Please vote in this poll using the sidebar.
Which type of area would you live in if home prices were not a factor?
- downtown core (12%, 16 Votes)
- urban (outside downtown) (43%, 56 Votes)
- suburban (24%, 31 Votes)
- rural (17%, 22 Votes)
- remote (4%, 4 Votes)
Total Voters: 129
This poll will be active and displayed on the sidebar through 02.13.2010.
Only thing tying me to higher housing prices is a job in the suburbs. If I didn’t have to work for a living, I could move out into the country away from the city like I want and housing prices wouldn’t be nearly as a big a deal. Except, you know, that I wouldn’t have a job.
interesting that so many people are voting “rural.”
If traffic were no object
If good public schools weren’t needed
If I didn’t need to be in the Sea/Bellevue area so much for business, I’d vote rural but as it is, I need to be in the suburbs and not in the Seattle Public School District.
Everyone’s going to have a different idea of what those terms mean. I voted rural but the places I’m thinking of might be remote in someone else’s opinion.
By Jillayne @ 2:
21% isn’t really that high — approx 20.7% of US population live in rural areas, so its inline with reality. http://www.fhwa.dot.gov/planning/census/cps2k.htm
I voted rural. If home prices weren’t a factor, then needing to make a living wouldn’t be a factor either.
The kids have long left the nest, so schools don’t matter. But I don’t want rural where most people are toothless and married to their cousins. I want hippie dippie organic rural.
RE: Ira Sacharoff @ 5 – If you are talking about red area rural they are probably married to their siblings. Have you met their uncle dad?
darn it! 49% voted urban… guess I’ll never get that Green Lake house for $250K!
Ira I know someone who lives in Arlington and hates it. But, but but that’s what she wanted when she purchased her home!
THis is why I always tell people thinking of buying: you might plan on being there for 10 years, however, things change! Always have a plan B if you need to live somewhere else and can’t sell.
RE: johnnybigspenda @ 7 –
Sure you can:
http://www.realtor.com/realestateandhomes-detail/N5842-Lakeview-Drive_Green-Lake_WI_54941_1100025778
I want urban (so I can walk or take the bus everywhere) but far enough from Downtown to allow for a relatively large yard. Which, if money wasn’t an option, wouldn’t have to be that far…
RE: Jillayne @ 8 – I suggest developing a list of realistic chances. We all have seen someone buy and move out within 6 months. I don’t fully understand the very short durations, but I make the observation that it can, and does, happen.
Chances of staying:
Less than a year (small)
less than 2 years (bigger)
…
less than 5 years (quite probable)
…
less than 10 years (very likely)
…
less than 20 years (near 100%)
“Forever home” is too often like a “forever marriage,” forever comes and goes far too soon. (Maybe not soon enough, in some cases. We all have heard of people who are married less than a year too.)
RE: AMS @ 11 –
AMS- I’d like to respectfully disagree with the picture you paint. This is from a Seattle Times article from Apr. ‘09:
“A year ago, the American Seniors Housing Association found that seniors 75 and older have a great deal of equity in their homes, largely because most have lived in them 24 years on average; 75 percent of seniors owned their homes outright.”
I read somewhere (I wish I could link it) that about 30% of Seattle homes are owned outright with no mortgage. I’m guessing this number is declining but assuming that most of these individuals didn’t win a big court case or the lottery my guess is that most paid them off over time (20+ years).
For few personal examples my parents have owned their house 20 years and have been married for 36. My wife’s parents owned their house for 36 years and have been married for 42. The woman’s home we purchased in NE Seattle owned her house for 60 years (she’s 95).
It reminds me of the twisting of facts with marriage statistics. Its often quoted roughly half of all marriages end in divorce. That’s true, but not half of all married people have been divorced. The difference is that some people divorce mulitple times and skew the overall data set. Its the same with housing. Some people do (well did anyway) buy and sell every year as if a house was an accessory, but there are plenty of people who settle down too for the long haul.
RE: Tim McB @ 12 – Rather than start with those who are 75+ years old, I sample those who are selling and look at how long the home was owned. I find very few sellers who have lived in the same home for 20+ years.
That’s not to suggest, however, that someone doesn’t buy home A and live in it for 4 years. At that point home A is sold and home B is purchased. Home B might last 5, 7 years, whatever, and it’s sold to upgrade, or downgrade, to home C.
I suspect, however, that your observation is correct in that the older one is when the purchase is made, the less likely a quick switch to a new place will happen. I don’t know many 75+ year old people who move from one end of the country to the other for a job transfer. Same observation for 60+. I might also note that the demographics of those 75+ is much different than the general population.
“It reminds me of the twisting of facts with marriage statistics. Its often quoted roughly half of all marriages end in divorce. That’s true, but not half of all married people have been divorced.”
Yes, we need to know the rate of those who were married for the first-time. I guess one party might be married for the first time, and the other might be married for the 10th time, so maybe we’d need to carefully handle the data.
I am going to suggest that very few people marry with a plan of divorce in mind. Yes there are a few. There are some that marry for some legal problem, such as immigration laws. Often the plan is divorce after the five years, or whatever it is, that’s required for citizenship. There are other cases where people are better off legally married, even if they have a plan of divorce at a specific future date. I am suggesting that these are relatively small cases.
I do wonder, however, if someone is getting married for the 3rd time, are they simply marrying to get a divorce? Is that third marriage any less of a marriage than the first?
“I sample those who are selling and look at how long the home was owned.”
But by sampling those who are looking to sell the data is already skewed because it doesn’t take into account Warren Buffett type purchasers who buy and hold forever. They’ll never show up since they never sell. I can think of at least a half dozen who I work with right now that are of that mindset.
“I find very few sellers who have lived in the same home for 20+ years.”
The reason you hardly see them is because they sell so infrequently.
I also argee with you that 75 year olds are not the moving type and not the typical owner, but consider this, if the average years of ownership of a 75 year is 24 years that means the average purchase took place when they were 51. Not a spring chicken but not ancient as well.
“I do wonder, however, if someone is getting married for the 3rd time, are they simply marrying to get a divorce?”
In this reference, if referenced back to housing I’d agree very much with you. I’ve always wondered why people buy and sell so frequently. The transaction costs alone are a good deterrent, out you immediately at a loss (of part of your down payment at least).
“Is that third marriage any less of a marriage than the first?”
Yes, it is if your concern when sampling is looking at the number of divorcee’s and not the number of divorce’s in a given area. Similarly, in housing looking at people and seeing the length of time (on average) they own a home vs. the number of total transactions that take place in a given area. Say person A buys a home, lives in it 10 years and sells it to buy a bigger house. They live in it currently (17 years and going strong) and have no plan in selling it anytime soon. Person B buys one house and sells it the next year, buys another and sells it two years later. Purely looking from a transaction standpoint the Person B has an average of 1.5 years owning a house before selling. Person A has an average 10 years before selling (since the haven’t sold a second time)…but if you factor in the current time held in property the average for them they’re average would be 13.5 years and counting. That’s why I think only looking at transactions is missleading. It misses those who buy and hold. Thanks for the discourse, I always appreciate a difference of opinion.
By Tim McB @ 14:
RE: Tim McB @ 14 –
All deed transfers are properly recorded, or so I assume. If there were a lot of people who were selling after holding for 20+ years, then why don’t they show up in the county records?
For the sake of illustration, let’s assume that everyone held for 20 years. What do you think I’d find at the county records? I’d find that all sellers have owned for at least 20 years.
Unfortunately, that’s not what I find.
[Unless you think there are a lot of unrecorded transactions, let's not get into perfection of security interest]
Oh, and there’s one more issue: You start time zero very close to today. I start with a second sale, and work backward. All homes eventually sell.
RE: Tim McB @ 14 – Oh, there are two things that strike me, now that I give this a bit more consideration:
1. You could claim that some of the homes that I see are serial switchers, like the marriage example. Who knows, maybe with each new marriage a new home is purchase, but there are other people who buy and hold, such as the case with those who stay married longer. It’s tough to separate who is going to make it the long haul on the outset.
2. I try and avoid investment property, but there are investors who are sole proprietors or partners. I have no way to separate these transactions. That said, I have no information as to whether the holding period is shorter or longer than those that are owner occupied.
3. I make the assumption that past data is predictive of the future owners. There is no reason that a shift in holding time cannot take place, and in fact, given the current economic situation, and housing price issue, I suspect that it’d be better to shorten the projected holding time.
4. I have no information on how many people sell and rent. We have some renters who buy, and we have buyers who sell and rent.
This is no silver bullet, but making the assumption that someone is going to buy and stay put for 30 years is risky, and does not recognize that there are so many who don’t make it.
RE: AMS @ 16 –
Thanks for the chat. I just have two more points. 1. ) Going back to my example if Person A owns a house for 10 years sells it and buys a house and sells it and buys another house and sells at 20 years. Their average is 15 years. Person B over the same period rents for 9 years, buys a condo and sells it after 2 years to buy a bigger condo for 2 years then sells it for a town home after 2 years followed by 3 more purchases each lasting 5 years. His/her average duration is 3.5 years. If each is calculated as one statistic the average is 9.25 years (15 + 3.5 / 2 people= 9.25). If its looked transactional the average is 6.375 years. (10 + 20 + 2 + 2 + 2 + 5 + 5 + 5 = 51 transactions / 8 = 6.375 ). Personally I think the former this is a better measure to predict future probability. Second, you mentioned that you don’t see people hanging onto property. Are you professionally involved with real estate? I’d be curious to flesh out this hypothesis. I hear all the time that the average person stays owns a house for 7 years (the Tim’s quoted it many times) but I wish I could see the methodology for it.
By Tim McB @ 17:
No, the average is 10 years. Two homes over 20 years. Maybe you meant “at 30 years” (20 years holding the second home, or “after 20 more years”) which would be two homes over 30 years. Moving forward, I’ll assume the “at 30 years” for a total of 20 years in the second home.
That’s not my methodology. I take a given time period and look at closed sales. For simplicity, let’s assume that we take a month of sales, and we find there were only two. One held for X years and the other held for Y years. Ignoring the statistical problems such as small samples, we have (X+Y)/2 as our average. So if one person held for 20 years and another held for 10 years, then the average for that sample is 15 years. I never use a small sample like 2. Personally I like a sample of at least 30.
No one sells twice in my small sampling period, or so I assume. I’ve not checked that. Given that there is only one sale per person, the methodology is the former.
Expected Value computation: Let’s assume that I will catch a single sale from both buyers in my sample, both with equal probability. The equal probability assumption is from the fact that we are starting with the end point, rather than the starting point. The idea that it’s only one per person comes from the assumption about one per person above.
[(10+20)/2 + (2+2+2+5+5+5)/6]/2 = 9.25 years.
I guess what we could do is develop the probability that someone holds 20 years.
Note my original message:
“Chances of staying:
Less than a year (small)
less than 2 years (bigger)
…
less than 5 years (quite probable)
…
less than 10 years (very likely)
…
less than 20 years (near 100%)”
What kind of distribution is this? I am not sure. Logarithmic with the inflection at the mode, maybe? I am sure it’s not that clean.
Every now and again I’ll see a sale where someone has held onto a property for 50+ years. I hope it is total obvious that 50 years is at least 50% of a person’s expected life. Given our culture, how much does this happen? According to my methodology, not very often.
We could also look at the mode, as measured in discrete years, always rounded up to a full year. No way would we see a mode of 30 years. I doubt we’d see a mode of 1 year. My guess, and it’s only a guess, is that the mode for holding period would be in the set {5, 6, 7, 8}.
Single people get married. Some get divorced. Some have a baby, or another baby, and want a larger home. Some find a new job and want to reduce the travel. Some find work in a different part of the country. Some are employer sponsored moves. Some decide they don’t like their neighbors. Some decide they don’t like the busy road. Some want to move to a smaller place with less maintenance. We’ve heard from people who left the area to find less expensive homes in other parts of the country.
I imagine there are many more reasons that someone decides to sell. Some of the forces are internal and some are external. I am sure the REALTORs could outline this better.
Going the other way, I have also been known to track specific homes. While I have not developed a rigorous methodology, I am going to guess that some homes have longer expected ownership times. Maybe some places are cursed? Maybe it’s the neighborhood? idk, but some of the properties that have long holding periods are followed by another long holding period. Again, I have not really sampled and tested this properly.
This is similar to the long marriage that ends by death of one party. The widow might remarry and stay married for a long time the second time around. I have not tested this. It’s just an interesting idea. If she’s a black widow, then it should be no surprise that the second marriage ends in another death.
As far as housing goes, I guess an exit strategy should be in place, or perhaps the buyer should become a member of my Church of Real Estate. Certainly I recognize that no matter the divorce statistic, there are those who go the long haul, for whatever reason, under whatever conditions. I am not suggesting that’s a bad thing. I am not promoting divorce. What I would suggest, however, is that if someone believes it’s ’till death, then that person should be a little more certain about the decision. If it’s only going to be for a couple of years, then the time and effort put forward in selection might not be so important. Let me remind you, in my Church of Real Estate we believe in long-lasting housing relationships. We, at the Church of Real Estate, are horrified by the divorce rate of owners from homes. These people are not living proper.
There’s a good chance that duration increases as the relative* cost of the house increases. “Starter” homes (and condos) are just that, starters. Most of my friends who bought studio/1BR condos went in with the plan of getting out after 2 or 3 years of price increases (insert joke here). Most of my friends who bought starter homes planned to fix them up a bit, get some equity, and move somewhere with good schools. I think you could map correlations with sufficient data and time.
Positive duration:
Increasing house price
(Perception of) quality of neighborhood/area
(Perception of) quality of school district
Negative duration:
Decreasing house price
Increasing house age (not really sure about this one, actually, because the inverse doesn’t seem true)
(Perception of) proximity to “ghetto” or blighted areas
(Perception of) proximity to high crime area
Proximity to high density “hip” urban area (this would principally appeal to singles, yuppies, etc who would sell as soon as they had families)
Expensive homes in nice neighborhoods in good school districts probably have a low turnover rate. Inexpensive homes in shady neighborhoods with crappy school probably have a high turnover rate.
* relative to other houses in the area
RE: AMS @ 18 -
“Let me remind you, in my Church of Real Estate we believe in long-lasting housing relationships. We, at the Church of Real Estate, are horrified by the divorce rate of owners from homes. These people are not living proper.”
LOL-I had to laugh.
Thanks for the sum up.