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MortgagePoint April 2025

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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 72 April 2025 J O U R N A L hold onto their houses for a long time because a state tax law incentivizes them to do so. Proposition 13, adopted in 1978, mandates that homeowners pay property taxes of 1% of their home's assessed value, and strictly limits tax increases. For many Californian homeown- ers, especially in expensive coastal areas like Los Angeles and San Fran- cisco, it doesn't make financial sense to more than double their property tax rate to buy a similar home in the same area. Prop 13 is also a factor in homeown- er tenure increasing significantly over the last decade. But it's exacerbated by the rapid rise in mortgage rates over the last three years. Many California homeowners are locked in not just by low proper- ty taxes, but by low mortgage rates. Mortgage rates hovered between 3% and 5% from 2010 to the start of 2022, dropping to a record low of under 3% at the height of the pandemic moving frenzy. Since early 2022, mortgage rates have been sitting in the 6%-8% range. Selling a home where you pay a 3% mortgage rate to move and take on a 7% rate would significantly increase a homeowner's monthly payment—and in California, your property tax bill would also jump. "Long-term homeowners tend to have low monthly payments. If they were to move—even using their equity as a down payment—they would have a much higher monthly payment because home prices and interest rates have soared over the last several years," said Gregory Eubanks, a Redfin Premier Agent in Los Angeles. "Many older homeowners are adding on and cre- ating a multigenerational home, with their kids and grandkids moving onto the property. And even many people who do move hang onto their house and rent it out because low property taxes and low monthly payments make them view it as a financial asset." California's Proposition 19, which was designed to allow older homeown- ers to keep relatively low tax rates when they move, went into effect in 2020. It's unclear how effective Prop 19 has been at freeing up housing inventory. "But it's a problem for young people trying to break into the state's notorious- ly expensive housing market," Redfin Senior Economist Sheharyar Bokhari said. "Tight inventory only pushes home prices up more and adds to the genera- tional homeownership divide." The only major metro with a bigger increase in homeowner tenure than Los Angeles is Providence, Rhode Island, where one of the main factors is an ag- ing population. The average Providence homeowner is 54, older than nearly every other major U.S. metro. Older people have typically owned their homes longer than younger people, and they're less likely to move. Tenure was reported the short- est in Louisville, Kentucky, where the typical homeowner remains in place for eight years, followed by Las Vegas (8.4 years) and Charlotte, North Carolina (8.7 years). One reason for short tenure in those places is that the relative affordability of buying a house encourages moving. The typical home in each of those three metros sells for under $440,000, compared to roughly $900,000 in Los Angeles and $1.5 mil- lion in San Jose. Trends in Tenure Around the United States, home- owner tenure has f lattened out over the last few years. After peaking at 13.4 years in 2020, the average tenure de- clined to 11.8 years nationwide in 2023 and stayed the same in 2024. Homeowner tenure declined slight- ly each year from 2020-2023 mainly because of the pandemic-driven mov- ing frenzy. At the start of the pandemic, record-low mortgage rates and the increasing prevalence of remote work motivated many Americans to move. Tenure remained the same from 2023- 2024 because home sales were slow due to high mortgage rates and sale prices. Still, homeowners are holding onto their houses for nearly twice as long as they were in the early aughts. The typical homeowner stayed put for 6.5 years in 2005, then tenure gradually increased over the next 15 years. There are several reasons for the increase. The American population has grown older, and older people are less likely than younger people to move. Gen Zer's and millennials typically stay in homes for shorter periods because they're switching jobs and starting families. But baby boomers and older Gen Xers—who are more likely to be homeowners—tend to be settled in with less reason to relocate, and they're HOMEOWNERSHIP TENURE HAS NEARLY DOUBLED SINCE 2005, BUT FLATTENED IN RECENT YEARS MEDIAN U.S. HOMEOWNER TENURE, IN YEARS

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