- Tom BrezsnyThe Trigger and The Tipping Point
Continuing the conversation… talking about low inventory and its impact on the availability and affordability issues that are at the heart of Santa Cruz County’s worsening housing crisis.
For 30+ years now, our market has cycled through periods of relatively low inventory, due in part
to deeply-entrenched slow growth policies. But in 2013, just as we were coming out of the depths of the Great Recession, the supply of homes took a precipitous plunge into all-time, record low territory, where it has remained ever since.
The ensuing ten years of declining inventory have radically disrupted the balance between supply and demand and driven prices beyond what most of us could ever have imagined. And even though interest rates have more than doubled in the last year, prices are still going up because the supply keeps shrinking!
So why 2013? What triggered the tipping point between a cyclically low inventory and a new chronic state of ultra-low supply that seems so permanent? When we take a closer look at the demographic shift that’s washing over the U.S, the culprit is immediately recognizable. The rapidly aging population is changing the landscape for housing in myriad ways.
Coming to terms with the impacts of aging feels a little like our oft-fumbling efforts to grasp the magnitude of climate change. Evidence of a graying culture is everywhere and we’ve known it was coming for a long time. But no one really wants to talk about it, so it’s like deja vu all over again, everytime some new realization reminds us just how sweeping the effects of an aging population really are.
So let’s look at a few of the ways our aging population impacts local housing availability and affordability… The majority of Sellers in Santa Cruz fall into two categories: Either they’re Trusts selling a home for someone in their 80s or 90s who recently passed away or they are aging baby boomers who have owned their homes for a long time and are trying to downsize.
Most of the latter are moving out of Santa Cruz to somewhere less expensive. There are also a lot more boomers waiting in the wings, who haven’t quite figured out how to downsize. On the flip side, the majority of buyers are millennials, a generation or two younger than those selling. They are coming from outside of the County and many are buying their first homes.
The irony is that millennials looking for their first houses are competing for the same listings that aging baby boomers are also trying to downsize into. That competition drives prices up and makes it harder for those trying to buy either their first homes or their last ones.
