CALIFORNIA'S 'LOCK-IN' TAX LAWS CAUSE OWNERS TO STAY PUT: CHANGE IS AFOOT
New ballot measure could spur 55+ turnover, a boon for builders of move-down 55+ homes and communities, and risk for higher-end segment homes on the coast.
- The initiative is significant because 52% of single family owner-occupied households in CA are 55+.Additionally, most 55+ California homeowners have lived in their houses for a lengthy period of time. 63% moved in before 2000, and 78% before 2005, according to the 2015 American Housing Survey.
- Housing turnover rates should increase. The CAR expects an increase of approximately 40,000 sales, or roughly 10% more than current levels, and the California Legislative Analyst expects “as much as tens of thousands” of increased transactions. We would expect 55+ homeowners to increase efforts to purchase move-down and active-adult homes.
- We would expect turnover to be most impacted in areas with relatively high HPA among residents with the longest tenure in-home. These homeowners have the largest spread between market value and assessed value, likely the greatest need to downsize due to age, and are more likely to be on fixed incomes.
- We believe a larger proportion of these homeowners exist in coastal California counties as opposed to inland counties (see map). Note that the spread between median sales prices in coastal counties and inland counties has widened dramatically over the last six years, in part due to mix, but also due to substantial inventory constraints in coastal markets. Looked at on a mix-adjusted basis using the FHFA Purchase-Only Index (but with a more limited set of metros), we see a similar dynamic with Coastal pricing having increased at almost twice the rate of Inland pricing since 1991.