A Yale University report finds that there's a big difference — 30 percent — in retirement savings between single men and women, and a major part of the reason: real estate transactions.
Called "The Gender Gap in Housing Returns," the study by Yale School of Management researchers Paul Goldsmith-Pinkham and Kelly Shue finds that, of that 30 percent gap, 45 percent is attributable to gender.
The reasons for the difference are twofold: buying and selling timing, and negotiation skill (and gendered perceptions of those skills).
According to their figures, the average net worth of homeowners between 60-70 years old is as follows:
- couples $698,626 each (total $1,397,252)
- single men $753,536
- single women $394,635
The researchers compensated for a variety of factors to keep their results as apples-to-apples as possible. For example, they tracked transactions by more finite locations which enabled them to assume a similar economic status.
The study tracked 9 million real estate transactions where they could, with over 95 percent certainty, assume gender (via names) coupled with the initial and final purchase prices. Their numbers also assume singledom from age 30 to 65.
While the study has breakdowns by state of gender differences, Texas' nondisclosure rules makes assessing negotiation effectiveness between genders impossible (the difference between list and actual sale price).
One dimension the researchers couldn't break out was race. They also didn't break apart different and same-sex couples.
Timing the Market
The researchers showed that single females are more likely to purchase a home when markets are high and sell when they are low – not dissimilar to the Dallas Police and Fire Pension Fund, and we know what happened there. Approximately 45 percent of the overall gap is attributable to timing.
The study reported that females pay two percent more for the same home as a single male and sell for two percent less. Compared to a male-male buyer-seller pair, females lose every time. When females sell to either gender, they lose against a male-male combination and when they buy from a male seller they pay more.
The difference between listing price and selling price also plays out in the amount of negotiated discount. Females lose on all counts compared with male-male pairs. Female sellers give larger discounts to male buyers and pay closer to asking price when buying from a male seller. Even female-female pairs get a good discount. Overall, female negotiation skills don't pay off.
I suspect negotiation expectations between genders are cultural. The report mentions similar work conducted in Denmark where those researchers found smaller and insignificant differences.
In the U.S., females pay the price at both ends of timidity and "leaning in." Timidity allows them to be taken advantage of while self-confidence (viewed as aggression?) by females is often challenged harder. Striking an effective balance is yet another cross for females to bear.
The report also showed men assume more risk – stretching to purchase a more expensive property. This daring generally paid off. When mortgage leverage is factored in, an annual 1.5 percent underperformance by females jumps to more than fivefold to eight percent. This is because using money (mortgage) wisely magnifies returns.
Here's an example where all things are equal except the buyer's appetite for debt:
- A $100,000 home purchased by a female with 20 percent down ($20,000) that appreciates at 2 percent annually for five years will be worth $110,408.
- That same person, playing it less safe, buys a $150,000 home with the same $20,000 down payment and same two percent annual appreciation has a house worth $165,612 after the same five years.
- The first purchaser made $10,408 while the second made $15,612 – a 50 percent difference. Factoring in the differing mortgage payments, interest and taxes brings the numbers closer together.
How to narrow the gap
The report’s findings pointed to an effective (if somewhat uncontrollable) method to close the gap at retirement – single females need to reduce their number of real estate transactions.
This first plays out when it's shown that by year 10 of ownership, the gap has closed. It closes because as they showed earlier, single females lose on average two percent at each end of a transaction. Reducing the number of lifetime transactions reduces exposure to those negotiation outcomes, leaving single women with pure, genderless, market-driven appreciation.
The other way to mitigate the disparity is to be more aware of the timing of any transaction. As the study showed, females are more likely to buy when the market is high and sell when it's low.
Finally, dare I say it? The best, best way for a single woman to enjoy a comfortable retirement is to marry a man late in life. If you add the average net worth for a single female homeowner between 60 and 70 years old to that of a similarly-aged single man, the resulting couple would be worth $1,148,171 (beware of divorcées with alimony).
On average, that's just $248,081 less than a longer-term married couple. A small price to pay for a near-lifetime of blissful singledom – and at that age, he’ll die soon and leave you everything.
A version of this story appeared on Candy's Dirt.