Average U.S. homeowner tenure dips after pandemic upheaval

Homeowner turnover is essential to real estate agent incomes, but Californians are notorious for staying put. After two years of pandemic upheaval, is this pattern finally shifting?

Considering the state’s chronic inventory shortages, real estate professionals — and homebuyers alike — are certainly hoping so. Californians now stay in their homes for longer than they did a decade ago. In fact, several of California’s major cities boast the longest homeowner tenure in the nation, including on average:

• 18 years in Los Angeles;
• 17 years in Oxnard;
• 17 years in Anaheim;
• 17 years in San Jose;
• 16 years in Oakland;
• 16 years in Fresno; and
• 15 years in San Francisco, according to a Redfin report.

The good news for agents (and homebuyers) is that the typical U.S. homeowner tenure flattened in 2021. The report, which analyzed county records across the country, shows that the typical American home changed hands every 13.2 years in 2021, down from 13.5 years in 2020.

Here in California, the overarching long-term trend is rising. From 2012 to 2021, median homeowner tenure went up:

• 4.4 years in Los Angeles;
• 4.4 in San Francisco;
• 4 years in Fresno;
• 4 years in Bakersfield;
• 3.9 in Oxnard; and
• 3.9 years in Oakland.

It’s too early to tell if the national trend is a true inflection point or simply a blip, but there are clues. For one, home refinances exploded in 2020 and 2021 as homeowners rushed to take advantage of record-low interest rates. With super low rates locked in, these homeowners are unlikely to move in the near future.

Yet the biggest clue lies in a homeowner incentive unique to California: Proposition (Prop) 13.

Prop 13 and turnover

Also known as the “welcome stranger law,” Prop 13 limits property taxes to 1% of a property’s assessed value, or its current market value if less. This rewards longer home tenures with lower property taxes, relative to those of newer neighbors — all at the expense of neighborhood turnover.

Related article:

Reduced homeowner turnover is a drain on California’s for-sale inventory

Seniors account for 14% of California’s population. Fearing their property taxes will mushroom when they sell, many older California homeowners are putting off moving longer and longer. This (understandable) stubbornness is now clashing with the state’s high demand, low inventory, and soaring home prices.

For reference, home prices are still white hot across California’s largest metros. In 2022, prices rose by an average of:

• 20% in Riverside;
• 19% in San Diego;
• 16% in Sacramento;
• 13% in Los Angeles; and
• 11% in San Francisco.

Despite today’s high demand and low turnover, Prop 13 remains as a sweetheart deal for long-time owners and a nightmare for buyers and agents who rely on high transaction volume to make ends meet.

Related article:

Seniors aging in place suppress inventory

With inflation in full swing and shoulder pads back in style, agents may be forgiven for thinking they’ve stepped into the 80s. But the spiraling property taxes of the 80s that displaced so many California seniors from their homes haven’t made such a comeback. In fact, older Californians are aging in place more than ever.

Further, seniors in California already have the ability to transfer their lower tax rate to a replacement home. To transfer their tax rate to a new home, senior homeowners need to:

• own and occupy the home and be eligible for the $7,000 homeowner’s assessed value exemption [Rev & T C §69.5(b)(4)];
• be at least 55 years old or severely and permanently disabled [Rev & T C §69.5(b)(3)];
• purchase a replacement home of an equal or lesser value than the home they sold [Rev & T C §69.5(a)];
• purchase a home in the same county as the home they sold, or in another accommodating county [Rev & T C §69.5(a)]; and
• close the purchase of a replacement home within two years before or after closing the sale of the old home. [Rev & T C §69.5(b)(5)]

Yet Prop 13 — a reaction to seniors and other vulnerable residents losing their homes to out-of-control property taxes — remains incredibly popular in California.

The tax ramifications of moving could change thanks to ballot initiative 21-0032, or the Tax Cut and Housing Affordability Act, which seeks to exceed prop 13’s 1% tax-rate cap. This initiative still needs signatures to appear on the November 2022 ballot — meaning changes to Prop 13 are far from concrete.

Build, baby, build!

What can real estate professionals do to turn low turnover around? The answer is to support new construction. California’s legislature is still scrambling to find solutions for low supply, including:

• loosening strict zoning regulations;
• requiring amendments of local governments’ housing plans to include more low- and moderate-income units;
• encouraging accessory dwelling unit (ADU) construction; and
• incentivizing transit-oriented developments.

Because legislative efforts to increase housing stock in the low- and mid-tier housing stock have focused on building multi-family units, metro areas like Sacramento and San Diego have enjoyed California’s largest annual increases in construction.

While builders have started cashing in on legislative incentives, job losses still loom large over the industry. Keep an eye on your local service area’s jobs recovery for a clearer picture of its home sales recovery.

Related page:

Legislative steps toward more affordable housing