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Homeownership

Silent Generation continues to downsize their housing

(HOMEOWNERSHIP) The Silent Generation are market shakers, it’d be unwise to ignore them.

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Housing market

Studying the 2016 housing data by generation is highly interesting. For the Silent Generation alone, it has brought forward some surprises that realtors may not necessarily expect.

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While this generation doesn’t have the dollars to live the high life, they often made choices, for example, downsizing to newer homes, which made them a significant force in the market. Ignoring them will be a mistake.

Home buying

The Silent Generation, people born between 1925 and 1945, only account for 8% of all homebuyers in 2016, the smallest share by generation.

This should not come as a surprise if you also consider that they are the generation with the lowest median household income at $66,600, likely living off their retirement funds.

Consequently, when they do buy homes, it is usually in the second lowest median home price bracket, at $220,000. They are also most likely to buy a home in senior-related housing at 24 percent.

The reasons seem to be self explanatory—at median age of 75, these buyers aged between 71 to 91 years tend to have the smallest families.

They hardly share space with dependents, like children—only about 3% have children under 18 living with them.

Somewhat surprisingly, in 2016 the Silent generation made the highest share (21%) to buy the newest homes, with a median house age of 1999.

Type of houses

The data also reveals two related extremes. On one hand, this generation accounts for highest share of single male buyers at 10%, perhaps due to divorce or death of a partner; on the other, at 91%, they make up almost all of the housing economy who are likely to move from an already owned home, due to downsizing.

Correspondingly, the Silent Generation also forms the smallest share of first-time homebuyers at 4%.

As a consequence, the reason for buying a multi-generational home within this generation is negligent—a share of only 11%, mostly to take care of someone ailing. Much more likely, the data reveals, these buyers purchase the highest share of a duplex, apartment, or condominium (17%) and townhouse (9%).

The data also clearly reveals that while the Silent Generation forms the highest percentage of homeowners who’d choose a neighborhood home with proximity to shopping (39 percent)

They are also the highest share among generations to purchase a smaller home and to be closer to friends and family (both at 23%).

Interestingly enough, the Silent Generation is in tandem with the Millennials, for the shortest expected tenure in the home with a median of 10 years, admittedly for very different reasons.

Least likely

As already established, the Silent Generation is not exactly the upgrading type. They are the generation that is most likely to move due to a household member’s health and least likely to move for a nicer home.

#silentgeneration

Barnil is a Staff Writer at The Real Daily. With a Master’s Degree in International Relations, Barnil is a Research Assistant at UT, Austin. When he hikes, he falls. When he swims, he sinks. When he drives, others honk. But when he writes, people read.

Homeownership

The Granny Pod could be the alternative to nursing homes (and why people will soon demand bigger back yards)

The Granny Pod looks like a guest house and sits conveniently in any backyard – they plug right up to existing plumbing and electrical and allow both caregiver and senior to have their own space while remaining connected.

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I’ve spent most of my life living everywhere but the United States, and from what I’ve seen in other cultures, when couples tie the knot parents come with the marriage! That doesn’t necessarily mean the parents live with the kids (although I’ve seen that in countries like Japan, Korea, and Turkey), but I feel safe saying that it’s a given the kids will taken in/take on/take over their ailing parents at some point in said parent’s lives (Italy for example).

I’m not sure the US is set up that way. The big business of senior living facilities and nursing homes tells me otherwise.

But that might be changing thanks to the Granny Pod and similar mono-living facilities that can be installed in a person’s backyard (which is why we suspect people may demanding bigger back yards in coming years).

Close, but not TOO close

MedCottages or “Granny Pods” seem to be a viable solution for taking care of elderly family members without giving up the independence Americans put so much emphasis on.

A recent story explains that Reverend Ken Dupin created the MedCottage as an alternative to nursing homes, as 78 million baby boomers head toward retirement.

These 12 feet by 24 feet pods can sit conveniently in any backyard and plug right up to one’s existing plumbing and electrical. The pods allow both caregiver and senior to have their own space while remaining connected.

Retiree support for Granny Pods

For its part, AARP, the lobbying group for aging Americans, has gone on record to assert that local zoning laws pose one of the biggest obstacles to making such dwellings a practical solution to caring for aging family members in what it calls “accessory dwelling units.”

AARP spokesperson, Nancy Thompson said “the MedCottage has some of the features the organization advocates in accessory dwelling units, but not all of the universal design features that could be useful for people of all ages.” She does add that it’s a step in the right direction for accessory dwelling units.

No more condo fees

I’m no social worker, but studies bear out that human contact is vital as we grow older. Even in a worst case scenario (when an individual living in a nursing home is alone in their room for much of the day), they at least meet other patrons at lunch or dinner, and at whatever social outings are plugged into a daily schedule. For all the close circuitry and monitoring the Granny Pod offers, I don’t know if it takes the place of human contact, so hopefully families will remember the ties that bind them and do more than just monitor a screen to see if Granny is okay.

Another benefit of the Granny Pod is that once it’s paid for and installed, that’s it – no more monthly rent or condo fees that can deplete a retiree’s resources.

Granny Pod starting a movement

According to the Washington Post, other companies seeking to make similar structures are Seattle-based FabCab (whose name comes from Fabulous Cabin), and San Francisco-based Larson Shores Architects, which designs what it calls “Architectural Solutions for the Aging Population,” or ASAP, and its “Inspired In-Law” dwellings” demonstrates that assisted living facilities aren’t the only item on the menu.

As this type of structure catches on, it may threaten nursing homes and even retirement condo villages, and could influence the sizes of yards builders offer in coming years. Industry practitioners should be aware of the trend, and be able to offer this type of setup to clients who are actively considering options for their parents (the solution may just be a bigger back yard).

#GrannyPods

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Homeownership

Loftium trades a fat down payment for a spare bedroom made available for Airbnb

(REAL ESTATE NEWS) Loftium will help you out with a down payment on your first home if you turn your spare bedroom into an AirBnB and millennials seem open minded about this option.

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Homeownership may not be such a distant dream for renters hoping to buy one day. Seattle-based startup Loftium has devised an alternative approach to obtaining a down payment on a house: Airbnb a bedroom in the house for up to three years.

For buyers who have been pre-approved by a lender, Loftium will pay up to $50,000 on a down payment on a house.

The home must be the primary residence of the homeowner, so Loftium is not available for purchase as an investment property, per their eligibility FAQ.

In exchange for the dough, Loftium requires home buyers to sign a service contract agreeing to list a spare room on airbnb.com for 12-36 months, depending on the loan amount and rental price, and split the profits 70/30 with Loftium. The idea is to generate a passive income stream for the homeowner to help with monthly payments on the home.

While Loftium does take a cut of the Airbnb profits, they are in no way a co-owner of the home. If you purchased a home through them, it’s yours and yours alone – “like it should be,” the website declares.

There are a couple of caveats, and I mean, if someone is handing you $50,000 to help you buy a house, it would make sense to look into the conditions of ownership.

For instance, the Loftium home owner must be a good Airbnb host. So no sabotaging the listing by making the space sound like Shawshank, no making guests feel awkward or unwelcome, and listed rooms must be furnished with at minimum: a queen-sized bed (or larger) with mattress and frame, a chair, a desk or bedside table, and a lamp.

All other stipulations would be the same for any other Airbnb host.

This may sound a little insane, maybe even a little desperate to anyone who has successfully managed a down payment on a house to share the space with strangers for an agreed upon time, but this is exactly the boost many renters need to overcome the down payment hurdle. And Millennials are already primed for this sharing economy and are open minded to the arrangement.

Loftium co-founder Yifan Zhang believes that within the next five to ten years, prospective home buyers will have three standard options for coming up with a down payment: save, ask the parents to help out, or sign up for Loftium. Based on early interest, likely from those signing up for quotes and votes for their city (more on that), Zhang expects business to scale quickly.

So far, Loftium is only available in Seattle as a beta test for the service. There have already been successful homeowners in this brand new program, one of which had the clever idea of finding a place with a mother-in-law quarters to rent out as her listed space/bedroom, and Loftium is currently offering 50 down payments initially this fall in the Seattle area.

The plan is to eventually expand into Chicago and Washington D.C., but interested renters have the option of submitting votes for their city. As of publication, Austin is currently sitting around 4,000+ votes.

There will be some obstacles for particular cities that will prevent Loftium from setting up shop, such as city legislation that prevents people from renting out rooms in their homes, but I suspect that with the rise in popularity of alternative approaches to homeownership coupled with the demand of travelers seeking to rent out a shared space, this could absolutely change over time.

The service sounds almost too good to be true, and it will be very interesting to hear the success, or even horror stories, of how these contracts will play out, but I believe others will jump on board to offer something similar.

Take heed millennials, homeownership is within reach!

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Homeownership

How many homeowners are impacted by proposed MID cap?

(REAL ESTATE NEWS) The mortgage interest deduction (MID) cap inserted in the proposed tax bill could impact more homeowners than originally thought.

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MID mortgage interest deductions existing home sales

As a part of the recent tax reform legislation release, the House proposed reducing the mortgage cap at which one can no longer deduct their interest payments from their taxable income by a factor of 50 percent. But how many people would this proposal actually affect? As it turns out, quite a few.

The current mortgage interest deduction (MID) sits at a cool million dollars, meaning that anyone who currently has a mortgage of up to $1,000,000 can deduct the amount of paid interest from their taxable income. These proposed changes would lower that number to $500,000 — still a respectable figure, some would argue.

That said, researchers at the National Association of Realtors (NAR) crunched the numbers, and the results are surprising: somewhere around 15 percent of Americans own homes with mortgages totaling at least $500,000 — and those numbers are “conservative” by NAR’s estimates.

Additionally, projections show fairly aggressive growth in the number of homeowners with $500,000-plus mortgages in as few as 10 years.

Once one adjusts for future inflation, the number of people who might be affected by this bill within the next ten years certainly isn’t negligible, with some states seeing almost twice the number of $500,000 and up mortgages within that time frame.

The bill wouldn’t affect people who now own houses with mortgages that are in excess of the proposed MID cap, but the current rate at which houses are rising in value means that the percentage of people affected could still be quite high, and anyone hoping to remodel or sell during this time will most likely have to contend with the revised MID cap if the legislature does pass.

Ultimately, NAR says a bill lowering the amount of deductions from taxable income will lead to a few things. First and foremost, homeowners whose mortgages meet or exceed the proposed MID cap may be reluctant to sell, resulting in scarcity and tampering with the market.

Equity value could potentially drop, and home values in general may be susceptible to dropping values as a result of the tax reform as it is currently proposed.

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