
Baby Boomers Who Won't Sell Are Dominating the Housing Market - SQL2219
https://www.bloomberg.com/news/articles/2017-08-08/baby-boomers-who-won-t-sell-are-dominating-the-housing-market
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0xB31B1B
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.

~~~
paulcnichols
What's stranger still is when affordable housing advocates align with the
boomers against building new construction because its not all affordable.
Basically its much easier to say no to anything than yes to a compromise.

~~~
Tiktaalik
I've never seen any housing advocate be opposed to new housing just because it
would be unaffordable. Always there is another reason. Often in such a
scenario the new housing proposal relied on displacing existing low income
housing.

Affordable housing advocates would be happy to see low density mansions
upzoned into relatively cheaper multi family housing but those are never the
proposals we see. Instead again and again we see proposals to tear down
affordable multi family apartments for working class people in order to build
larger, more expensive multi family apartments for the middle class. I am
unsurprised to see housing activists opposed to these sort of upzonings even
if they would result in a net increase of housing.

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k3oni
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.

~~~
Bartweiss
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
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.

~~~
richardknop
It becomes a lot simpler once you get the bankers off your back. Being
mortgage free and having your own house is very liberating feeling.

------
smaili
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.

~~~
jartelt
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
The landlord deducts mortgage interest as a business expense, a cost savings
which is passed on to renters.

~~~
jartelt
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.

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Rotten194
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.

~~~
kylestlb
If you read the article, it certainly isn't too sympathetic to the millenial
home-seeker. It is mostly neutral to both the buying and selling side. At one
point they almost paint him as a hipster by describing what he's wearing -
which includes a Schlitz belt buckle. They also raise questions of
gentrification.

~~~
alistproducer2
I disagree. The tone seems very sympathetic to the home-seeker. I got a "hard-
working, salt-of-the-earth carpenter white kid hustles to attain the American
dream." While old, prickly, angry black people jealously hold onto their
homes. And by the way, for balance, an Italian guys feels the same way. This
article sucked.

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tannerbrockwell
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
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
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
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/stor...](http://jacksonville.com/business/real-
estate/2011-01-30/story/how-banks-are-enjoying-homestead-exemption)

~~~
nradov
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.

~~~
pmiller2
Well, it is "tax avoidance," which is completely legal. It's just not "tax
evasion," or any kind of special exemption.

~~~
nradov
Tax "avoidance" usually implies exploiting some sort of unintended loophole in
a tricky way that doesn't necessarily generate much economic value. In this
case the homestead exemption is specifically and explicitly allowed. There's
really nothing being avoided.

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alistproducer2
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.

------
nmeofthestate
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
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
Would you sell in their place? They have no reason to sell. They are acting as
rational participants of the market.

~~~
lmm
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
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.

~~~
lmm
> "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.

The context seems to imply something deeper than that, a complete non-interest
in selling:

> “Give me $2 million,” the homeowner replies. “I don’t want no low number.”

> It turns out the price is for the whole block. Even then, the potential
> seller has second thoughts.

> “I wouldn’t sell even if you gave me $2 million — this is my retirement,” he
> says. “If you gave me a bag of money, I wouldn’t sell.”

~~~
richardknop
What if he values his property at more than $2 million? So he said "I wouldn’t
sell even if you gave me $2 million" because he was insulted by low ball offer
of 200k.

~~~
lmm
> What if he values his property at more than $2 million?

Then surely he'd've said so - he could've said "no, 3 million". Instead he
says his price is 2 million, then decides he wouldn't sell even for that.
There's something else going on there.

~~~
richardknop
Maybe. But what if the something else is he just likes his house and doesn't
want to sell. He has enough money to cover his retired lifestyle cost and he
enjoys living in his house.

There's nothing wrong with that. In free market you are free not to sell your
property even if somebody offers you 100x it's market value. Nobody can force
you to sell if you want to keep it.

And besides the millennial guy from the article couldn't afford $2 million
anyways (he wants to spend 200k) so that question was pointless anyways
because even if the old person said yes he doesn't have the cash.

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

~~~
pmiller2
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
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
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."

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squozzer
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
Why would old people voluntarily move out of their nice old houses and move to
some remote lower quality house?

~~~
squozzer
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?

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

~~~
Fifer82
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
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.

------
Shivetya
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.

------
shawnee_
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
> 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.

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gmarx
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?

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

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

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pjc50
How can people who aren't participating in a market be said to be "dominating"
it?

~~~
richardknop
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
Why are people living in their homes a 'problem'?

~~~
richardknop
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.

~~~
cesarb
Why are people living with their parents a 'problem'?

~~~
richardknop
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.

~~~
TACIXAT
Not if it's a 5 bedroom house, as stated above.

~~~
richardknop
Change 5 to 3. It was just an arbitrary number to make a point old people are
living in places and have spare bedrooms. Not all old people so parents of the
guy in the article might not have extra room in their place?

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11thEarlOfMar
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
Which neighborhood, or at least, which region of the US?

~~~
11thEarlOfMar
Silicon Valley.

------
sbjustin
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/)

