Baby Boomers Who Won't Sell Are Dominating the Housing Market | Hacker News Reader

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

bloomberg.com

59 pointsSQL221999 comments

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.

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.

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.

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.

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.

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.

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/gro...

[1] http://www.lao.ca.gov/reports/2015/finance/housing-costs/hou...

Thanks for these references -- I look forward to reading them.

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.

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.

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.

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.

The way it used to be is you would own a larger house to raise a family. Then your 2 kids would leave and you would sell and buy something smaller and cheaper and often in a warmer climate.

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.

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.

It seems like there was this huge assumption that Boomers would be interested in downsizing, but it was totally false.

Boomers like their houses and their big gardens. They have no interest in moving to an apartment or even a townhouse. Why should they uproot themselves from their current lifestyle and disrupt their existing social networks if they can afford to stay?

Exactly... the guy in the article is painter, a job that is easily transportable. Move to Detroit, it's starting to improve and they are almost giving the property away.

Inkster is giving property away, but rent in the desirable neighborhoods of Detroit is well over a grand a month. In the modern high rises with a nicely updated kitchen, you're looking at two grand. House prices in Indian Village are honestly pretty unaffordable for local salaries (I say as a fairly well-paid Big 3 engineer). If I were going to recommend a place to move to -- Lansing, Grand Rapids, Ames, Columbus.

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.

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.

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

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.

You also have to consider the fact that the older generation will lobby against government policies that would weaker their position.

Its the same in many countries.

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.

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.

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.

Agreed. Nobody should be forced to sell their property. You bought it and you can live their your whole life.

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.

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?

Because it's not really practical to build more land, and it's difficult for people to choose their neighbours whose land use is going to affect their own; things like utilities, transit and emergency services have to be organized geographically. If guitar prices are high, anyone can make more guitars, and if you don't agree with your band on what kind of music to play, it's easy to form a new band with a different group of people. Land and housing don't behave like that.

Which is fine. There is a limited space on this planet so obviously population can't grow forever. It's high time we start decreasing world population if we want to save the environment and keep this planet habitable.

Forcefully taking private property from individuals to later sell to other private parties for private use sounds like the nightmare version of eminent domain.

True capitalism provides only incentives to build, it's boomer era policy that makes this either very difficult from a bureaucratic standpoint, or unprofitable, and in most cases both. It's not right to blame someone for wanting to stay in their home, I disagree with that entirely. It's also not right to restrict and regulate supply to the extent that future generations have nowhere near the same opportunity for home ownership the previous generation took for granted.

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/

I have a hard time believing that banks are "exempt from paying municipal property taxes" as a blanket rule. Surely, that would depend on a given locality's laws. Further, it seems that, in general, banks are liable for annual property taxes on REOs post foreclosure [1].

[1] https://www.quora.com/Does-the-bank-pay-annual-property-taxe...

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.

http://jacksonville.com/business/real-estate/2011-01-30/stor...

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.

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...

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.

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

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.

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.

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.

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.

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

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.

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.

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.

> "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.”

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.

> 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.

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.

My first thought would be that they're old, and comfortable with their current living arrangements, so money is mostly worthless to them.

The only thing they'd want to do with it is give it to their children, but they'll inherit the property when they die regardless, so selling is just a hassle.

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?

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.

Yes, but framing the problem as a clash of demographics with derogatory terms for entire age-groups of people is lazy crap IMO.

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

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.

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.

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."

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.

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.

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

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?

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

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.

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.

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.

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.

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.

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.

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.

> 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.

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?

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

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

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

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.

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

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.

Upthread someone has the right answer to the "real problem": https://news.ycombinator.com/item?id=14958382 - zoning.

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

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.

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

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?

I think it's an issue of efficancy. Elderly couples living in 5 bedroom houses when they'd more likely be better suited with something smaller.

Who are you to say that they would be better suited with something smaller? How incredibly presumptuous of you. This is their private property that they bought and paid for fair and square. You can't force them to sell it just because you or others want it.

He isn't saying they would be suited with something smaller or they should move.

Just stating the fact that from purely arithmetic reasons it's not optimal for retired people to live in big houses with bunch of empty unused bedrooms. That is indeed factually inefficient use of the space.

It doesn't mean they are somehow wrong to want to stay in their houses they paid for fair and square. Just pointing out the problematic situation in real estate market as there is very low supply of new property.

Ownership is participation. Imagine if a similar proportion of owners of shares of publicly traded companies henceforth refused to sell their shares under any circumstances for several decades. That would have a significant effect on stock prices, no?

What, like Porsche/VW? Or countless other closely held or family companies?

Well, yes. If any of those owners were to suddenly sell their stock in sizable quantities, that would have an effect on the market, as they too are participants in said market. What point are you trying to make?

Selling has an effect on the market, but "not participating nor offering for sale" .. doesn't?

They both do. Ownership without sale increases prices because the same amount of dollars are chasing fewer opportunities.

Anecdotally, my neighborhood has 115 homes. No sales in 2 years. No homes listed at the moment.

Average age of owners is about 55.

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

Silicon Valley.

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/

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