Don’t hold your breath for retirees to free up today’s precious housing inventory — the vast majority have no intention of leaving their homes anytime soon, according to a new survey by The American College of Financial Services.
Of the 1,000 people aged 55 to 75 (born between 1941 and 1961) who participated in the Home Equity and Retirement Income Planning Survey, 83 percent said that they don’t want to relocate in retirement. In addition, virtually none of the respondents indicated a desire to rent.
“One very interesting notion was that the desire to age in place increases significantly as you get older,” said survey author Jamie Hopkins, Professor of Retirement Income Planning and Co-Director of The American College New York Life Center for Retirement Income Planning, in a press release. “We saw more uncertainty between the ages of 55 and 62.
“But once we started getting past 62 and you start moving into retirement, we saw that these individuals really don’t expect or want to leave their homes.”
Should we still be wary of a boomer housing bust?
The results paint a somewhat different picture than the long-time popular notion that a massive wave of baby boomers looking to downsize in their empty-nester years could result in the next housing bust or what one researcher deemed the “great senior sell-off.”
However, as explained in the August 2015 edition of Fannie Mae’s Housing Insights, “the likelihood of baby boomers occupying single-family homes has changed little in recent years, despite the fact that boomers are experiencing major life changes that might be expected to cause a downshift in their housing consumption.”
There’s no question that whatever this older generation decides to do will have a domino effect.
“The accumulating evidence that baby boomers are not downsizing has important implications for the housing market. Boomers have an enormous residential footprint, occupying two out of every five housing units and accounting for half of the nation’s housing wealth,” the Fannie Mae report said.
Therefore, any change in their housing consumption could result in significant ramifications and should be watched closely.
The biggest problem economists foresee is the potential mismatch between the types of homes retirees would need to sell — which data from the American Housing Survey indicates are mostly detached single-family homes, a third of which are larger than 2,500 square feet — and market demand.
Arthur C. Nelson, director of the Metropolitan Research Center at the University of Utah discussed his concern that boomers won’t be able to find buyers for their homes in a 2013 article from The Atlantic’s City Lab. “Even if the numbers matched,” he said, “the preferences don’t.”
Many of today’s modern families would be interested in boomer’s large single-family households, but the market shift toward urban townhomes and condos, though small, could land us in another housing crisis, Nelson said.
Uncertainty about reverse mortgages
The survey also pointed to a major discrepancy between what retirees believe they know about reverse mortgages and what they actually understand. While many showed a strong desire to “age in place,” only 14 percent had considered the possibility of a reverse mortgage, a special type of home loan for individuals over the age of 62 that allows them to convert part of their home equity into cash.
A little less than half (44 percent) of survey participants said they didn’t enter into a reverse mortgage due to insufficient income. Other reasons included “too young” (10 percent), “not ready” (10 percent) and “too risky” (9 percent).
“Hopefully that’s the biggest takeaway from this survey,” Hopkins added. “Advisers and consumers need to start thinking about home equity, including reverse mortgages, as part of the retirement income planning process.”