Why Boomer Homeowners Aren’t Selling

by Steve CookJanuary 12, 2018

Until very recently, a growing number of retiring homeowners have downsized by selling their family home and have either bought or rented something smaller. Downsizing can make their golden years easier and more enjoyable by making upkeep more manageable and reducing the costs of utilities and taxes. For retirees suddenly living on a fixed income, their houses may provide the financial cushion they need to enjoy their retirement.

Now that baby boomers, a generation second only to millennials in size, are reaching their late sixties and seventies, they are not doing as expected. Demographer Arthur C. Nelson, professor of Urban Planning and Real Estate Development at the University of Arizona, predicted that the downsizing boomers will add significantly to the nation’s inventory of listings.

Nelson predicted that the retiring of the boomer generation would trigger a “great sell-off” of homes, creating an oversupply so huge that housing markets will plunge into another depression by 2020. Nelson believes the real estate depression would be so brutal that boomers who wait to sell will lose everything. “My suspicion,” Nelson says, “is that many hundreds of thousands, maybe millions of those homeowners in the 2020s to 2030 and beyond will simply give up the house and walk away.”

With less than two years to go, the exact opposite seems to be happening. 90 percent of Americans over 65 plan to continue living in their current homes after retirement while only 15 percent have moved into smaller homes to make maintenance easier, according to a 2012 survey by the National Council on Aging. In 2017, only 27 percent of all home sellers were over 65. The reluctance of seniors to sell is a major cause of the inventory shortage. Only 6 percent of seniors sold their homes because they are retiring and only 9 percent sold to save money.

Many seniors like where they are living. In a 2015 AARP survey, 78 percent of the respondents stated that they “strongly” agree with the statement: “What I’d like to do is stay in my current residence as long as possible.” Approximately half of those surveyed noted that “being near a church or a social organization” (53 percent), “living with all ages” (51 percent) and “being near good schools” (51 percent) is “extremely or very important.” Roughly 7 in 10 respondents said “being near family/friends” (71 percent) or “being near where you want to go” (69 percent) is “extremely or very important.”

One quarter can’t afford to move or still work. A sizable percentage (28 percent) simply can’t afford to move. One in five seniors are still working either full or part-time and want to stay close to their jobs.

Senior black couple standing outside a large suburban house
None of these surveys address another important issue related to seniors’ finances — their desire to build equity. Twenty million boomers and younger adults bought homes between 2002 and 2006, which was the peak of the housing boom. Prices fell from 2007 to 2011, by as much as 40 to 50 percent in some markets. About 6 millions homes were lost to foreclosure or short sales when their owners went “underwater” or owed more on their mortgages than what their houses were worth.

Many more homeowners managed to make it through the Great Recession, and they now are building equity. However, they lost an entire decade of appreciation of their home’s value. They bought their homes from owners who had seen the value of their homes skyrocket during the housing boom, and most buyers at that time expected homes to continue to appreciate.

Instead, those who bought during the boom saw their homes lose value at a rate the real estate economy has not seen since the Great Depression. In most markets, prices have finally exceeded the peals reached ten years ago and owners are finally gaining equity. In the fourth quarter of 2017, the S&P Case Shiller CoreLogic Index reported prices were rising at a rate of 6.2 to 6.4 percent, about twice the average for real estate. In 2016, CoreLogic estimated the average homeowner gained $15,000 in equity.

So not only do seniors have no pressing reason to sell, but they also have many reasons to stay put in order to get the most that they can out of the current housing recovery.

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About The Author
Steve Cook
Steve Cook is editor and co-publisher of Real Estate Economy Watch. He is a member of the board of the National Association of Real Estate Editors and writes for several leading Web sites, including Inman News. From 1999 to 2007 he was vice president for public affairs at the National Association of Realtors.