Tom Kelly: Off-the-radar seniors provide housing stability
A new study by the Harvard Joint Center for Housing Studies revealed that lender unwillingness to issue loans remains the biggest chuckhole on the road to housing recovery.
Some homebuyers – many of them low-equity members of Gen-X and Gen-Y – can’t qualify for a loan. Many lenders are requiring higher credit scores than what was needed to qualify for a loan just a few years ago. Plus, some banks are also requiring potential borrowers to come up with larger down payments. The result has left a greater number of homebuyers than expected on the sidelines unable to purchase a home.
So where’s the smooth road to housing today? The Market Enhancement Group, a research team based in Southern California, recently broke down the latest data supplied by the U.S. Census Bureau. It came as no surprise that not only do seniors have a ton of equity but nearly 5 million of them plan to sell and buy in the next three years. Homeownership for seniors (65 and older) is as high, or higher, than any other age group.
And, because many of them plan to pay cash, there’s no need to provide a seller with a letter of pre-approval from a lender. No worries about FICO scores. Questions about size of down payment are largely irrelevant.
“In all the hoopla over youth, we’re forgetting a very important segment of the population – seniors,” the MEG report found. “They’re not flashy and they’re not the ones creating new trends on social media or with the Internet. But senior homebuyers and sellers have one unique characteristic that sets them apart from other generations – stability.”
Here are some key findings from the MEG study:
• Overall, only 31 percent of U.S. homeowners own their home free and clear.
• Some 68 percent of all seniors own their home free and clear. The remaining 32 percent will own their homes free and clear in six years or fewer.
• About 15 percent of all senior homeowners plan to sell their home in the next three years and buy another home – this translates into 4.9 million families and 9.8 million transaction “sides” for real estate salespersons.
• And 94 percent of those 4.9 million families selling their home plan to pay cash for their next home.
Traditionally when Americans retired, they would make big cross-country moves or head south to the sun. But times have changed and, while some seniors still seek the sunshine, more are opting to stay put or make a short-distance move.
Only 1.6 percent of retirees between the age of 55 and 65 moved across state lines in 2010, according to an analysis of Census Bureau data. Florida once was the retiree haven, attracting more than one in four retirees who did move. From 2005 to 2010, that number dropped to one in seven.
More retirees are opting to stay near where they once worked, moving out of the pricey real estate metro areas to places an hour or two outside of the city, where real estate prices and taxes tend to be cheaper.
To help facilitate these senior moves, the National Association of Realtors offers a Seniors Real Estate Specialist (SRES) designation. It focuses on better understanding senior needs – so that agents learn to ask the right questions at the right time and in the right tone of voice.
To earn the SRES designation, applicants must complete a two-day course, pass an exam and provide documentation of at least three transactions involving senior clients in the past 18 months (or submit two such transactions prior to the first annual renewal date).
The education module includes a comprehensive workbook, presented in 11 sections. During the opening day, instructors define niche marketing and generational differences, discuss housing issues, the process of retirement, equity conversion and capital gains taxes.
Day two delves into estate planning, communication modes and the role of the agent as it relates to developing a client base, communicating with the client and their advisers and family members, educating parties to the transaction, negotiation strategies and administrating the process to a successful conclusion. The workbook also includes tips on working with and counseling seniors, reprints of articles and other reference materials.
While first-time homebuyers are absolutely critical to the housing industry, seniors should not be overlooked. They might not need as many loans but they definitely are able to move.