Study: Home Ownership Key in Retirement

Older home owners who leverage the equity in their home may be better off in funding their retirement, according to a new study by the Urban Institute. However, the recession may have hampered many retirees’ abilities to do so.

“Not only does a house meet the basic needs of shelter, but it’s an asset that typically can be used to build wealth as home owners pay down their mortgages,” the study’s authors note. “In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources—Social Security, pensions and savings—is incomplete because it ignores the home.”

Before the recession, home owners aged 65 or older could have used their home’s equity to increase their retirement income by over 50 percent – up to $60,000 –either by borrowing a home equity line of credit, selling their home at a profit, or taking a cash-out refinance or second mortgage. However, the Urban Institute’s study notes that percentage fell to 50 percent – up to $49,000 – by 2012, even though retirees accumulated an average 10 percent more equity than in 1998. Home owner’s equity grew from $117,000 to $166,000 between 2000 and 2006 before falling to $129,000 by 2012.

The study’s authors say that older home owners have more opportunity to unlock the wealth potential of their homes in retirement, particularly now with the recession over.

“The majority of older adults, regardless of income, race and ethnicity, and education, own homes that they could use to help finance their retirement,” the authors note.

Source: “Study: Home Equity Still a Retirement Failsafe?” RISMedia/Urban Institute (Nov. 13, 2016)

Is Home Equity Still a Retirement Failsafe?

Homeownership is one of the more viable paths to a secure retirement—but many older homeowners missed the prime opportunity to leverage that equity before the recession. How much usable equity can older homeowners now expect in retirement, given the rebound in home values?

A recent study by the Urban Institute explored the answer to this question, analyzing the equity patterns among older households before, during and after the recession.

“Not only does a house meet the basic need of shelter, but it’s an asset that typically can be used to build wealth as homeowners pay down their mortgages,” the study’s authors state. “In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources—Social Security, pensions and savings—is incomplete because it ignores the home.”

Homeowners aged 65 or older, according to the study’s findings, could have used their home’s equity to grow their retirement income by over 50 percent (up to $60,000) pre-recession, either by borrowing a home equity line of credit, selling their home at a profit, or taking a cash-out refinance or second mortgage. That percentage dropped to 40 percent (up to $49,000) by 2012, despite accumulating an average 10 percent more equity then than in 1998. Home values, still, grew 3 percent by 2014. Monetarily, the average older homeowner’s equity stake increased from $117,000 to $166,000 between 2000 and 2006, then decreased to $129,000 by 2012.

The swings not only parallel the movement of the market—according to the study’s findings, equity patterns follow mortgage debt trends, as well. From 1990 to 2006, national mortgage debt grew to $11.3 trillion from $2.5 trillion, then fell to $9.9 trillion by 2015; for the average older homeowner, debt grew from $44,000 to $82,000 between 1998 and 2012.

Mortgage loan-to-value (LTV) ratios also moved in tandem; in fact, the proportion of older homeowners with LTV ratios at 80 percent or more doubled from 1998 to 2012, according to the study. The proportion of underwater homeowners tripled over the same period.

Older homeowners today have more favorable retirement conditions, but not without contingencies. Low-income and minority homeowners tend to have most of their wealth tied up in their homes, but accumulate the least equity overall, according to the study—with loan approval related to income, these segments could become challenged, even though they have the potential to increase their retirement incomes considerably more so than other higher-income or majority groups. Low-income and minority homeowners, the study’s authors postulate, will likely rely on Social Security as their primary source of income in retirement.

Older homeowners overall, however, have more of an opportunity now to unlock the wealth potential of their homes in retirement, even with the recession in the rearview. Their prospects, as the study demonstrates, lean on home value, as well as mortgage debt. State the study’s authors, “The majority of older adults, regardless of income, race and ethnicity, and education, own homes that they could use to help finance their retirement.”

Older Americans Ready to Tackle Housing Market, Survey Says

Three out of four homeowners born before 1961 are confident they will have a financially comfortable retirement according to the Freddie Mac 55+ Survey, a comprehensive survey of the housing perceptions and preferences of Americans over the age of 55.

The first Freddie Mac 55+ Survey also found that the majority of homeowners in this age group were very satisfied with their homes, their communities and their quality of life. Consistent majorities also said homeownership makes financial sense at almost every stage of adult life, whether or not a person is married or has children.

“The overwhelming message of the Freddie Mac 55+ Survey is that homeownership works. The American Dream delivered greater financial stability and satisfaction to the homeowners who lived through every recession since the 1970s, including the housing crisis of 2008,” says Dave Lowman, executive vice president of Single-Family Business at Freddie Mac.

In addition, while many over the age of 55 would prefer to age in their current home, nearly 40 percent said they would prefer to move at least one more time, and 70 percent of those said they are likely to purchase their next home. According to Lowman, this will create significant opportunities and challenges for the industry for years to come.

“The decisions the nation’s Baby Boomers and other older homeowners make will have an enormous impact on the demand for housing and new mortgage credit for the foreseeable future,” Lowman says. “Whether they buy new homes or decide to refinance and renovate their current ones, the size of this generation and the fact that they hold close to two-thirds, approximately $8 trillion, of the nation’s home equity makes it very important that we watch what they do.”

Overall, 76 percent of homeowners over the age of 55 are confident they will have a financially comfortable retirement, according to the Freddie Mac 55+ Survey. Majorities in every demographic group surveyed share this confidence to varying degrees: African-Americans (77 percent), Hispanics (64 percent), Asians (80 percent), homeowners who are currently working (74 percent), as well as homeowners earning less than $30,000 (55 percent).

The Freddie Mac 55+ Survey also shows consistently strong links between homeownership and a person’s satisfaction with their home, community and financial situations. Specifically, 59 percent of homeowners are “very satisfied” with their communities, 64 percent with their current home, and 54 percent with their quality of life.

A majority also believe homeownership makes financial sense for most Americans. Specifically, 96 percent feel homeownership makes financial sense for people who are either married with children or between 35-49 years of age. Smaller majorities said homeownership makes sense for people over 55 (87 percent), married couples without children (85 percent), single people with children (79 percent), and single people without children (53 percent).

In terms of helping others become homeowners, nearly 25 percent of the respondents say they have already helped someone financially with a down payment.

Why Baby Boomers Drive the Housing Market for Millennials
The Freddie Mac 55+ Survey also identified a number of other opportunities and challenges for the housing industry that will stem from the decisions Baby Boomers and other older homeowners make over the next few years.

For example, 63 percent of the 55+ homeowners surveyed say they prefer to age in place if they had complete control over it. However, nearly 40 percent indicate they would prefer to move at least one more time. This suggests nearly 27 million homeowners over age 55 may move again. When asked when they expect to move next, 13 percent think they will move within four years.

• Of those homeowners who would consider moving, 12 percent believe their next home will be more expensive than their current one, while 37 percent believe it will be in the same price range, and half believe it will be less expensive. At the same time, 23 percent of homeowners say they would have to make major renovations in order to age in place.

• 55+ers cite cost and convenience as the top factors influencing whether to move and where to live: affordability of living in a particular community (46 percent); having the amenities needed to live there for many years after I retire (44 percent); less maintenance (41 percent); having a place where I was no longer responsible for caring for the property (e.g. yard work, snow removal) (30 percent); proximity to other family members (31 percent); being in a walkable community (28 percent); having abundant services for adults my age (25 percent); access to public transportation (17 percent); warmer climate (19 percent); having a place that is smaller than my current home (e.g. downsizing) (19 percent).

For more information, visit www.freddiemac.com.

Boomers on the Hunt for Perfect Retirement Pads

Look out, boomers are on the move.

According to a recent survey from Better Homes and Gardens, 57% of boomers say they plan to move out of their current home, and 70% say the house in which they retire will be their best.

“Boomers are focused on having a fulfilling, fun lifestyle and community comes first,” says Sherry Chris, BHGRE president and CEO.  Whether it’s living in a smaller, rural or farm community (39% of respondents) a traditional 55+ retirement community (27%), or an urban community (26%), boomers are seeking a more-active lifestyle in their golden years.

The decisions boomers make about a retirement house can mean the difference between having sufficient cash flow, a retirement imperative, or falling short, says Roger Roemmich, a senior investment consultant and author of “Don’t Eat Dog Food When You’re Old!”

The home is a linchpin in everyone’s retirement plan, he explains whether boomers choose to downsize and bring in several hundred dollars more a month, or leverage the home to increase cash flow through a credit line or reverse mortgage.

But these living decisions have to be made sooner rather than later, he says, about five years out of retirement. At that point, boomers tend to become more realistic about their options and start thinking, “’If we didn’t live in such a big house, we’d be in better shape.’”

Recently, boomers have been trading in their McMansions for smaller standalone homes or stylish lofts and condos in towns with great outdoor recreational opportunities, part-time job opportunities or urban areas with access to culture, entertainment and eating amenities, Chris says.

They’re also willing to step outside their comfort zones.  Years ago, retirees tended to gravitate toward communities in which they’d rub elbows with their same-aged peers, but Chris says today’s boomers want to be with people of all generations.

While the number of boomers looking for a new home in retirement is rising, the majority still want to stay close to where they currently live. In fact, 72% of respondents say they plan to retire in the state where they’ve put down roots. However, money talks: 69% of boomers say they would be willing to move to another part of the country where living is more affordable.

Some states, chiefly in the Sunbelt, are very retiree-friendly, explains Roemmich, particularly on income and property taxes. “The more temperate the climate, the easier it is to make due.”

Source: Fox News

Time to Sell?

Is it time to sell my own house?

In the last 18 months, we have replaced:

1. the hot water heater
2. the dishwasher
3. the guts of 2 different toilets
4. the washing machine
5. microwave
6. the refrigerator
7. garage opener

What will stop working next?

It is time to contemplate our next move. It is probably time to plan a move when all the appliances are aging, as are the residents of the home.

It is time for a new family to occupy this house and make it their own.  The adjustable basketball hoop has been up for 25 years, and hasn’t been used since my children moved out. The volleyball net also sits unused in the garage, and rarely coming down are the bicycles hang on the garage ceiling. The play-set has been removed. The collection of balls and outdoor toys have been stashed.

Although it is a shed as far as the town is concerned, my kids called it “the clubhouse.” It was a sleep-over site in the woods, a place to seek shelter from the rain, a haunted house for Halloween and a site for hot chocolate and marshmallows in the winter. It was a hangout place during all seasons, complete with a fire-pit built of rocks. I feels like it is time for children to be running in the yard, and planning there own activities in the “clubhouse.”

My memories will always remain. My husband and children’s memories will always remain. Should it be time for the next family to create their own memories?