Researchers from the Center for Retirement Research at Boston College have utilized a new dataset linking home sales to seller age to test anecdotal evidence that older Americans generally get less value out of home sales.
The results, summarized in a new report, show that older sellers do in fact get less — particularly starting at age 70 — and the home-sale value gap grows over time.
Older sellers receive lower returns for two primary reasons, the report finds, including that their homes have poorer upkeep and that they more often sell on private listings and to investors.
The size of the value gap is meaningful, researchers warn, such that an 80-year-old seller realizes about 0.5% per year less than a 45-year-old, which corresponds to a 5% lower sales price for a home with the mean holding period of 11 years.
"On the typical home price of $400,000, this reduction amounts to a loss of $20,000," the report quantifies.
The good news, according to the CRR, is that both proactive actions from older home owners and broader policy changes could help reduce the discrepancy. They cite reforms introduced in Illinois to make private listings more transparent, for example, which significantly reduced both the prevalence of private listings and the magnitude of the age gap.
A Novel Analysis
The new CRR analysis starts by constructing a new dataset that links actual housing transactions in the CoreLogic Deeds database, which aggregates public deed records from over 3,000 county clerk and recorder offices across the United States, to ages in voter registration records. In some counties, the authors note, the data goes back more than five decades.
The CoreLogic transaction data are then linked to voter registration records supplied by a company called L2, providing the property owner's name, residential address, zip code and date of birth. Because L2 data only cover registered U.S. citizens and primary residences and only 65% to 75% percent of adult citizens are registered to vote, the match covers only about 40% of all CoreLogic transactions.
However, the matching frequency rises over time, from less than 5% in the late 1990s to nearly 50% by the early 2020s, giving researchers sufficient confidence in the dataset.
Also notable, the reported home prices were somewhat higher for the matched than the unmatched sales. These lower values may reflect that the unmatched sales include second- and investment-home properties, homes purchased by non-citizens, and homes owned by non-voters — all of which the researchers assume would have lower prices.
The authors likewise apply additional parameters to the data to ensure reliability. The holding period must be three years or more, for example, to filter out home flipping, and the transaction cannot involve a fiduciary deed, because the age of the seller would not reflect the age of the owner.
After applying all adjustments, the final sample for the baseline regression analysis consists of about 10 million repeat sales.
What the Numbers Show
Through multiple layers of regression analysis, the authors conclude that poor upkeep and a greater tendency to sell properties via private listings are the key drivers of value loss for older home sellers versus younger sellers.
In short, they write, the condition of the property matters a lot. Over time, older homeowners seem to simply fall behind on both major repair work and more modest modernization and upkeep efforts that can have a significant affect on a property's value.
As the report details, home sold publicly via the Multi-Listing Services (MLS) are advertised on a publicly available list, while properties sold privately are typically advertised among the agent's personal network. In general, they note, this will result in fewer bids and lower effective demand, driving down pricing.
Some sellers may prefer a private sale to protect their privacy, the authors note, and some agents may use off-MLS marketing to test market pricing for unique or luxury properties before committing to a public list price. But in general, listing privately can negatively affect the final sale price.
"The most obvious reason is that fewer people will know that the property is for sale," the report explains. "Less obvious, sellers are exposed to some agents' non-profit-maximizing actions, such as encouraging sales to professional investors or developers so that they can receive higher fees via dual agency. Therefore, if older sellers are more likely to sell off-MLS and/or to investors, this practice could help explain the large age gap."
Ultimately, the authors occlude, a simple regression shows that the likelihood of private listings and sales to investors increases with age, with the oldest cohort being 2.3% more likely to sell off-MLS than sellers in the reference group and 2.7% more likely to sell to an investor.
Further results show that sales to investors are more likely when transactions are off-MLS, and this effect is much larger for older sellers.
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