Home ownership is not the boon to older Americans that it once was | Hacker News Reader

Home ownership is not the boon to older Americans that it once was

nytimes.com

30 pointsMilnerRoute79 comments

How can one not understand that their house increasing in value means the house they want to buy also (proportional) increases in value?! Are those older Americans represented in the article thinking that their house will increase in value to 700K while the apartments they wanted will stay at 100K for 20 years?

I don't know but you can see that this misunderstanding is extremely widespread, bordering on universal. Name any American politician who does not agree with the idea that the way to help poor people is to get them to "build wealth" through homeownership, a scheme under which some future person must necessarily become impoverished.

The building wealth part is because you have a non-depreciating asset worth something. For most people their only wealth is a retirement account, a meager savings, and the equity in their home.

And your home/land is an asset that provides utility that isn't spent by you using it.

That's kind of the crazy part though - how the hell does something you use and abuse every day, that you by definition leave out in the elements, not depreciate? Or at the very least, it is messed up that the depreciation is so minimal compared to the appreciation of the home (and not the land)

The land I can see. Land is in limited supply; AFAIK it's mostly just Hawai'i that's making more on occasion, and that's about it. But the actual building should depreciate.

You seem to assume that people living in their home will spend nothing on maintenance and upkeep. In my experience, the mortgage is about half the expense of owning a home.

The land is the asset, the bet is generally that the land will appreciate faster than the house will depreciate. This has generally been true in large metro areas and regional hubs, as net migration to those areas has been positive. That changed a bit during COVID with remote work, but most employers now seem to want at least partial physical presence.

Until Covid hit, it kind of worked, as long as you sold and moved far enough away.

Now Midwest prices are moderately close to California prices that it’s not as easily done.

And it never worked very well in the same metro unless you seriously downsized - from large house to small condo.

45 minutes outside of Chicago you can get a decent size, newish house for 3-400k. That’s up from pre covid but still very much trade-down-able for someone sitting on a paid off house in the Bay Area or Greater NYC.

It used to be that the move from Chicago to about an hour outside Chicago would be “big enough” to make it worthwhile. And being only an hour away is different than across the country.

I’m not sure that’s as much the case anymore.

Well that’s now a different claim.

When I was growing up in the suburbs of NYC, everyone’s grandparents moved to Florida. That’s further away than Chicago.

You can get a decent-sized, newish house for 300-400k in a desirable neighborhood inside the city of Chicago, on the Blue Line, and then of course in a variety of inner-ring suburbs (Forest Park, Skokie, Berwyn, Niles). You definitely don't need to take a 45 minute commute to buy a house in Chicago on that budget.

That's even worse. If everything was uniformly expensive, it wouldn't encourage people to move away from talent hotspots. But the differential prices means it's a drag on labor and thus productivity.

Midwest prices are nowhere near California prices. Not even moderately close. The only place that might be remotely true is Chicago.

I have some properties I track, the CA one used to be 5x the Midwest one, now it’s only about 2-2.5x.

Chicagoland prices are much lower than California prices, even in high-demand areas.

Chicagoland prices factor in high levels of state and city debt. Someone moving to Chicago from out of state is essentially taking on an extra $85K of debt. While residents aren't directly personally liable for those debts, they should expect higher taxes and lower service levels in the future. A municipal bankruptcy is possible.

https://www.wsj.com/articles/chicago-will-need-a-miracle-to-...

California and it's large cities have their own fiscal problems but generally not as bad.

I don't know. I'm pretty well acquainted with the Chicagoland fiscal situation, which is real and ugly, and this "add $85k" thing seems like a just-so story. Can you show your work getting to that figure?

It's probably some math involving "unfunded liabilities" that the government has (usually oversized pensions or something).

This can cause a cascade where the governmental entity that has the liabilities keeps raising taxes on its constituents so they keep moving outward to the suburbs or away.

Detroit is a famous example of this, but it's happened to other areas (cities have gone bankrupt before).

this is one of those things that makes me feel like I'm insane.

- if housing is to be an investment

- it must appreciate faster than inflation

- if it appreciates faster than inflation

- it must become unaffordable

there is literally NO WAY around this, regardless of any mechanism by which housing appreciates. If housing is an investment it must become more unaffordable over time.

And yet it seems that literally 95% of people just... never think of this? Instead, the only discussion that ever takes place is centered on the mechanism by which housing appreciates: blackrock, airbnb, foreign investment, lack of rent control, lack of subsidies, monetary policy, immigration, or, the worst one: simply that "people are too greedy to build affordable housing."

every time, every single time I read one of these things I feel like I'm taking crazy pills.

We do need to separate housing-as-investment-vehicle from the experience of the couple in the article. Their retirement plan (own a large house, downsize to a small house) shouldn't depend on their home value appreciating faster than inflation. It should be possible to own a home outright just so you don't have a monthly payment while not banking on your house containing more wealth than you put into it.

Now, in the real world, home prices change and those changes aren't evenly distributed, so what happened to this couple is that they ended up getting priced out of a downsize (at least in the type of home they'd envisioned). But that doesn't mean that they were planning on appreciation, they were just not planning on appreciation leaving them behind.

Same. I keep trying to point out to people that the fact the US has pinned residential real estate as a bedrock growth investment asset necessarily precludes it from being affordable. It can't be both.

The last time US residential real estate had a chance to become affordable, the entire global economy fell apart. So much so, that the government stepped in for _years_ on end to prop up the asset class.

You’re definitely not wrong but I believe the idea is that with a growing population and expanding housing availability and differences in desirability based on a number of factors, you get a gradient effect where older houses have more value than new houses, but there are new houses for people who can’t afford those older homes which have increased in value to a point where few can afford it

The more expensive housing becomes the higher the economic stakes become and hence policy enacted to protect homeowners and hence prices going up even more.

I think they did understand that. They expected their home to appreciate at about the same rate as the apartments they wanted to downsize into. If, while retirement planning, their home was worth $300k and nearby acceptable condos were selling for $200k, then it's entirely reasonable (though in retrospect wrong) for them to look at the market and believe that this should mean that no matter how housing prices change they should always be able to sell their more-valuable house for a less-valuable condo.

What happened here isn't that they got blindsided by their home not appreciating fast enough to outstrip local condos, what appears to have happened is that the local housing market now values those condos higher than it does their detached home. That's a pretty fundamental cultural shift that I can't blame them for not predicting 20 years ago.

> what appears to have happened is that the local housing market now values those condos higher than it does their detached home.

I think it is even more benign: they are trying to stay in the same area and in their area (likely sparsely populated, given their 2-acre lot) the available condos are giant 4-level new developments that cost a lot.

They can still downsize, just need to move further away from where they live today. My 2c.

I think this is basically the heart of the matter. Given the large-lot neighborhood they're used to, finding a condo that's going to feel "comfortable" to them is hard enough to begin with. Then, factor in the accessibility issues like finding a one-level, 2-bedroom condo with no steps, no multi-step front stoop, and preferably with a no-step shower and a garage: you've narrowed the market dramatically. You're basically in "retirement community" territory, which is significantly more expensive per square foot than SFH, not less. Having just been through this, it means locating somewhere you swore you'd never live and sticking out like a sore thumb as a senior in a "starter" community.

Sell family house for 500k, get apartment 250k, 250k to live off.

Sell family house for 1M, get apartment 500k, 500k to live off.

What am I missing?

You're not missing anything. There's a subset of HN that sees greedy real estate speculators everywhere, even in a simple elderly couple with a simple retirement plan that involved owning exactly one home.

Here's a URL for the story that doesn't require you to create an account to read it.

https://www.fidelity.com/insights/retirement/own-home-retire...

That's actually the URL I'd submitted. One of the moderators changed it to the New York Times site (which hides the article unless/until you create an account).

Senior mobile home parks are often overlooked. People move into them out of financial necessity and then find out they like living there. Low maintenance, low cost, a bit more independent than renting a condo, can park close to haul in groceries, as much community as you need or want or not, common facilities like a clubhouse and pool without any maintenance. Some parks, residents own the land and control space rents, or the city controls space rents (e.g. San Jose <= 3%/year increase), the rest the space rent is about what you would pay in property taxes on a SFH. A very few parks the park owners gouge the tenants on space rents.

Gift link: https://www.nytimes.com/2024/04/20/health/seniors-home-equit...

How does NY Times not shut this down / ban you for doing this?

Why don't they shut down the link after like 10 unique people visit it?

Because they still make money off ad impressions.

Then why don't they give it all away for free with that logic?...

Look up “price discrimination”.

Because the goal is sustainable subscription revenue. This feature is for subscribers to promote NYT content, typically among people you know and discuss the articles with, which is probably a great channel for them gaining new subscribers.

> Yes, sharing a gift article URL generated from a New York Times paid subscription on platforms like Reddit is generally against their terms of service. The New York Times allows subscribers to generate gift links for specific articles, which are intended for personal use, meaning they are supposed to be shared privately with individuals rather than publicly. Publicly posting these links can lead to unauthorized access beyond the intended use, which violates the terms outlined by the New York Times for using their subscription services. It's always good to check the specific terms and conditions directly on their website to understand the limitations and permissions regarding the sharing of content.

The rising price of a house you own means very little if everything is going up - plus throw in inflation, interest rate, and taxes. If you move now, you are going to pay more unless you significantly downsize.

I think downsizing was always part of the original calculus.

The advice I’ve always heard was get a starter house, once you’ve got enough invested and more income upgrade, eventually downgrading to a bungalow which helps pay for your end of life.

However, bungalows are going for way more than other house types because of all the simultaneous demand.

Scott Galloway's TED talk seems relevant here.

A couple things I like to mention:

I rent. Right now my house cash makes $2,600 after taxes by putting it in T-Bills. This effectively drops my rent to $1,300/mo vs buying and spending $3k/mo for mortgage, taxes, insurance, HOAs and maintenance. I'm happy to rent for now, especially as it seems houses have little room to appreciate further.

I think gen Z abandons SFH for lifestyle reasons. Kids are having less children and don't want the maintenance and responsibility of a SFH.

> I rent. Right now my house cash makes $2,600 after taxes by putting it in T-Bills. This effectively drops my rent to $1,300/mo vs buying and spending $3k/mo for mortgage, taxes, insurance, HOAs and maintenance.

By my math this puts your "house cash" at around $600k[0]; the vast majority of your generation (and, for that matter, the vast majority of all Americans) do not have that kind of money to invest; their "house cash" is maybe enough for a 10% down payment on a house in the exurbs or a 1 bedroom condo. That said, I wish more people in your position would rent -- far too many would view $600k as an opportunity to buy multiple "cheap" properties as rentals.

[0]: $2600 per month is $31200 per year; to earn $31200 per year with an effective interest rate of ~5.17%[1] would require a principal of 31200/0.0517 ~= $603k. [1]: https://www.marketwatch.com/investing/bond/tmubmusd01y?count...

Cash is about $900k. I gave the after -tax amount (tbills are fed taxed but not state taxed).

Right, so the average person will pay an even more insane mortgage, making renting an even better deal for them.

> ...it seems houses have little room to appreciate further.

I keep thinking this, too. But my neighbors home just sold for $894/square foot and the first 3 offers they accepted were all $80k to $100k over their asking price which was already fucking insane to me (and I own the same model on a "better" lot but they put in ~$40k in renovation before listing -- forget whether or not I could even afford to buy my own home if I tried to buy it today, I straight up wouldn't even bother. It has literally not been worth the sticker price for close to 2 years now). They had 8 offers the weekend they listed, the first 3 they accepted fell through because those buyers were accepted on other homes they liked more. The offer that went through was $50k over asking. The new owners put 20% down and mortgaged the other 80%. It's an absolutely staggering monthly payment -- effectively the same house on effectively the same lot but they're paying nearly 4x what we are monthly on housing.

There was an article today about our local housing market [0]. I cannot wrap my head around who the fuck is buying these homes and where the hell they're getting their money from. I've thought for years now that we were reaching the top of this market but here we are. It's a very, very hot market where I am, which was also true when we bought here back in 2015/2016, but now the prices have more-than doubled.

[0]: https://www.msn.com/en-us/money/realestate/it-takes-349-200-...

> I think gen Z abandons SFH for lifestyle reasons.

It's not that Gen Z abandoned SFH living. A better way to say it is that 20-somethings tend to live in dense apartments in areas which have activities for 20-somethings (bars, parties, concerts, etc).

That's likely been true for 20-somethings for a very long time. Human nature.

Then, 30-to-40-somethings settle down and move to quieter places with more space and more suitable for having their own kids. I'm pretty sure when Gen Z gets to that age range, they'll do the same.

What does SFH mean?

Single Family Home

I thought the prior generations all downsized to lower cost areas when they sold their home. Before it was FL and AZ, but now it’s maybe Ohio and New Mexico? Or are those low cost places really have no homes available? With the stair elevators and other modern retrofits I think most homes can be made accessible.

A 71-year-old Californian explains why she's one of many boomers reluctant to sell their large homes and downsize — and it has nothing to do with money

Eliza Relman Mar 24, 2024

https://www.businessinsider.com/71-year-old-boomer-cant-find...

The gist:

   Frieden and her husband are prioritizing accessibility, so they've looked mostly at larger condominium buildings with elevators. But they'd also like a small outdoor space, like a balcony, enough wall space for their art, and a home office and spare bedroom for visitors.

    But there are very few bigger units available, Frieden said. Most of the condos are small one- or two-bedrooms without any outdoor space and with modern, open-plan layouts that appeal more to younger people's tastes and lifestyles.

   "They feel and seem like they're built for young people," Frieden said of the condo buildings. "They even market, 'the greatest thing about our complex is the gym and the shared courtyard, shared rooftop environment, the bike racks' — all of these things that might not be first on the mind of a senior."

I don’t understand. A two bedroom for a couple is plenty.

The guest bedroom can also be the office in the 2nd bedroom. Many complexes have a few units for hoteling guests in the building which is very nice.

Balconies have been absent for years, maybe liability risk and more value as usable square feet. But there is usually some nice courtyards, rooftop pools, and of course nearby parks in any city. I guess they don’t want to share the space with others from the sound of it? But places like the villages have thriving 3rd places, and during the workday retirees will have the run of the rooftop pool and courtyards.

Elderly should absolutely be using the gym and pool. Many communities have shared gardens where you can get a plot to grown on.

Are these untenable compromises?

From the article, it seems that needing to drive all over is a big deal, unlike a more close-knit community. I'm 75 and moved from a suburb where I could walk to the corner store and even a nice lake (walking is great for seniors) to the boondocks.

Divorce and home sale.

Now, the downtown (tourist trap) is 12 miles away, and all the stores I really like are 50 miles away. The driving is a bit much. I am very much liking the prospect of less driving, neighbors who aren't preppers, and less than the 3 feet of front stairs. I'm still strong and can lug a table saw up the stairs, but why ... like that 40 pound cooler with my shopping?

Community becomes more important. You want some friends nearby, as well as shopping, and medical facilities. I'm 50 miles from the V.A. medical center and ophthalmologist. Handy is dandy.

There's a small place for sale near my daughter's for a mere $680K, with many miles of walking trails, so I don't really need the gym and pool, which come with a HOA fee of over $500/month. Close-packed condos, so lose the workshop, and worry if I am going to go to war over the small grand piano. (I have a Roland keyboard from my married days with a shift-worker partner, but it ain't the same, even if I upgrade it when I can't keep repairing it. )

Working on the cure ... Everyone's wants and needs are different, except for basics. Out of concern, the family bought me an Apple Watch, mainly for the emergency calling.

Seems to be unpopular but we lived as a family of four in a two bedroom apartment for 7 years. I just think for two people it’s a good amount of space — though so guess it won’t hold a workshop? Our community has a wood working shop available to use anytime for seniors, is this really not tenable.

TL;DR: Boomers want to eat, keep cake. If only it was easier to abscond with their unearned profits from living in an exclusionary subdivision for their entire lives.

Don’t worry, when they die the taxes owed will evaporate through the pernicious step up basis at death rule.

Paywalled, so I can't read the article, but a funny problem of Boomers owning expensive properties today is that a lot of them can't afford to sell because of capital gains on homes they may have bought 40-50 years ago for <$100,000. If they don't have much wealth besides their home (many homeowners) they won't have enough to move into a new place in their area because everyone else's home has shot up in value as well, and taxes just ate up a hefty portion of the sale from their previous home. So they make do with what they have, property values go up, and a lot of people are unable to buy homes because it doesn't make sense to sell.

I'd be interested in seeing, say, a five-year moratorium on capital gains from real estate to see if it helps cool the market.

All I’ll say is, I’ll vote out any government that passes any policy that benefits only the boomers. Consistently influencing policy decisions that only benefited them at each point in their life is why we’re in the mess we’re in. You can’t just change the rules for the game every other generation has been dealing with just because you now have to play it too.

If it cools the market down it benefits just about everyone except the speculators.

It doesn’t cool the market, only allows people who already have made a lot of money at the expense of others, keep their money while others don’t. Do I get a moratorium on my income taxes?

They can absolutely sell. The first 250k (500k if married) of *profit* is excluded completely from taxes. And then any profits after that are taxed at 0%, 15%, or 20%. If you're making that much money on a sale you're not getting my sympathy that you might pay < 20% of your PROFITS. Get out of here with the pity for the well-off.

If they don't need the cash bad enough to sell, then don't sell. If they do, they'll have quite a nest egg after.

Interesting idea. Pair it with allowing older home downsizers to maintain their previous taxable value so long as the new property is worth less than the one they are selling. The interest adjustment will still be there but at least the taxes aren’t

>cool the market

Do you mean warm it up? It's currently frozen. Lower interest rates are the surest way to fairly warm the market up. Cutting capital gains tax makes the rich richer and the poor poorer. Warming the market won't increase supply though.

Cool it down, as in, lower real estate prices.

Market hotness is measured in days that a house is on the market, not dollars it sells for.

https://fred.stlouisfed.org/tags/series?t=market+hotness#

Lower interest rates are the surest way to fairly warm the market up

That’ll will unfreeze the market but also resume the insane price spiral.

Try building. And not a little bit either. Think Post-WWII.

“Let’s give away more money to people that have already gotten a massive windfall in homes some crumbs fall down to everyone else.”

Somehow I’m not enthusiastic about this proposal.

Canada does this. 100% of primary home profit is tax free, even if it’s in the millions.

They also don’t tax lottery winnings.

I’m not a huge fan of high taxes but it would seem to me not taxing either of groups makes and putting the burden on wage earners makes no sense at all.

Lotto winners I can see. Given that it’s a government scheme and they are already making a hefty profit, tax on top seems like double dipping.

Really? It's literally money won through a game. It would seem taxing it heavily makes more sense than telling someone working 40 hours a week at $15/hr they should be paying taxes instead.

If it was a game run by anyone else, sure. But in this case you pay the tax by buying the ticket.

FWIW I think it's rather immoral for governments to run lottos to begin with.

Sure the government raises some taxes through the lottery, but there is no reason why it can't be more.

I doubt it would cool the market. Some would argue the $250k/500k capital gains exclusion kicked off the huge runup in housing prices in the 2000s. Suddenly it was a very tax advantaged, leveraged investment.

https://www.federalreserve.gov/pubs/feds/2008/200853/

PROP 13 in California probably has similar distortions to the market.

There's already a 250k per person exemption on capital gains from an owner occupied home. If you're married, that's 500k.

Certainly, in a lot of places, that doesn't cover growth from a house bought in the 80s, but it will at least make a significant dent in the taxable gain. And it's long term taxable gains, so the rate isn't too high, even if you've got to pay state income tax.

Gift link to get past the paywall - https://www.nytimes.com/2024/04/20/health/seniors-home-equit...

As it’s been explained to me (I just bought my first home), the first 500k of capital gains on a primary residence are tax exempt.

FWIW in Canada capital gains on a primary residence are completely tax exempt and their housing market is even more of a mess than in the US.

So, to summarize this article, it's a short piece about one specific couple. There's not a single piece of data about other people that might be in a similar situation, there's not a single piece of relevant data about the housing market, in fact, there's not a single solitary bit of input from the author. The entire story is 6 paragraphs that quote one person saying they're having trouble downsizing out of their home.

This somehow translates to a title with a broad sweeping statement about all older Americans? And how home ownership is a problem for older Americans? How is this journalism? How is this published in the New York Times? Did the author even fact check anything this couple told them? Did they research into their situation at all? Who knows.

Is there more to the article that I can't see because I'm not subscribed, and it's not making it evident? I just don't understand what this is.

I think you’re only seeing the intro to the article, and then perhaps your ad blocker is preventing the “subscribe to see more” bit from showing up. The actual article is longer than six paragraphs and has some statistics and quotes from more people, including a researcher studying the space.

> The entire story is 6 paragraphs

There's more than 30 paragraphs in that story.

Every time I hear news about boomers not being able to downsize, I think “well isn’t it the good ol consequences of my actions”. The nimbys made it impossible to build and created a system where landlords benefited from just being born early. The rest of the generations have been dealing with this problem for years, welcome to the party.

It’s not really a generational thing, my parents where worried about the housing market in the early nineties when they saw that people had it as an investment.

The problem is that no politician wants to solve it in a sustainable way because it would lead to their own biggest investment, that is also leveraged, would loose value. But we also have a pension system that relies on humans being more populous.

Politicians have all these perverse incentives. If we could get a more direct democracy it would solve a lot of problems.

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