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?
TFR500 9:20 am on February 2, 2010 Permalink
Interesting blog. Yes, the “younger baby boomers” are a crucial segment to grasp in understanding housing trends. Fortunately, we are learning more and more about them now that they have a name (Generation Jones) and identity which is receiving so much national atttention. Google “Generation Jones”, and you’ll see it’s gotten a ton of media attention, and many top commentators from many top publications and networks (Washington Post, Time magazine, NBC, Newsweek, ABC, etc.) now specifically use this term. In fact, the Associated Press’ annual Trend Report chose the Rise of Generation Jones as the #1 trend of 2009. Here’s a page with a good overview of recent media interest in GenJones: http://generationjones.com/2009latest.html
It is important to distinguish between the post-WWII demographic boom in births vs. the cultural generations born during that era. Generations are a function of the common formative experiences of its members, not the fertility rates of its parents. Many experts now believe it breaks down more or less this way:
DEMOGRAPHIC boom in babies: 1946-1964
Baby Boom GENERATION: 1942-1953
Generation Jones: 1954-1965
Generation X: 1966-1978
Sophisticated players in the housing industry will make serious bucks by learning about the key differences in consumer and real estate purchasing behavior among Jonesers which differs from its surrounding generations.