How To Help Boomers Move & Free Up Homes
A recent article on Money.com states that one of the reasons that its harder to buy a home today is because Boomers refuse to move. According to new studies, American homeowners are living in their homes longer. Data from real-estate brokerage Redfin indicates that the typical homeowner in 2019 has lived in their home for 13 years. That’s a full 8 years longer than homeowners in 2010.
That’s a highly significant jump. Homeowners moving less frequently is contributing to a housing shortage for first-time and other home buyers, Redfin says. The lack of inventory is causing prices to rise, pushing potential first-time buyers out of the market.
It’s hard to argue with that logic. Where the article misses an important point though, in my opinion, are reasons they offer for why this is happening. They do point out reasonable explanations for Boomers not moving, particularly in California. One is that homeowners sitting on gobs of equity don’t want to have to pay taxes on those gains, nor do they want to lose their favored prop-13 low property tax base. The other is that, like millennials, they are being priced out of the market for homes, even if they’re intending on downsizing.
I believe, however, that its more than just Boomers refusing to move — it’s that many Boomers looking to downsize feel trapped because their lender told them they have to sell their existing home before they can buy their next home. Thanks to today’s stricter lending guidelines, many homeowners don’t qualify to have two mortgages at the same time.
To quote a recent article in the New York Times, “Low interest rates don’t matter if no one (i.e. banks) will give you a loan in the first place. And a lot of would-be buyers are in that situation."
'Buy first, sell later' programs are designed to give homeowners the option of tapping the equity in their existing home and using it to help buy their next home now, moving only once. There are variations to these programs — some companies will buy your next home for you, then lease it to you until you sell. Others involve bridge financing that will loan up to 100% of the cost of your next home, placing a mortgage on both the target property and your existing home. Companies like San Francisco Bay Area-based Pacific Private Money have been providing these “Transitional Bridge Loans” to clients of many California real estate agents and agencies, helping hundreds of would-be home buyers successfully buy first and sell later.
Making it easier for people to move is an important strategy for helping ease the difficulty in buying a home. The real estate industry and the alternative finance industry have both stepped up with creative programs designed to do just this. Now, if we could only get local government agencies to make it easier to build new homes, we might actually be able to make a dent in this current housing crunch.
Byline:
Mark Hanf is president of Pacific Private Money, a Bay Area-based alternative finance provider specializing in Transitional Bridge Loans for consumers seeking fast, reliable financing to purchase their next home.