Homes are costly in San Francisco’s Russian Hill neighborhood, as seen from Lombard and Hyde streets. According to a new Redfin analysis, the typical owner stays 16.5 years in a San Francisco home, one of the longest average tenures in the U.S.
Bront? Wittpenn/The Chronicle
San Francisco’s Sunset District has single-family homes as well as condos. According to a new Redfin analysis, the typical owner stays 16.5 years in a San Francisco home, one of the longest average tenures in the U.S.
Stephen Lam/S.F. ChronicleHomeowners in Los Angeles, San Jose and San Francisco keep their homes for 16 to 20 years on average, far longer than the national median of 12 years.The median home sale price in California has nearly doubled since 2015, making it harder for first-time buyers to enter the market.People who buy homes by age 30 have a 22.5% higher net worth at age 50 compared to those who wait until their 40s.
In California’s biggest cities, homeowners tend to stay put a lot longer than the average American.
The typical owner stays 16.5 years in a San Francisco home and 18.7 years in San Jose, according to a new Redfin analysis. In Los Angeles, owners hold onto their homes the longest in the nation — about 20 years on average.
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That compares to a nationwide median homeowner tenure of about 12 years, up from just over 6.5 years two decades ago.
The data underscores the impacts of California’s tax laws, which include unique incentives for homeowners that make them less likely to sell.
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Especially impactful is the landmark ballot initiative Prop 13. Since its approval by voters in 1978, the constitutional amendment has capped the property tax rate at 1% of a home’s assessed value at the time of purchase and restricted how much it can increase each year.
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“Prop 13 essentially fixes property taxes so that if you bought your home a really long time ago, you’re paying much lower property tax than if you bought the home today,” said Daryl Fairweather, chief economist for Redfin.
The median California home sale price has just about doubled since 2015, according to data from the state Employment Development Department. Because property taxes for longtime owners are based on older home values, buying a new home could mean a much higher tax bill — a pretty strong incentive to stay put. (Prop 19, approved by voters in 2020, allows people 55 and older to transfer their tax basis when they sell and buy a new house, though the benefit is reduced if the replacement home costs more.)
California’s capital gains tax is another element, Fairweather said. Inheriting a home comes with what’s known as a “step-up cost basis”: The value of the estate is adjusted to fair market price on the day the owner died. That means heirs typically pay capital gains taxes only on any increase in value after they inherit the home — not on the appreciation that occurred during the parent’s lifetime.
So if you’re structuring your estate hoping to maximize its value for your children, it makes more sense to stay in your home and let them get the step-up basis than to sell it yourself and pay capital gains taxes on the increase in value.
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These property tax laws have helped seniors on fixed incomes continue to be able to afford their homes, protecting them and their heirs from massive tax bills. But the laws have transitioned affordability burdens to younger generations: Higher prices — exacerbated by lack of inventory when people are incentivized to stay in their houses for longer — mean those young people are less likely to be able to afford a home at all compared to their parents’ and grandparents’ generations. And when they do buy a home, they pay a disproportionate share of property taxes compared to their neighbors.
David Garcia, the deputy director of policy at the Berkeley’s Terner Center for Housing Innovation, co-wrote a 2023 report about the problems facing first-time homebuyers. “The First Step Is the Hardest: California’s Sliding Homeownership Ladder” found homeownership in California was increasingly out of reach for young buyers.
Delaying the age at which you buy your first home can have a lifelong impact on your ability to build wealth, a new report from Realtor.com found: People who are able to buy a home by age 30 tend to have a 22.5% higher net worth at age 50 compared with people who wait until their 40s.
People who’d like to buy their first home face headwinds from multiple directions. When there’s more demand than supply, the cost of housing goes up. So in addition to the supply problem caused by people keeping their homes for so long, Garcia said, the rules in place make it so existing homeowners are reluctant to see any more housing getting built near them, potentially diluting the value of what may be their most valuable asset. Builders construct fewer “starter homes” than they did a half century ago, preferring more lucrative luxury properties. Less supply means higher demand, which leads to higher rents, making it even harder for potential buyers to save up for a down payment.
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We also don’t build a lot of housing with seniors in mind, Fairweather said. Older Americans generally want homes without a lot of stairs and in walkable areas near lots of other seniors. People won’t downsize if there isn’t anyplace more suitable for them to go.
Though Californians own their homes the longest, the national average has also risen by quite a bit, indicating this issue isn’t unique to the Golden State. Garcia said while other states don’t have Prop 13, legislative attempts to constrain rising property taxes have proved popular elsewhere. And many states have housing shortages of their own, though perhaps none as severe as in California.
Given the strong incentives to stay in place, what does motivate people to move? Jonathan Engler, the director of home loans for Golden 1 Credit Union, said the factors are the same as 20 years ago: New babies, new jobs, deaths. He said he’s observed the pendulum starting to swing in some parts of California toward first-time homebuyers, including factors such as policies allowing people to sell backyard units as separate condos and split single-family lots to build additional homes under the state’s SB9 law.
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The Bay Area is one of the most expensive housing markets in the world. But the region’s relatively high wages make those prices a little easier to swallow, said Andy Orion, a real estate agent who specializes in the Peninsula. He said a lot of his first-time homebuying clients tend to be discouraged by prices, but qualify for mortgages based on their incomes. It’s just a matter of waiting for a bonus, acquisition, merger or IPO — or getting help from family members — to build up the down payment.
While the results of the Redfin analysis weren’t surprising to him, he said new jobs and new babies mean a lot of his first-time buyers are shopping for their next home quicker than they might have expected. He makes them a bet when they buy their first home: If they stay there longer than five years, he’ll take them out to a nice dinner; if they sell before the half-decade mark, they pick up the tab.
He hasn’t lost that bet yet, he said.