Looking for Home Sellers? Tap into this Demographic!

By Ryan Kleis

REVERSE MORTGAGE EDUCATORS

We’ve been hearing the same drum beat over and over again for the past few years, and you know what, it’s true. Listings in the OC are low. Just look at these numbers – we used to average 6,000 active listings monthly in Orange County back in 2017-2019. But today there were only 2,523 active listings (January 2024). That’s a whopping 58% drop. I remember when you could just put in more hours, make more calls, and show more love to your network and see the instant results in your pipeline. The formula has been there for ages, but the results seem to be less satisfying these days and those listings are so much more elusive.

For the past 16 years I have been working almost exclusively with older homeowners but not as a REALTOR®, as a reverse mortgage loan officer. Yes, I am that guy. I’m the last person a homeowner wants to call for help. It’s like I had the last bottle of water in the hot Mohave desert, but you’d rather take your chances milking water from a dead prickly cactus, I get it. However, with all those years of working with older homeowners I have learned a great deal about why older homeowners need loans, why they sell homes, and why that matters to a REALTOR® in today’s housing market.

It’s a generational thing. Have you ever been speaking to someone 30 years older than you and they told you how much they bought their home for? It’s almost impossible not to roll your eyes from the price you hear and yet it’s true. On a weekly basis I am in the home of someone that purchased a home for $175,000 and now it’s worth over a million dollars. Why couldn’t I just have started buying homes at age 10, I think to myself, what a fool I was! Fortunately for many they did get their piece of the American dream and now it’s their biggest asset! Unfortunately, that asset is illiquid, and it is hard to convert it to spendable cash.

In my industry, our product was designed to help older homeowners turn that equity into cashflow. The commercials are on all the time. Stay in your home, get out cash, and never make a monthly mortgage payment. It seems like a good idea; homeowners have a plethora of equity, and they could use some of it by getting a reverse mortgage. In today’s market with so much home equity you would think I would be funding more loans than ever. However, inflation is squeezing our retired homeowners’ budgets. We have 10,000 people turning 65 every day and many are homeowners right here in Southern California. That means my dance card should be full, and my feet should be tired but it’s not and they’re not, so what gives? The reverse mortgage industry volume is low and down by about 50%. Sound familiar? The reverse mortgage volume is down just like housing inventory is down, refinances are down, and transactions down. What’s the common denominator here? Interest rates. In the reverse mortgage world when interest rates go up our loan amounts go down. For example, a 75-year-old with a $950,000 house in early 2021 could have received a loan amount of $559,000 but in 2024 that scenario would yield a loan amount of $400,000. See a problem here? That is about $160,000 less in cash the homeowner could get on a reverse mortgage due to higher interest rates. Say hello to illiquidity and goodbye to cashflow.

Now back to my original question. Are you looking for home sellers? Sixty-one percent of home sellers are in this spot. When interest rates started to go up in 2021 more and more older homeowners started to have trouble getting cash out of their homes. It did not matter if it was a conventional loan or a reverse mortgage refinance, equity was getting harder to access. This is when I started having more conversations with older homeowners about selling their homes. Even though I was just their loan officer, I was often the first one to let them know the days of cheap and plentiful money were gone. They were going to need to find another way to get cash out of what is their biggest asset. I think you know where this is going. For many the only other way to get money out of that asset is to sell it.

These conversations led me to wondering just how many older homeowners would be selling their home because it was getting hard to access all that equity. In 2021 I turned to something that many of you probably already know about, the National Association of REALTORS® Profile of Home Buyers and Sellers. They do a wonderful job of tracking who is buying and selling homes, you can get your own copy from their website and members get a heavy discount.

What was most interesting to me from NAR’s report was that 61% of homes sold were by a homeowner 55 years or older. Thirty-eight percent of homes sold were by homeowners 65 years or older. This made sense because many of the older homeowners I spoke with were going to sell their home not because they wanted to but because they needed to. It did not matter if they had a 3% 30-year fixed. They need to sell to be closer to family, because their home is too big, or they were equity rich and cash poor. I know when I am talking to an older homeowner there is a chance they are going to sell even if they don’t realize it yet. So keep this in mind when you are out door knocking your farm. It’s likely that your next listing will likely come from someone 55 or older.

For tips on working with seniors, sign up for one of our upcoming classes at OCR at www.ocrealtors.org/calendar