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The True Story Behind the Stuck Market.

We’ve all heard the news. Persistent lack of inventory has left home buyers more than frustrated. This condition has lingered for over two years and shows no sign of abating. Not only do buyers have fewer options, the competition for what is on the market proves daunting. And it’s especially difficult for first time buyers.

Put simply, the market is stuck. And Baby Boomers have a lot to do with it! In such a low inventory market, it would be natural to assume that it’s a seller’s market. While that’s true to a certain extent, a dose of reality is necessary to reveal the truth behind the reasons why the market is stuck. The words “be careful for what you wish for” come to mind.

The story behind the story is that Baby Boomers aren’t selling. And this is happening for a number of reasons. When Boomers aren’t moving, it constricts the market at all pricing levels. It stifles upward mobility of the younger demographics wishing to accommodate their own growing families and lifestyles.

Baby Boomer homeowners are at the age where they’re looking to maximize their retirement assets. However, at this most crucial stage in life, many remain unable to recoup their property valuation lost during the recession. To add insult to injury, many also lost valuation in the stock market- and dream of what it could be now.

While the majority of home valuations have improved since 2009, many Boomers wanting to sell, fail to see a return to the level they anticipated by now. Especially those who purchased shortly before the recession. Or, while some may have seen slim to modest valuation gains, they’re waiting to gain more.

Another reason for a constricted market it that many REITs, or Real Estate Investment Trusts scooped up distressed properties during and after the recession. These properties were fixed up and rented out for good income. This segment of the market would otherwise have been a part of the normal for sale housing stock. Much of this stock is mid to lower priced properties, and single level Ranch style homes on small parcels, which are Boomer friendly. However now, and for the foreseeable future- they remain off the market.

For tax reasons, most Boomers would prefer to sell and buy something small and less expensive. But the major reason Boomers aren’t selling is there’s literally no place for them to go. Many Boomers are unlike generations before, who moved to retirement communities in warmer climates. Because their networks are important, many Boomers want to remain in the communities in which they grew up or raised their children. Some might move closer to urban centers for proximity to a more exciting lifestyle. But to many- this is not an affordable choice.

For those wishing to remain in, or close to their communities, friends and families- there is a dearth of this secondary housing stock. Whether to a downsized condo or to a rental, new developments offering these smaller, more affordable choices are rare. And if available, they come at too high a premium in most suburban communities close to Boston.

For either of the above reasons, a large chunk of Baby Boomers and the more elderly are putting off selling. Aging in place is the term for this population who continues to wait- either by choice or necessity. Some with handicaps are opting to adapt their housing to accommodate physical limitations. Whatever the reasons, data shows Boomers, especially, are waiting to sell an average of ten years longer than in previous generations.

From this Blogger’s perspective, the final nail in the coffin is the following. Public policy and zoning restrictions are a major factor to Boomers’ having fewer, to no choices in downsizing- and remaining in their communities. So these communities themselves, contribute to the market being stuck.

Many Boston suburbs have tight, and expensive housing stock, and continue to operate under outdated, restrictive zoning laws. Fearful of a decline in home valuations, many town officials and residents fail to see the future benefit of allowing new developments into their communities. Yet many towns are updating their public school systems to accommodate greater student populations.

More suburban communities and their elected officials need to change their zoning laws and grant new building permits to innovative developers. If they don't do it soon, they'll be obliged to, because a bill requiring cities and towns to create multifamily zones passed in the Senate last year. This dovetails nicely onto the 1969 mandate of Chapter 40 B in the Massachusetts housing code. Which states, if the percentage of existing affordable housing in a community is under 10%, towns and developers need to offer affordable units amounting to roughly 25% of any new project.

These affordable units, along with market rate units would bring positive changes to any community. They accommodate the downsizing Boomers who want to remain and spend their retirement dollars in their community. They offer aspiring younger generations a chance to set up households and grow into the community. And they offer the chance for folks who grew up in the community, yet otherwise would be priced out- to remain there.