Tens of millions of homes nationwide will soon come up for sale as baby boomers slowly release their 46 million homes, worth $13.5 trillion, according to Fannie Mae data.
“Baby boomers hold a significant share of aging housing stock, and many of them are getting ready to transition out of it, so there’s going to be an opportunity there,” says Paul Buege, president and COO of Inlanta Mortgage. Each home will be unique. “Home markets are all local, and each house is like its own snowflake.”
Do you want one of these not-so-new, special snowflakes of your very own? Should you jump on this opportunity? I once did, acquiring a modest, 1920s Sears catalog home that I would describe as barely heated. It doubled in value in a few years, while also opening my calendar to an endless stream of contractors milling on my property to decommission the oil tank and ponder whether the wiring might start a house fire and dig up the front yard because the cracked sewage line was made of … terracotta. Yes, that’s a thing. My toilets flushed into pipes made of crumbly stuff that cracks.
The home required two resources: Extensive time, for weekend projects and ongoing daytime contractor meetings, and also a mindset of making do. I was young and flexible enough to not particularly care; I would not repeat the experience now, as a busy parent.
Whether purchasing such a home is financially prudent is easier to determine if you understand home pricing. Chris Heller, former CEO of Keller Williams Realty International and current editorial board member at Agent Advice, recommends you not think of old homes as cheaper than new homes, because the price tag usually reflects what the local housing market will bear, not the age of the home.
“The condition and the location are going to dictate the value more than the age of the home,” he says.
He also suggests not comparing the prices of new and older houses, because they’re rarely apples-to-apples. For example, many new homes come sans landscaping, leaving new owners to shell out for basics like a lawn and trees, plus window treatments and “upgrades” that are actually essential, like shelving.
Meanwhile, an old home might come with bargain basement real estate taxes, but also $450 monthly heating bills and 26 squeaky windows that drive you bananas for 10 years (voice of experience here). “You just have to be more diligent about understanding what you’re buying, and what things you’re going to need to spend money on,” Heller says.
A home inspector once advised me to not buy an older home unless I understood its story. If a narrative emerges – say, the home’s second owners stayed put for 50 years, and did renovations early on and nothing since – then future costs are reasonably predictable. If the inspector can’t tease out the house’s past among unexplained staining in the vents and four generations of wiring, proceed with caution. Surprises await.
Homes become “old” after kicking around for six decades, says John A. Kilpatrick, director of the Washington State Economic Development Finance Authority and managing director of real estate consultancy Greenfield Advisors. After 60 years, maintenance and upkeep costs spike and original components deteriorate: doors and cabinets need replacement, wiring grows outdated, everything creaks. Expect lead-based paint somewhere on the walls and possible asbestos, and of course a thriving lineage of mice or cockroaches who have reproduced prosperously on your property for generations.
This upkeep, however, is not the metric around which you should base your decision. Focus instead on what real estate pros call “functional obsolescence,” which means that the home’s original features are no longer functional.
Consider: Can you deal with the extension cord? And heat or air-conditioning that doesn’t actually heat or cool? And bedroom walls built before the birth of modern soundproofing? And less than sealed and insulated walls? If modern comforts and logistical ease and are your goals, hightail it to a modern condo.
Whether or not you can even get your hands on one of these older gems varies enormously by region, Kilpatrick says. As a rule of thumb, shiny new developments are often found far afield from city centers, while historic, often-walkable neighborhoods can dependably be found nearer downtown.
Peter Birkholz, a principal at historical preservation architecture firm Page & Turnbull, suggests the age of your likely home is a byproduct of other priorities, which might include commute, outdoor space, or room for a Humvee-sized couch. Birkholz lives in downtown Oakland, Calif., where much housing is old. “Walking to the grocery store, I’m amazed to see houses being lifted and upgraded. It’s as expensive or more expensive to do the rehab than to build new,” he says. He lives with his family in a 1914, one-bathroom bungalow that overheats in hot weather. “I’d much rather be where I am, where we walk to the farmer’s market and get on public transit and are centrally located.”
Kilpatrick says you can often find a good deal on aging homes by looking in long-established neighborhoods where developers have recently put in new homes _ teardowns. Those older remaining houses may be more valuable to you as a place to live in than they are to a developer to demo and make room for a bigger house. “Typically, people shopping in the neighborhood will be looking for the new houses, and a shrewd buyer can get a pretty good bargain.”