Baby Boomers Change Retirement – and Housing

by CJ Yeoman, Writer/Editor

The passage of Baby Boomers through American society has effected huge changes in attitudes toward women’s equality in the workplace, sexuality and parenthood. And now as they have started reaching the age of 65, boomers are redefining retirement and how to handle it.

And this is creating a HUGE opportunity for real estate professionals. How will you take advantage of it?

Busting out

Our friends at the KCM Blog say “Baby Boomers [are] About to Bust Out of Homes,” detailing the positive aspects of the booming numbers of these seniors who will be deciding where to spend their retirement years.

Of course, there’s the reality they may be forced to continue working because they have either lost value in their retirement nest eggs or they have not saved like they should have. But we’re talking here about those who are now deciding how they will be housed when they retire.

According to a recent study from the Center for Housing Policy (quoted by KCM), the homeownership rate exceeds 80 percent for those aged 65 to 84, and the typical homeowner has an average of $150,000 in home equity. Even those with a mortgage have an average of $93,000 in equity – so the ability to sell their home is not impacted by negative equity.

The Bipartisan Policy Commission says people over 65 “release much more housing than they absorb,” such as when they move in with their children, move into independent living facilities or nursing homes, or pass away.

“Between 2000 and 2010, people who began the decade aged 55 and over released over 10.5 million housing units (net). Most of these releases involve owner-occupied dwellings ….”

So as seniors are getting ready to make these decisions, will they have qualified real estate professionals to assist them?

Retirement assumptions going by the wayside

Tom Kelly of Inman News writes frequently on second-home purchases and says seniors will play a key role in the housing recovery. He figures nearly 5 million seniors are expected to buy and/or sell property in the next three years. With many of them boasting a “ton of equity,” seniors plan on buying their next home with cash, negating the effects of today’s horribly strict mortgage underwriting.

How many? Try 94 percent, according to the Market Enhancement Group, a Southern California real-estate research team.

The other surprise finding is that in 2010, only 1.6 percent of retirees between the ages of 55 and 65 moved across state lines. Florida is no longer the retirement haven it once was … and maybe no one state will take its place. Kelly says, “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.”

Also, boomers are not as willing to give up the cultural amenities they find in larger cities – or the better health-care providers. And why move far away from children and grandchildren you will need as a support system in later years?

California consumer confidence at a 5-year high

The California Composite Index of Consumer Confidence increased to 94.2 in the third quarter of 2012 compared with the second quarter revised reading of 89, according to Chapman University. Consumer confidence has been increasing steadily since hitting a low of 57.6 in the second quarter of 2008 and has been hovering between readings of 80 and 90 since the first quarter of 2010. The current reading of 94.2 is the highest overall consumer confidence since the beginning of the recession in the fourth quarter of 2007. An index level below 100, however, reflects a higher percentage of pessimistic consumers versus those who are optimistic.

The California Composite Index is generated based on three indices: Consumers’ outlook on current and future economic conditions, and an index measuring consumers’ spending plan.

The current economic conditions index increased from a revised May reading of 80.9 to 86.8 in August 2012. The index measuring future economic conditions increased significantly to a reading of 105.6 in August 2012 from a revised reading of 93.6 in May. Recent improvement in the job market positively affected consumers’ assessment of the current economic conditions and the outlook about future economic activity.

The index measuring consumers’ planned spending on big-ticket items, however, decreased substantially from the revised May reading of 96.0. The decline in this index in August 2012 to a reading of 86.1 may be due to high and volatile gasoline prices. Higher gas prices are reducing consumers’ disposable income and negatively affecting consumers’ planned spending.

REAL ESTATE UPDATE

NATIONAL MORTGAGE SETTLEMENT

As you know, last February the 5 major loan servicers - BofA, Chase, Wells Fargo, Citi, and Ally - reached a Settlement of the lawsuit filed by the 50 Attorneys General based upon fraudulent foreclosure practices which came to be known as the "Robo-Signer Scandal". As reported in DSNews.com, through the end of June, the servicers have extended about $10.56 billion in aid and loss mitigation to struggling borrowers in a variety of ways. 7,093 borrowers received first lien modifications with principal forgiveness in the amount of $749.4 million. The amount of principal forgiveness per borrower amounts to about $105,650. Bank of America was the only servicer that failed to offer first lien modifications with principal forgiveness under the settlement. Another $10 Billion in lender obligations remains to be satisfied. In addition, the servicers have implemented between 35 and 72 percent of the 304 servicing standards required under the Settlement. However, Fannie Mae and Freddie Mac which hold 60% of the nation's residential loans were not included in the Settlement and continue to refuse to make any principal reduction.

 

HOMEOWNERS BILL OF RIGHTS

In July, California enacted the major pieces of legislation which were introduced by Attorney General Kamala Harris. These provision, which will take effect January 1, 2013, will incorporate many of the provisions of the National Mortgage Settlement into California law and specifically will: 1) eliminate "dual tracking" of foreclosures during loan modification negotiations (it's unclear if this will extend to short sales); 2) give borrowers a right to stop foreclosures that violate these laws; and 3) provide for civil penalties and attorney fees against violating servicers. While some worry that these laws will make credit harder to get in California, they will compel lenders and servicers to provide borrowers with fair and honest treatment in the loan modification process. They will not force any lender to make any loan modification.

 

NEW LOAN MODIFICATION OPTIONS

As referenced in my last E-News, in response to the above Settlement and Legislation, we can anticipate lenders getting more creative in their resolution of problem loans. Ocwen has now offered it's "Shared Appreciation Modification" which will write the principal debt on a property down to fair market value with payments reduced to as low as 2% interest. The unpaid balance will be forgiven over 3 years if the borrower stays current. In exchange, the lender will receive 25% of future appreciation to be paid upon sale or refiance. Look for similar opportunities to arise with other lenders... maybe even Fannie and Freddie.

 

DEBT FORGIVENESS RELIEF EXTENSION

We are still waiting for any confirmation that the Debt Forgiveness Relief Act will be extended beyond it's current December 31st expiration date. The Senate Finance Committee approved a bipartisan bill before heading home for summer recess that would extend the Mortgage Forgiveness Debt Relief Act through 2013. This will go to the Senate in September; President Obama has included the extension in his 2013 Budget proposal that would extend it through 2014; but nothing has passed into law as yet. The big question is where does Mitt Romney stand on this issue. So far, he's remained silent.

 

DEPARTMENT OF REAL ESTATE CRACKDOWNS

Through the end of June, 2012, The California DRE which licenses and regualtes real estate brokers and salespersons, has caused the suspension or termination of over 1,000 licenses, a 100% increase over just 5 years ago. And Cease and Desist actions against unlicensed persons acting as agents are up 170%. Whether this is the result of increased violations in a down economy or just increased vigilence by DRE, there is no question that investigations are up. Some fear that recent DRE activity points to efforts to stop "dual agency" where the listing and selling agent or broker are the same. What we expect is an obligation of agents to be able to show that they have protected the rights of both buyer and seller, particularly in a short sale situation.

 

If you or someone you know is upside-down on real estate and don't know which way to go; or if you are being contacted by a creditor demanding payment; or facing a DRE investigation, be sure to get legal help right away. Our BPE Law $200 flat fee Consultation Program can offer knowledge of what to expect and form strategies to respond and hopefuly eliminate any liability. To schedule a Consultation, please contact our office at (916) 966-2260 or e-mail me at sjbeede@bpelaw.com.

 

The information presented in this Article is not to be taken as legal advice. Every person's situation is different. If you are upside-down on your loan, especially if you're facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

 

 

5 acre buildable lot

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