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Lucy Berman has a unique perspective, experiencing firsthand both sides of the empty-nester conundrum having a major impact on the tight Midpeninsula housing market.
A real estate agent since 2004, she sees potential homebuyers struggling to find homes they can afford in one of the nation’s most expensive housing markets. With the expense comes the fact that available home inventory continues to shrink.
At the same time, Berman and her husband, Palo Alto homeowners since 1984, whose children have left the nest, are among those acknowledging that they are living in more house than they need in a city where property values have increased enormously in recent years.
Like many other local empty nesters, the Bermans considered downsizing to a smaller home on a smaller lot a few years ago. But they decided such a move just didn’t make sense financially.
“We found once we paid all of the taxes (resulting from a sale), there would be no money left,” Berman said. “We have a lot of friends in the same position. Most of them have owned their houses anywhere from 20 to 40 years.”
And most are staying put, Berman said, thinking about remodeling projects that will allow them to age in place. Those would include things like relocating their master bedroom downstairs or finding where in the house they could build an elevator to the second floor. Those individual decisions to stay, multiplied hundreds or thousands of times, combined with the continuing large number of overseas investors sinking cash into pricey Midpeninsula real estate, is having major consequences for Berman’s clients.
“It’s very difficult for people to find places to live here, whether they’re now renting locally or moving here from elsewhere,” she said. “There’s a very limited stock of houses for sale and the prices are astronomical compared to other parts of the country. I have had clients who ended up not taking jobs here after seeing the cost of living. It’s a huge problem for local employers.”
Getting socked with taxes on a house sale is indeed a deterrent for many empty-nester homeowners, said Michael Dreyfus, a residential real estate broker and president of Silicon Valley for Golden Gate Sotheby’s International Realty.
“They look at taxes and capital gains and blanch, because they might have 40 percent going to state and local taxes,” Dreyfus said.
For homeowners who benefited from 1978’s Proposition 13, paying higher property taxes on a new dwelling is another drawback when they consider selling and relocating.
Dreyfus said those negatives are especially true for older members of the baby-boom generation, or the 77 million Americans born from 1946 to 1964. This is not as much of an issue however, for empty nesters on the younger side of the scale, or the late boomers, the youngest of whom are still more than a decade away from traditional retirement age. They no longer need the amenity of top-rated schools for their children and may even be wearying of the region’s infamous traffic congestion.
“A move for them is more likely not connected to retirement,” he said. “They have lots of time left and have the attitude they’re not going to let taxes get in the way of their lives. They’re enthusiastic about the possibilities for the second half of their lives.”
Most of his clients in that category move to another part of the Bay Area, often San Francisco, or to a less-expensive part of California or a neighboring state, Dreyfus said.
“Psychologically, it’s an easier thing for them to do if they’re worried about leaving friends or a favorite yoga class,” he said. “They still feel they’re a part of the Bay Area community. And some have second homes in places like Tahoe or Montana or Carmel, and they want to spend more time there.”
Brian Chancellor, sales manager in the Palo Alto office of the Sereno Group, agrees that younger baby boomers tend to be more willing to sell their homes than their older counterparts, move to new communities and become active members. “And I think they’re less concerned about their children inheriting their property,” he said. “They want them to earn their own way in the world.”
Chancellor said despite the area’s incredibly tight housing market, common-sense measures could be taken to help ease the availability of existing homes and help create more affordable housing.
He advocates more California counties adopt existing state laws allowing homeowners ages 55 and older to retain their Prop. 13-created lower property taxes on new properties they purchase. Chancellor also supports area cities building more densely developed, transit-oriented housing suited to empty nesters so they can sell large houses they no longer need.
People’s attitudes toward living with less space, possessions and automobiles are changing, Chancellor contends, even in Silicon Valley. But the region hasn’t really caught up with the idea of building more, denser housing, exacerbating the area’s housing problems.
“As people get older, they’re not getting into their cars as much,” he said. “If we had more of the right (dense, transit-oriented) type of development on the Peninsula, and public transit was clean, cheap, safe and convenient, people would be more likely to sell their homes. I’ve had the opportunity to see more livable communities when I lived in Italy and Scandinavia. My wife is Danish, so I’ve spent lots of time in Europe. I’ve only had to rent a car once when there.”
Whether empty nesters are considering a sale of their property, renting it out, or just staying put, the strength of the Midpeninsula housing market is stoking lots of activity, said real estate agent Karen Trolan of Alain Pinel, who is a past president of the Silicon Valley Association of Realtors. She said there are lots of advantages to selling in the current hot market, and she’s seen many empty-nester clients move to less-expensive markets like Auburn (in the Sierra Nevada foothills) or Arizona. Others decide to rent out their properties if they want to keep their options open to return to the Bay Area or plan to eventually bequeath their homes to heirs.
David Goll is a freelance writer for the Palo Alto Weekly. He can be emailed at david.w.goll@gmail.com
