The baby-boom generation and their older counterparts are aging in place at higher rates than ever before, creating a potential opportunity for the reverse mortgage industry — and vexing millennials looking for a deal on their first properties.
Americans aged 55 and older now control 53% of owner-occupied homes, according to data from real-estate research firm Trulia and the U.S. Census Bureau. That’s a record high since the department began collecting such data all the way back in 1900, and a rise from just 43% in 2006.
Governments have engineered the system to encourage older homeowners to remain in their properties, a Tuesday story from Bloomberg posits, through methods such as beneficial tax laws and strict zoning regulations that prohibit desirable apartments in certain areas.
It’s a significant issue in states like California, where voters approved the tax-limiting Proposition 13 in 1978. Under that law, which remains on the books today, property tax payments remain pegged to the prevailing rate from the time the home last changed hands — giving older homeowners who bought in the 1970s and 1980s a huge incentive to stay put and reap the benefits of their retro tax bills.
Experts at the National Reverse Mortgage Lenders Association’s regional meeting in California recently cited the law, along with slowing construction and a constrained supply, as reasons that the state could soon see a reverse mortgage boom. For instance, the average seller in the Golden State hasn’t moved in 10 years, while 71% of Californians aged 55 or older have been in their current homes since 1999.
A growing trend
But Bloomberg didn’t just find Californians taking advantage of unique tax laws. There was also a couple in Nebraska who said they like “putzing around the yard” of their longtime property, and several elderly homeowners in Philadelphia who couldn’t bear parting with buildings that had been in their families for generations.
This presents a challenge to younger folks like Jake Yanoviak, the 23-year-old who spends the Bloomberg article riding his bike through the City of Brotherly Love in search of owners looking to sell. With listings scarce, Yanoviak resorts to cold calling and directly approaching residents on the street, most of whom are less than receptive.
“Where do these young people get this money?” one homeowner in South Philadelphia asks rhetorically. “This neighborhood still has the soul of the past. Everybody I know — people older than me — wouldn’t move from here for nothing unless they couldn’t afford it no more.”
Another potential target was more blunt.
“Give me $2 million. I don’t want no low number,” he tells Yanoviak before quickly changing his mind. “I wouldn’t even sell if you gave me $2 million. This is my retirement. If you gave me a bag of money, I wouldn’t sell.”
Read the full story at Bloomberg.
Written by Alex Spanko