keeps getting bigger, the amount of land stays the same. Something has to give or it's unfair to people who were unlucky enough to be born later. I'm all for having an absolute right to property you can carry, but land is different.
  - richardknop 9y ago
    Overpopulation is a problem which needs to be taken seriously but it's mostly a problem in developing world (Africa, Asia etc). US / Europe don't have overpopulation problems. I think "Something has to give" is a little bit dangerous thing to say as private property ownership is one of main pillars of western free market societies. Why would land be different to property?
    - theEXTORTCIST 9y ago
      Forcefully taking private property from individuals to later sell to other private parties for private use sounds like the nightmare version of eminent domain.
    - 9y ago

Gargoyle 9y ago

I'm at a loss why anyone is expected to sell their home.

pmiller2 9y ago
The expectation is more that there should be a functioning residential real estate market. There isn't in many locations due to lack of supply.
- mitchdoogle 9y ago
  The focus of the article is still strange though - who knocks on doors to try to convince someone to sell their home? I just took a look at Trulia at the neighborhood the man in the article was looking at - plenty of homes in the $200k - $300k range, a few even less. Seems he is just a bargain hunter who is trying to beat the real estate market rather than participate in it. If he wants to buy a home he should pay the market price for where he wants to live or find a cheaper place to live, of which there are many within just a few miles of his desired location.
  - pmiller2 9y ago
    I guess a guy going door to door is more "interesting" than someone saying "we've been looking at Zillow and Trulia for 6 months and not finding anything."
kylestlb 9y ago
I don't think the article is making that point. It is illustrating how difficult it is for people to both buy and sell homes when the overall supply in some impacted areas is down. It would be interesting to see data on how many people are moving out to rural areas for retirement now vs a few decades ago. I would bet it has been trending down.

Shivetya 9y ago

There are other reasons as well not mentioned in the article but perhaps more troublesome. Occupational licensing for those who have not retired may mean picking and moving to another locale would incur costs of obtaining new licensing to practice their trade. This can differ even on a county by county basis. The other is government aid, think Medicaid an similar. This can vary by state and even at the city level benefits can change so the risk could be a lower standard of living even after being flush with funds from a good sale. So young people are not only up against regressive regulation preventing some from moving but the abuse of land-use regulation which blocks more people from coming in.

deleted 9y ago

[deleted]

joshuaheard 9y ago

Interesting. I'm 56 years old and cashed out some tech equities to buy 6 rental properties with low interest rate mortgages.

Fifer82 9y ago
I personally have a problem with this. Sure sitting on your arse and enjoying the income is a good thing, but in a situation where there is a housing shortage, it is definitely a scummy thing to do. Each to their own of course. I am so tired of seeing the government line "supply and demand". Maybe if people weren't allowed to own 30 homes simply because they existed before an incredible housing boom there wouldn't be so much of a problem.
- richardknop 9y ago
  It's not scummy at all. I would do the same thing if I had the capital. And logically, older people will have access to more capital than young people so they will scoop up houses and rent them out. It's rational in current market and conditions. To make this less appealing you need to change legislature, increase interest rates etc.
- sidlls 9y ago
  I'm somewhat sympathetic, but it's only scummy if he or she lives in an area with a housing shortage and doesn't actively push for more development. The owner is one person and it isn't necessarily their fault the locals have a NIMBY problem. I'd certainly be in favor of adding a surtax proportional to the rent of residential properties.
- smcdow 9y ago
  Yeah, well... we all make our choices. We, as Americans, have made the choice to live in a market economy, replete with all its pros and cons.
- joshuaheard 9y ago
  I rent to young families who cannot afford the cost of owning a house themselves yet. Once the mortgages are paid off, the rent will be our retirement income so we don't have to depend on Social Security.

sbjustin 9y ago

I'm not sure how this is even a real problem. Try a different neighborhood. I've never had a problem finding a house to buy and I've never heard anyone say that's an issue. Everything has a price, I guarantee one of those people would sell, given the right offer. There are many homes for sale in that area also, just not the less than 200k he wants to pay: https://www.zillow.com/homes/Brewerytown,-Philadelphia_rb/ https://www.zillow.com/homes/Brewerytown,-Philadelphia_rb/

JakeWesorick 9y ago

Come to Detroit! I'm sure we can find a house for you.

TACIXAT 9y ago
Baltimore too. Housing is affordable and there are a good number of tech jobs due to the government presence.

k3oni 9y ago

And why would they participate in the market and sell? Most of my older neighbors have paid off their house and are retired so now they have where to live without paying a mortgage every month so no extra expense for that. Isn't this the general idea of some people thinking ahead? What would they do if they sold? Go to a nursing home? I was talking with one of them a couple years ago about the idea of downsizing. They couldn't find anything that meet their requirements so they didn't.

pizzetta 9y ago
I mean, the argument is ridiculous. They are blaming people who own houses for not selling houses. Build more houses --simple. Allow development. What's the next headline? Young people without real-estate holdings are first time buyers.
- kmix27 9y ago
  I think that's over simplifying it, that's certainly one dimension, but the need of the article explores a different angle entirely. I think it's getting at the more complex problem of how public policy coupled with longer life expectancy has housing markets in something of a strangle hold. It's a really difficult problem.
Bartweiss 9y ago
The tone of the whole thing is quite odd. It's like saying "Boomers who won't cash in their IRAs distort stock market", but houses are not just an investment mechanism! Everyone starts out house-negative, so the assumption that people are going to sell down from 1 house to 0 is a bit bizarre. Sure, some might eventually downsize, rent, or move to shared living, but not everyone will. I'm not sure why this is a surprise.
- k3oni 9y ago
  I agree hence my comment. For me personally i'm looking at paying our main property off and call it a day. No more mortgage, no more bank that can get my house in case something happens etc etc. Plus with no more mortgage and other bank payments your life becomes a bit simpler. The market is sill there for housing, if the market supports new housing they will be built.

0xB31B1B 9y ago

The real problem, and the article alludes to this, isn't just that the boomers aren't moving, it's that they aren't moving AND they're preventing more and denser housing from being constructed in their neighborhoods. Many of these boomers live in single family zoned neighborhoods and fight tooth and nail against allowing any multi family developement around them (i.e. Duplexes or 4 plexes). This chokes of supply, raises land prices, and makes living unaffordable for younger folks who do not yet own.

rayuela 9y ago
This hits the nail right on the head! Current home owners are very clearly incentivized to restrict housing supply. Zoning reforms should be at the forefront of discussions on how to address the current housing crisis.
dmoy 9y ago
My neighborhood is like that, and they have a hilariously contradictory slogan. "Keep Seattle Livable", by apparently opposing higher building zoning laws so that only short single family homes can be built. They have it in their head somehow that the current housing stock is affordable, despite the fact that a small 3br single family here sells for like a million, and rent is like >$2k/month. Keep Seattle Livable for people who already own their homes in the area, so other people can't move in.
rch 9y ago
My armchair opinion on this position is that it tends to serve developers and employers more than the 'younger folks' you mention. Employers in particular need to start increasing wages, opening satellite offices, and encouraging remote work whenever possible.
- tmh79 9y ago
  World leading professional economists tend to disagree with you [0], and our government sponsored research groups tasked with addressing livability also disagree with you [1] but you are free to keep your opinion. [0] http://faculty.chicagobooth.edu/chang-tai.hsieh/research/growth.pdf http://faculty.chicagobooth.edu/chang-tai.hsieh/research/gro... [1] http://www.lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.pdf http://www.lao.ca.gov/reports/2015/finance/housing-costs/hou...

tannerbrockwell 9y ago

REO or real estate owned is the term for a bank holding a property. A bank is exempt from paying municipal property taxes so they try to hold them until the market rises. If a bank ever sells a foreclosed property they must recognize the difference between the original loan and the sale. A loss factors in to how they must calculate the banks solvency. They have no incentive to put property on the market other than the maintenance fees. This article seems to be trying to stir the pot of generational warfare. A better Target would be empty houses that banks won't sell at market prices. http://www.realtytrac.com/statsandtrends/foreclosuretrends/ http://www.realtytrac.com/statsandtrends/foreclosuretrends/

nradov 9y ago
False. Once a bank acquires title to a property they are legally liable for the property tax. Local governments can (and have) foreclose on REO properties for failure to pay property tax.
- pmiller2 9y ago
  That's right. Bank-foreclosed properties are big old liabilities that they want off their balance sheets ASAP. Unless the mortgages were extremely underwater, there's no real incentive for the bank to hold on to them.
  - tannerbrockwell 9y ago
    It's called marked to market. They will hold properties rather than recognize the loss when it sells for less than the original loan. This article proves that banks used the homestead exemption to avoid property tax: http://jacksonville.com/business/real-estate/2011-01-30/story/how-banks-are-enjoying-homestead-exemption http://jacksonville.com/business/real-estate/2011-01-30/stor...
    - nradov 9y ago
      Using the homestead exemption isn't avoiding property tax. It's legally allowed for any owner who meets the criteria. The banks do still have to pay the property tax; the exemption only lowers the taxable value.

smaili 9y ago

At the heart of the problem: > Public policy contributes to the generational standoff. Property-tax exemptions for longtime residents keep older Americans from moving. Zoning rules make it harder to build affordable apartments attractive to senior citizens. It's moreso about gov policies than it is about generational differences.

40acres 9y ago
You also have to consider the fact that the older generation will lobby against government policies that would weaker their position.
jartelt 9y ago
Yep, the market is skewed by policy. You get to buy a house using the mortgage interest deduction and then you get artificially low property taxes as your property value increases over time (in CA). Meanwhile renters don't get any sort of "rent deduction" and get stuck paying higher rent when property values go up even though the landlord's property taxes don't go up much.
- votepaunchy 9y ago
  The landlord deducts mortgage interest as a business expense, a cost savings which is passed on to renters.
  - jartelt 9y ago
    Landlords are going to charge market rate for rent. They won't charge a lower rent if their property taxes are lower than they should be due to prop 13 and won't charge a lower rent if they are deducting mortgage interest.
collyw 9y ago
Its the same in many countries.

alistproducer2 9y ago

The tone of this article is terrible. It's blaming old people for not wanting to sell their homes they've paid off. The whole point of mortgaging a home purchase is the hopes that one day, when you're old, you'll have it paid off and you can chill. I'm sad I gave this piece a click. It may encourage the author to keep doing journalism.

gmarx 9y ago

I wonder if longer term this current trend of "desirable" places becoming more and more expensive will ruin them and currently cheaper places will become desirable? What made those areas desirable in the first place? Can those places stay desirable if they contain only old rich people? What's fun about a NYC without kookie artists?

squozzer 9y ago

It's more than just stubborness. 1) As others have mentioned, many people look forward to paying off their mortgage and gaining an instant monthly cash benefit from that. 2) Those who sell into an up market will probably have to buy into an up market. This causes problems with more than just money -- imagine a situation where a seller is a week from closing their house without a contract on a new house. They've become a landlord's wet dream. 3) Property tax relief for older people isn't just an expression of political might / parasitism -- it's a reasonable accommodation to the reality of fixed incomes. But we might have some opportunities here. Maybe more building designed for older people might break the housing logjam. 1) Older people, retirees more accurately, don't NEED to live close to jobs. Close to hospitals, maybe, or family, but not jobs. 2) Older people probably don't drive as much, so the need to upgrade road capacity isn't as pressing. 3) Older people frequently have needs that require extensive rework of their current homes.

richardknop 9y ago
Why would old people voluntarily move out of their nice old houses and move to some remote lower quality house?
- squozzer 9y ago
  Excellent question. The product would have to be compelling to entice older people to move. And generally speaking, what we have come to know as "the projects" have a reputation for as petri dishes for crime and other social ills. I'm guessing a "project" inhabited with older people might avoid that stigma. Moreover, it might thwart the NIMBYs who protest every proposed development in ways that ordinary projects wouldn't (what, you don't like old people??? AARP, aux barracades!) So at least it stands a better chance of being built. Not claiming that personal experience is data, but I live in a neighboorhood that emails everyone every time city hall has a proposed project on their docket. And those who show up voice the usual objections - traffic, other infrastructure concerns, "quality of life" issues -- essentially telling potential newcomers to move somewhere else. Having said all that, I myself am a couple of decades from official retirement age, but my GF and I wanted to move to a house that had no stairs. Talk about a housing shortage! That requirement alone filtered out about 90% of the available housing in my target area. So there might be an opportunity, though what form it would take, who knows?

shawnee_ 9y ago

There's a huge logical fallacy in this debate that is constantly overlooked (or suppressed) ... it's that the older houses owned by these boomers tend to get converted into rentals. When they do get sold, the amount of work needed to get them livable is just too much. So they go to local "Property Management Companies (PMCs) looking to up their rental income portfolio while simultaneously making the supply artificially scarce. Here's their typical MO: 1) Buy the house from the boomer. 2) Put the cheapest shiny sheen over the decrepit and crumbling bones of an aging house, hiding as best as possible infrastructure problems. 3) Put the house back on the market as a "remodel". Use a realtor or some other salesperson to create a false sense of scarcity and urgency related to the perception of "supply / demand", thus increasing the "market value" of the house. Create bidding wars among individuals and private REITs/landlord companies. 4) End up selling it to another private REIT (whose pocketbooks are bottomless) and set the base rent of the hyperinflated value of the house accordingly, thus increasing market rents. In reality, of course, the house is actually crap, needs tons of work, is constantly experiencing electrical or plumbing issues. The renters, though, have no recourse as they've already signed a year-long lease trapping them in the company's investment. Sometimes a family does end up buying the "remodel" only to discover that the work has been done shoddily and to hide flaws rather than to extend longevity. It sucks and is evil on about every level. But nobody is reporting it: regional news stations and newspapers won't let investigative journalists expose the fraud either... because the "real estate" section is their lifeblood in terms of ad revenue.

jbob2000 9y ago
> 2) Put the cheapest shiny sheen over the decrepit and crumbling bones of an aging house, hiding as best as possible infrastructure problems There is a good reason for this, we deal with it in Toronto. The permit you need to do a tear-down and rebuild will cost you as much as the materials for the house and there will be huge delays in acquiring the permit. If the red tape wasn't so burdensome, we could rip down these garbage, post-WW2 matchboxes and build modern housing.