Sticker shock stalls downsizing boomers
Betsy Friedlander, 66, and Mike Klipper, 67, have adored their light-filled, three-story colonial in suburban Bethesda, Maryland, for nearly three decades. They had the more-than-3,000-square-foot home built, and they raised their two sons in it. Now with the boys grown and gone, they are looking for a new home as part of a new lifestyle.
"I think we wanted to have more of an urban life, if we could be downtown and walk to everything, that would be our preference," said Mike.
But after an exhaustive search of condominiums and townhouses in downtown Washington, D.C., and in downtown Bethesda, they learned a tough lesson about this new lifestyle. It has become incredibly expensive. The prices were so high, and the properties so small, they would be getting very little for their money. One bedroom condos were selling in the $1 million range in some buildings.
"We started looking in D.C., and we were shocked, absolutely shocked, because we thought we would be able to sell our house and put a little money in the bank, and buy something we would enjoy," said Betsy. "Even if we went up a substantial amount, we didn't see anything that we could feel comfortable living in."
Even making a lateral move, buying for the same prices as they could sell their home, they would get half the space and still have to pay large condo fees. They finally decided to give up.
"Here we stay!" proclaimed Betsy, with a tinge of regret.
It's a problem facing the baby boom generation (born between 1946 and 1965) from coast to coast, and it is also creating a larger problem for the overall housing market. Boomers were expected to downsize out of their large suburban homes, bringing much needed inventory to the market.
Their desire, however, to live in walkable, urban centers, where they can lead an active physical and cultural lifestyle, is just not affordable in today's tight market. They are therefore staying put longer, and causing a huge shortage of available inventory for the overall housing market. Renting isn't much an option either with rents nationwide at record highs.
"Fifty percent of boomers feel like they can't get out of their house, and that's limiting supply," said Jane Fairweather, whose Bethesda real estate firm represented Betsy and Mike in their search. "So the houses that we're waiting to come on the market, for the young families that are trying to move into the good school systems and the good neighborhoods, aren't coming on."
There were 9 percent fewer homes for sale in January of this year than there were one year ago, according to Realtor.com.
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That, in turn, is pushing prices higher for the homes that are listed, because those homes are now seeing bidding wars. Higher prices are then sidelining first-time and even midlevel buyers, in something of a vicious circle.
"We were a bit shocked at the prices, yes," said Howard Sokolove, also a resident of Bethesda.
Sokolove, in his early 70s, is retired, but his slightly younger wife, Ruth, is a baby boomer and still works as a nurse in a nearby hospital. They already sold one of their cars, hoping to move to a more urban setting.
"We would have to spend at least twice as much, maybe 2 ½ times as much for a similar-sized space," said Howard.
The Sokoloves decided to stay put as well, although they worry about aging in a house with stairs and a large yard that needs upkeep.
"I'm learning to love what I've got," he said.
Back at her real estate office, Fairweather explained how she rationalizes these moves to her clients. She asks them to think about what rooms they use the most. The answers are generally the kitchen, family room and bedroom.
"And if you measure that square footage, it's going to be close to what you'll end up with in a condo," said Fairweather, "but it's a major psychological transition, and oftentimes it takes a lot more time to get people ready."
The problem is considerably more acute in higher-priced suburbs of major urban markets, but even in smaller cities, the inventory problem persists.
Some builders, like Pulte and Lennar, have put major resources into so-called active-adult communities, where single-level homes are offered at very affordable prices, and they have seen strong demand; these communities, however, are generally not close to urban centers. They tend to be more popular in the South and Midwest and in less urban areas.
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"I think that part of the enjoyment that we have is being in a diverse community. That's really important. And diverse in every way. Mike and I enjoy being with people of different generations," said Betsy.
She and Mike said they would not consider moving to an active adult community.