January 22, 2008 by Mimi Miller.

RISMEDIA, Jan. 22, 2008-The recent housing price bubble has caused concern, with the post-2000 increase in house prices keeping the younger generation out of the housing market, particularly in California and Hawaii, Nevada, Florida and the east coast states from Maryland north. Yet in context, these increases are merely one facet of a larger transition on the horizon.

What is the generational housing bubble?

The massive Baby Boomer population (78 million) is poised to enter elderly years after four decades of surging through the housing market. The elderly sell many more homes than they buy and in the next decade the relatively smaller younger generation may not absorb all the homes released by the Baby Boomers sell-off.

The younger generation is not only smaller but its purchasing power has been eroded by the rapid increase in house prices in the recent boom. This surplus of potential home sellers is expected to create a prolonged buyers’ market–a sharp reversal from recent decades-and will likely cause prices to soften and decline.

Newly estimated data reported in this article show that roughly 2% of people of all ages younger than 70 sell homes each year, but the selling rate climbs far higher after age 75 [1]. Meanwhile, the percent buying homes peaks at a much younger age, 30 to 34 (3.6%), before declining steadily into older ages.

After three decades of relative stability, the ratio of seniors to working age adults nationwide will increase by a total of 67% in the next two decades (2010 to 2030). After 2010 the leading edge of the 78m strong boomer population will pass age 65 and growth among the elderly population will substantially exceed that of younger adults, an unprecedented social and economic development that is expected to impact every state in the U.S.

How will it affect the states?

There are important differences between the states in the ages at which residents become net home sellers rather than buyers. The six earliest (where sellers dominate before age 60) are New York; Connecticut; New Jersey; Massachusetts; Illinois; Alaska. The latest (who sell on average after the age of 74) are Florida; Arizona; Nevada.

The study forecasts the time when the total number of annual sellers of all ages begins to outnumber the buyers, based on the growing number of seniors relative to younger adults, and applying typical per capita home buying rates at each age in each state.

States where sellers will dominate before 2015: New York; Connecticut; Massachusetts; Pennsylvania; West Virginia; North Dakota; Hawaii

States where sellers become surplus between 2016 - 2020: New Jersey; Rhode Island; Ohio; Iowa; Nebraska; Louisiana

A further 16 states, led by California and Illinois, develop a surplus of sellers in the 2020s .

Finally, another 21 states reach a position of surplus sellers after 2030 - including most of the Southern and Western states.

Consequences for the housing market

The market shift could begin as early as 2010, as the leading edge of the baby boom generation moves past the age of 65. As the number of sellers in the market begins to outnumber the buyers, it’s likely to lead to a drop in the housing market. It could mean:

- A collapse in home equity - for half the families in America, home equity amounts to more than half their net worth (this is especially important for the working class and most of the middle class)
- Young adults could get a bargain if they can wait long enough for prices to bottom out - but by waiting for the best price they could exacerbate the problem
- Many communities could acquire an excess of vacant and unsold properties, or they could be converted to rental units pending sale
- Property values will be assessed downward and this will diminish tax revenues available for municipal services

Planning for change

The coming generational transition in the housing market will upset the historic balance of buyers and sellers and demands action from state and local governments to reduce the impacts. They can:

- Monitor new construction and unsold inventory to prevent overbuilding
- Plan services and community designs to retain aging residents as long as possible, slowing their departure from the broader community
- Plan services to attract young households, such as better day care and schools, and more appealing amenities
- Attract new immigrants, who already account for 40% of US growth in homeownership this decade
- Invest in the economic capacity of youth, through higher education and job training - young adults with college degrees are more likely than those with high school degrees to become home owners, and they pay an average 64% higher price when better educated.

The impact of the aging boomer population will effect, not only housing prices, but transportation, land use and community development. It demands a response from urban planners and local officials that acknowledges the need to transform urban environments, and soon. Because this is a nationwide problem affecting a broad swath of the citizenry and with potential negative effects on the U.S. economy, the federal government should also assist in these solutions.

Aging and home ownership trends

A widely reported study by Mankiw and Weil (1989) predicted a 47% decline in house prices during the 1990s, based largely on their modeling of declining demand as baby boomers aged - an expectation that home investments would peak and decline after age 45. However, instead baby boomer demand for housing has grown into their 50s and house prices have doubled.

It has since proven that home ownership rates rise with age, and do not generally peak until after age 65. John Pitkin’s (1990) study of elderly homeownership was especially notable for showing how most variation in homeownership among older age cohorts over time is explained by demographic factors and inertia from prior decades, while current economic factors add small but significant effects at the margin.

Housing price changes and home ownership

In recent years, abnormally low mortgage rates have helped to inflate housing prices. This has encouraged even more home buying. In what might seem a paradox, when market fundamentals drive housing prices up, word of mouth and the fear that rising prices will make future purchases unaffordable amplify the trend. As a result, the number of buyers in the market increases to include both speculators and young adults accelerating their entry into homeownership.

This short-term housing bubble is now bursting in most of the U.S. Many analysts expect prices to decline through 2009 before beginning recovery. However, the eventual recovery in some states will be prevented by the downturn of the generational bubble that has been newly identified in this study.

Source: Journal of the American Planning Association (JAPA)

For more information, visit www.informaworld.com/japa.

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January 17, 2008 by Mimi Miller.

By David Sobel

RISMEDIA, Jan. 17, 2008-You’ve all had that experience with a client where you drive up to a house and they don’t even want to go inside. It’s an immediate “un-appeal.” You may know the inside of the house shows much better, but you just can’t convince them to spend the time to even go inside. In today’s market where lots of choices in housing are available to the buyer, why should they?

Here are some easy, inexpensive fixes that will help create that outside appeal and get you one, giant step further to a sale.

1. Paint or stain the front and garage doors, especially if they show any weathering. These are the first visuals where a potential buyer focuses. If garage doors are metal and dented, they may need to be replaced.

2. Any old, basically abandoned sheds or small structures, must be removed, the area graded and the grass replaced.

3. Change any dated, outside light fixtures.

4. Fix that driveway. If it is blacktop, make sure cracks and crumbling areas are dug out and filled and then the whole driveway sealed. If it is cement, have large cracks filled and repaired professionally. The buyer must at least feel they can drive the moving truck in confidently!

5. Make sure landscaping bricks are in their proper placement. Mowing, weed-whipping sometimes moves them and this is something the homeowner rarely notices, but makes the property look unsightly.

6. Fill in bare dirt under large shade trees. Plant shade-tolerant plants in defined planters or groundcover. Landscape properly for that area.

7. All landscaping beds should be cleaned out and updated for the time of year it is in your region. Place new bedding material down.

8. Have trees and bushes pruned and trimmed. If a bush or tree is looking old or about to expire, remove it and replace it with a similar size and type if you can. If there is a tree limb(s) over the roof, have them removed.

9. If the house needs painting and a full paint job is not in the cards; have it touched up professionally in the worst, most visible spots. Paint shutters and fix them if they are hanging crooked. At least this may help get your client in the front door, even if they negotiate a full paint job into the sale later.

10. If the house is sided, have it power-washed and have gutters and windows cleaned. Window cleaning inside and out makes the house feel updated and fresh, rather than old and dingy.

11. Make sure grass is in good shape, weeds are removed, trimming done regularly. So many sellers fall down on this job the minute the house is listed, and this is critical to selling a house quickly, especially one where the owners have already moved out. In snowy climates, removal must be done regularly too. If owners have moved out, make sure you have an HWA Home Warranty to re-assure buyers.

12. Keep garbage and recycle containers inside the garage, along with all toys and equipment. Make sure the garage is neat and organized. Painted walls and floors also go a long way in this area and are inexpensive to do.

13. Decks should be washed and repainted or re-sealed; plantings around them cleaned, weed-free and looking good. Patio furniture should be in excellent condition. Even though it is in the backyard, this is the area where the family can envision enjoying the warm days and the new yard.

14. If the roof has missing shingles and they can be replaced inexpensively, suggest this be done as it may save negotiation over a completely new roof. Roof repair needs and costs should be minor or the homeowner might as well replace the entire roof.

15. If the homeowner wants to do a bit more, suggest solar lights lining the driveway or installing a more attractive front door with lead glass inserts and replacing plain doorknobs with something more custom.

16. If you have an evening showing, make sure lights are on outside and inside the house. This is warm and inviting.

17. If it’s a holiday season, by all means decorate the home! Just like sugar cookies or vanilla scent on the inside of the house, this really says “it’s a home” and I can see myself enjoying life here! In the least, always have some greenery or flowers for the season on the front step or porch; even a birdbath with a little garden around it says home.

Remember, most home buyers cannot visualize even these simple changes and clean ups in a house and the ones who can, will be looking for a reduced price. So to sell the house at top dollar and quickly, make it “appeal” to the many who will be seeing it rather than the few who are looking for a “fixer upper.” These people know what they want, go after it and need less assistance.

Finally, have neighbors or friends look at the finished results to see if you or the home owner has missed anything key that would be quick and easy to do. Use this article in your listing presentations so they can get started right away on these easy, inexpensive fixes and adapt the ideas to their home. When that home looks fabulous, update that picture on the Internet! This is especially important if the season has changed too and it’s a reward to your client too!

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