Baby Boomers Aging in Place and the Need for More Homes
According to a report from ATTOM Data Solutions This Week in Real Estate, the average homeowner who sold their home in Q4 2018 realized a 30.2 percent return on their original purchase price. Below are a few highlights from the fourth week of January that influence our business:
Q4 2018 Home Seller Gains
Nationally, homeowners who sold in Q4 2018 sold for an average of $54,500 more than their original purchase price, a slight decline from last quarter, a jump from last year. The $54,500 average home seller price gain in Q4 2018 represented an average 30.2 percent return on the original purchase price, down slightly from an average 30.4 percent return in the previous quarter but up from an average 25.6 percent return in Q4 2017. Among those 20 markets, San Francisco saw the greatest seller gains in Q4 2018, selling for an average of $361,125 more than their original purchase price. Seattle, Tacoma, Bellevue sold for an average of $171,969 more than their original purchase price while Portland, Vancouver sold for $132,500 more than their original purchase price.
Half of Boomer Homeowners Plan to Age in Place
More than half of Baby Boomers plan to age in place, electing to renovate in order to meet their changing needs, according to a new survey released by Chase and Pulsenomics. Among this group, 52% said they will never move from their current home, and 88% said they plan to make improvements to their home, with bathroom renovations topping the project list. Nearly two-thirds of respondents said they think home values are rising in their area, which provides an incentive for homeowners to tap their equity in order to age in place – and enhance their investment. Amy Bonitatibus, chief marketing officer for Chase Home Lending, said Boomers are likely to explore loans that grant access to equity in order to fund home improvements. “With home prices generally healthy across the country, two-thirds of these homeowners are turning to financing options like home equity lines of credit or cash-out refinances to complete their upgrades,” Bonitatibus said. “On average, homeowners are financing about $18,000 per household with more than half saying they intend to start remodeling within a year.”
More Homes Needed to Replace Older Stock
Over the 40-year span from 1961 through 2000, housing starts averaged a little over 1.5 million a year, but they have been nowhere near that high since 2006. As a recent NAHB study explains, one outcome of this shortfall has been a tendency for older homes to remain in service longer. Attempts to improve the stock of housing in the U.S. (for example, through new development standards or building codes) therefore make relatively little sense without a concomitant strategy to increase overall production. The NAHB study showed that the number of homes completed has been running below even the number of net new household formations. It should therefore not be surprising that data from the Census Bureau’s American Community Survey show that the number of homes built before 1970 has been declining at quite a slow pace. There were 52.83 million of them in 2014, and by 2016 the number had fallen only to 52.17 million. This implies that only a little over 6 out of every 1,000 homes built before 1970 are removed from the stock each year. Some of the loss rates the Census Bureau uses to estimate the number of housing units in the U.S. are even smaller, showing less than 1 housing unit per 1,000 being removed from the stock per year in the Northeast and West regions.