If you ask ten different people about their plans for retirement, you might get ten different answers. However, some themes are common, at least in a general way.
One answer that you might receive frequently involves home equity. Many Baby Boomers, in particular, have accumulated a considerable amount of equity in their homes. They often assume that they will sell those homes at a tidy profit, and move to a cheaper location. Or, if they plan to stay in the same location, they at least plan to move to a cheaper home.
That’s certainly not a bad idea in general; most retirees no longer need a sprawling five bedroom McMansion, nor do they want the headache of repairs and extensive lawn care. But if you’re counting on a certain profit, it might be a good idea to temper your expectations just a bit.
Why? A new study from Zillow predicts something they’re calling the Silver Tsunami, or a wave of retiree- owned homes hitting the market at the same time. Other soon-to-be retirees in your area might be planning the same move, and if the market is flooded with properties in a short time period this tends to drive down prices. It’s simple supply-and-demand economics.
Another potential problem with the future real estate market revolves around the differences in tastes and finances, between Baby Boomers and younger consumers. Millennials and Gen X home buyers might not have the financial capability of affording some of these larger suburban homes, and in fact their tastes tend to skew toward smaller and tidier urban dwellings.
Some areas will be affected more than others, for sure, so there’s no need to worry about dire predictions just yet. Another possibility is that even if you sell your home for a bit less than you had hoped, the purchase price of your retirement destination might also end up lower than you had estimated.
The idea to remember is that economic conditions can change, and the real estate market in particular can sometimes surprise us. Remember the old rule: “Don’t put all your eggs in one basket”. And keep in touch with us as you plan for retirement, so we can help you prepare for a stable retirement income that keeps pace with your future budget.
