Women lag in wringing value from housing transactions
When it comes to building long-term financial security, it's widely known that women are held back by a persistent gender wage gap.
For a median-income worker, one study estimates that over a full work life, women will earn $1 million less because of the gap in wages combined with the fact that women's work tends to get interrupted — to raise kids, to care for aging parents. Lower earnings mean less to save in 401(k)s and IRAs, and lower Social Security and pension benefits.
Now comes news that women also lag in extracting profits from homeownership. According to recent federal data, the median net worth of a single male homeowner between the ages of 60 and 70 is nearly $241,000, compared with $160,000 for a single female homeowner.
In a study published by the National Bureau of Economic Research, Paul Goldsmith-Pinkham and Kelly Shue, of the Yale School of Management, estimate that nearly one-third of that gap may be because women, on average, spend more when they buy a home and accept a lower price than single men when they sell.
On average, women agree to a purchase price 2% higher than men pay, and women agree to a sale price 2% lower. The academics estimate that the gap translates into men, on average, earning $1,600 more a year in housing wealth.
This new nuance to the gender wealth gap comes as single women are increasingly solo homeowners. According to the National Association of Realtors, in 2019 17% of first-time homebuyers and 18% of repeat buyers were single women. That compares to single men accounting for 7% of first-time buying and 8% of repeat buying.
The new research is based on more than 9 million home sales between 1991 and 2017 in which the researchers had data on a purchase and eventual sale and could clearly identify the gender of the buyer.
They estimate that about 45% of the gender difference is market timing: Women tend to buy more when prices are higher and sell more when prices are lower. But the bigger factor — accounting for 55% of the gap — is that women seem less focused on getting the best deal. Looking at men and women selling in the same ZIP codes and in the same months, the average annualized return women earned from housing was nearly one percentage point less than what men earn.
Getting the best deal
This research doesn't address the why behind the gap. Prior research has suggested that men gravitate to negotiation — a game to be won — and there's plenty of research showing that women aren't exactly incentivized to negotiate. In the workplace, negotiating for a raise or promotion can land women in the penalty box for being too pushy and assertive.
At least in the realm of homebuying, women don't have to worry (as much) about the repercussions of being more assertive. It's not as if you need to show up the Monday after closing and keep in touch with the buyer-seller.
For women, simply being aware of this research might help push you to be more focused on getting the best deal. You need to be engaged and informed.
Love your agent? Great. But you still need to run the pricing show whether you are a buyer or a seller. Agents are paid a commission based on the sale price. That presumably gives them an incentive to help you nail the best price as a seller, but studies have shown that what often matters most to agents is getting the deal closed (and thus getting paid).
That's worth thinking about if your agent encourages you to take the first offer rather than to counteroffer, or perhaps wait another week or two to see who else might come along.
As a buyer, unless you explicitly hire a buyer's broker (not common), your agent is going to get paid based on the sale price. That isn't necessarily an incentive to help you negotiate the lowest possible price.
You need data. Before choosing a broker, ask candidates for every transaction in your neighborhood for the last few months, for comparable homes. Not every broker will necessarily bring you the same list.
Are you being shown some generic price-per-square footage that includes a large area? Or did your agent give you recent sales in your vicinity, of homes of comparable size and in comparable condition? That's how you make an informed decision.
When buying, it's obviously important to read the room. If you expect you are going to be bidding against other people, making a lower initial offer can backfire. But if that's not in play, then don't be so quick to offer the asking price. Maybe you end up at the offering price after negotiating, and there's also a good chance you may be able to close the deal for less. (You also can research at what percentage of asking price recent sales in an area occurred.)
When selling, setting the right asking price is the key to making a deal sooner; the longer your home is on the market, the less negotiating leverage you have. If an offer comes in below what you want, don't reflexively tell yourself it's OK, because you just want to get the sale done. Make a counteroffer.
If you need some extra incentive, remind yourself that being more price sensitive when selling (and buying) can play a sizable role in your eventual retirement security.
TRIBUNE NEWS SERVICE