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One of the most puzzling aspects of the local housing market is the number of vacant homes in and around Staunton. Despite an ostensibly tight housing market, anywhere from 2% to 8% of the city’s housing stock sits empty (no one has a good handle on the actual number), in some cases for years on end. Some of that stock consists of second homes, owned by affluent city dwellers elsewhere who have the money to maintain a small-town retreat. Some is “vacant” only in the sense that the homes are unoccupied more often than not, owned by investors who use them as short-term rentals.
But some of those homes, it turns out, are simply waiting for someone to die.
That insight comes from an April story in The New York Times, which quoted an estimate from Flock Homes, a real estate investment service, that there are roughly 7.2 million vacant single-family homes nationwide that are deliberately kept off the market. These so-called “zombie homes”—it’s unclear from the article whether that’s the writer’s label, or whether he picked it up from Flock—typically are owned by retirees who have paid off the mortgage but no longer live there. Some may be in nursing homes or assisted living facilities, some may have moved in with their children or to a second, smaller home that better meets their needs.
Whatever the reason, the house sits empty because the tax bill triggered by a sale would far exceed the cost of leaving it vacant. That exit penalty primarily includes capital gains taxes, paid on the increased value of a home that’s sold, but in some cases might include depreciation recapture taxes, which apply to sellers of rental properties. In the biggest markets, the total tax liability can add up to more than $100,000, compared with annual costs of less than $10,000 for insurance, maintenance and real estate taxes on a vacant property.
Real estate that get passed down to heirs, on the other hand, is inherited on a “stepped-up basis” to the current market value, effectively eliminating the tax overhang. Under those circumstances, it makes perfect economic sense to leave a house sitting empty rather than putting it on the market, since even a decade in limbo may mean less of a financial bite than a quick sale. Indeed, Flock’s analysis concludes that in Los Angeles, where 34% of the homeowning population is 65 or older, it would take 19 years before carrying expenses exceed exit taxes.
Locally, our carrying costs and exit taxes presumably are lower, but that doesn’t mean Staunton or the wider SAW region have escaped the zombie problem. Indeed, real estate values have climbed so sharply since the pandemic that the temptation not to sell grows larger with each passing year. “Our market does have ‘zombie’ houses, even though I had not heard of that term,” a local realtor acknowledged for me in an email exchange. “I have my eye on two, and when I say ‘my eye on,’ it’s obituaries, because the families are waiting until their loved one dies in the nursing home they have moved into.” The realtor added that there’s no estimate of how prevalent the phenomenon may be locally, but it’s “probably more than we realize.”
Meanwhile, it’s worth remembering that vacant homes generally don’t fare well, and even less so when family members are trying to minimize maintenance expenses over a period of several years. Indeed, if you Google “zombie homes,” the top definition refers to bank foreclosures that result from properties being abandoned and subsequently becoming dilapidated and run-down. From there, it’s just a few steps to more widespread urban blight, suggesting that city officials and homeowners’ groups should take a livelier interest in identifying the zombies in our midst.
Looking askance 