The “Great Recession” is changing our view of home ownership and the types of neighborhood we want to live in retirement, according to new research from the Urban Land Institute (ULI).

 If they are right, it has broad implications for the role of housing in retirement planning.

 Two key predictions from the report, Housing in America, for the decade ahead:

        * Home appreciation will slow considerably, to about 1 percent to 2 percent annually; and,

       * The current U.S. homeownership rate, now at 67 percent (a decline from the record high of 69 percent at the height of the housing boom) will fall further, to about 62 percent.

Hard hit by the dips in home values are the baby boomers.  The report predicts that both younger and older baby boomers will be staying in their suburban homes –waiting for prices to increase – rather than downsizing or moving to retirement communities.  

They also predict that the younger generation (those in their 20s) will rent longer, less anxious to buy a home given what they have seen happen to home prices in the past year.

Here’s what they have to say about the housing preferences of baby boomers:

 *Aging baby boomers (55 to 64 years old) – Although they are nearing retirement age, many will keep working out of necessity or by choice. Some will be forced to stay in their suburban homes until values recover. Those who are able to move will not choose traditional retirement locations or senior housing, opting instead for more mixed-age living environments that cater to their active lifestyles. Suburban town centers with a walkable urban “feel” will appeal to this group.

*Younger baby boomers (46 to 54 years old), now in or entering their prime earning years – This group will also face a tough time selling suburban homes, hampering the ability of these boomers to move. Because the recession has left many younger boomers with flat incomes and less home equity, their ability to purchase second homes will be greatly diminished, curbing prospects in general for the second home market. However, like their older counterparts, they will be drawn to more connected, compactly designed communities when they are able to switch houses.  

Some seniors are already finding the housing market decline to have a disastrous impact on their ability to finance long-term care. The housing appreciation they hoped would pay for long-term care is gone and or they can’t sell their home to free-up money to move into a retirement community, assisted living or nursing home.  If you anticipate selling your home to finance future long-term care needs that may no longer be very realistic.  You might want to consider long-term care insurance that could help pay for care at home (some policies also permit funds to be used to pay for home modifications).  A reverse mortgages (for those 62 and older) are another way to help finance staying in your home as you age.   This article provides some tips on how home value plays into retirement planning.

Has the decline in the housing market changed your retirement housing plans? Do you think the report is right that traditional age-restricted retirement communities are a thing of the past?

Hey, baby boomers and seniors, Uncle Sam has a pretty nice gift for you if  you want to move.  If you’ve lived in your home at least five consecutive years  and are considering downsizing or moving to a new location, now might be the time.  

The first-time home buyer tax credit has been expanded to include homeowners who have owned and lived in a home as their principal residence for at least 5 of the last 8 years. A tax credit is a dollar-for-dollar reduction in the taxes you owe, so it’s a nice incentive.

The tax credit is for up to $6500 on a replacement home purchased between Nov. 6, 2009 and April 30, 2010.

The phase-out range for unmarried individuals and married people who file separately is between modified adjusted gross income (MAGI) of $125,000 and $145,000. The phase-out range for married joint filers is now between MAGI of $225,000 and $245,000.

The National Association of Home Builders has a website on the federal housing tax credit with information, limitations of the credit and frequently asked questions.

Here is the official announcement from the IRS.

We also recomemend you seek advice of tax counsel to make sure you qualify.

 Baby boomers will be leaving metropolitan and suburban areas and heading for rural and small-town destinations seeking lower living costs and a higher qualify of life, a new government report predicts . The U.S. Department of Agriculture’s Economic Research Survey predicts the number of boomers between 55 and 75 living in rural areas will increase from 8.6 million to 14.2 million between 2000 and 2020.

 If you are one of those baby boomers who think you might be heading to a small town, keep in mind that those towns will be facing a rising demand for housing, transportation, health care and retail to support the growth.

 Health care costs can especially be impacted – and they are not necessarily less expensive.  Long-term care costs, for example, can be higher where there are fewer sources of care and more demand.  See the Longevity Alliance report on the Hidden Costs of Moving for more information about how moving can alter your health insurance costs.  These are often the kinds of costs we forget to factor into a move to a new area.

 And if you have a Medicare Advantage plan you may find that you will have to switch to Original Medicare and a Medicare Supplement plan since network plans are generally less available in rural areas.

 And if you are planning to move and work remotely, remember the technology connections aren’t always as accessible in rural areas.  You may find yourself back on dial-up.

 Marketwatch listed 15  counties that are in the top 50 areas expected to grow.  

So if you’re considering moving to get away from it all, you may find yourself in a hot new community surrounded with people just like you.

Thinking of going  rural, what’s driving you to head to the country?

The value of our house has traditionally played a key role in retirement planning.  Cashing in that big gain would help bankroll our retirement lifestyle.  But the crash in home values has changed that for many people.  In fact, turned it upside down.

 A grim report from Deutsche bank says that the number of people with underwater mortgages (the house is worth less than the mortgage) will nearly double by 2011 to 48% of homeowners.  Those hardest hit are people who purchased between 2003 and 2006. 

If you find yourself in this position, here are four tips for dealing with lower home values and planning for retirement: 

1.  You only realize the loss if you sell.  So the longer you can stay in your current home, the better. Experts say 5 to 7 years may help you get back to an even position.  If you were thinking of selling because of issues around aging, there might be home modifications you can make that make it easier to stay in your home. The good news is that more of us say we want to stay in our home as we age.  So plan now on how to make that a possibility.   Or if assisted living or a continuing care community is right for you, find out what kinds of deals they are making for homeowners.  Many are cutting back on deposits or making special arrangements for those where the real estate market is slow.

 2.  If you were thinking about paying for long-term care services from gains from the sale of your home, now might be the time look at long-term care insurance.  The younger and healthier you are the easier it is to qualify and the less expensive the policy will be.  Make sure you look at a policy that includes care at home.

 3.  Don’t dip into the equity.  Over the past decade, many people used their house as a piggy-bank funding new cars, vacations, additions to the home, education and more.  First, distinguish the needs from wants.  Then look for other sources to fund the needs.

 4.  Review your financial plan and, if necessary, adjust your expectations about the value of your home if necessary.  Maybe it’s not as bad as you think.   And if you don’t have a financial plan, now’s a good time to get one.

 This article from Smart Money provides some good information about home values and what to watch for that can impact the value of your home

Thinking of selling your house because the staircase is getting too difficult to navigate? Or the bathroom has become a slip-and-fall zone? Or your kitchen cabinets and appliances demand too much bending and stretching?

Before you start even thinking of moving, check out http://www.homemods.org. It’s the website for the National Resource Center on Supportive Housing and Home Modification. On it you’ll find the latest ideas on safe home design. And, as you’ll see, there are a lot of ideas. Want to remodel your bathroom? The site has links to dozens of designs for safe-entry bathtubs, hands-free faucets and grab-bars ranging from the ornate to the purely utilitarian. There are literally hundreds of items on the non-profit group’s recommended product list.

Now, if you’re in the market to remodel your entire home, visit http://www.nahb.org, the website for the National Association of Home Builders. The group lists more than 1,000 construction experts across the country who have graduated from its Certified Aging-In-Place-Specialist (CAPS) program – a certification course for building professionals developed jointly with AARP. CAPS graduates are trained to help you retool your home so that you can continue living there comfortably despite the physical limitations you may develop as you get older. Hence, the term, “Aging in Place.”

To make it easy, below is a checklist of what you can do to make your home comfortable and safe for years to come:

The Basics

• Create “turning spaces” of five-foot diameter in every room.
• Make sure hallways are wide enough to handle walkers and wheelchairs.
• Doorways should be minimum 32-inches wide – 34 or 36 inches are even better.
• Install thermostats with easy-to-read gauges.
• Use luminous light switches.
• Levers are better than doorknobs – and more elegant.
• All flooring must be non-slip.
• Buy an emergency medical-response device for the bathroom.
• Get lights and appliances with remote controls.
• Install brighter lighting.

For the Bathroom

• Get a bathtub with a build-in seat.
• Make sure the shower has no curb or lip at its edge.
• The toilet should be installed at least 18 inches away from any side wall, cabinet or tub.
• Counters should be no lower than 32 inches with plenty of knee space under the sink.
• Get faucets with lever-style handles.
• The shower head should be hand-held.

For the Kitchen

• Buy an adjustable-height sink – a hands-free faucet is a big plus.
• Work surfaces and counters should be 28 to 42 inches high.
• If possible, get an oven with a swing door and a range with controls on the front.
• Always use large cabinet handles and drawer pulls.
• Design sinks, counters and work surfaces with knee space underneath.

For Outside

• Build at least one entrance that doesn’t require steps.
• Avoid more than a half-inch rise at any door threshold.
• Use plenty of lights along pathways and at all doorways.
• Install handrails wherever you have a step or porch.

Undertaking a full-scale retrofit for your home can cost more than building from scratch. But many of the basic items – e.g. larger cabinet pulls, hand-held showerheads and door levers – can be bought for a relatively modest sum. And, in the end, staying put in your own home is almost always cheaper and what most people say they prefer to do.