Baby boomers have historically benefited greatly from the U.S. housing market, amassing substantial wealth as home values surged. However, as they enter retirement, many are struggling with homes that no longer meet their needs and have become increasingly unaffordable.
In the past, buying a home was seen as the smart move for retirement. Many boomers watched their home equity grow, giving them a nice financial cushion. Today, boomers own an incredible $76-$90 trillion in total wealth, with nearly a quarter of that in real estate.
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But as they age, many realize that their big, multilevel houses with many stairs are no longer ideal and there just aren’t enough retirement-friendly homes available. Plus, even though many boomers have significant equity, that wealth is tied up in their homes, making it challenging to use for daily expenses.
A Tough Market to Downsize
The challenge for boomers today is downsizing – something that sounds easy in theory but is far more complicated in reality. Many older adults still carry mortgage debt, with rates at historic highs. In fact, the share of retirees aged 75 and up with mortgages has surged from just 5% in 1995 to 25% today, meaning that many retirees still make hefty monthly payments when they should be enjoying their golden years mortgage-free. On top of that, mortgage costs have jumped significantly and the rising costs of insurance and property taxes make it even harder for retirees to manage.
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If that weren't enough, high housing prices and climbing mortgage rates make it challenging for anyone to find a more affordable place. For boomers, selling a home to downsize often means facing high prices on smaller homes or taking on a mortgage with today's interest rates, which hover around 7%. While younger people struggle to enter the market, boomers often have cash or home equity on their side, giving them an advantage, but that doesn’t mean it’s easy or cheap to move.
A Shortage of Accessible Homes
Another big issue is that there aren’t enough homes that are easy and accessible for older people. As people age, they need homes with fewer stairs, wider doorways and easy access to things they need. Unfortunately, the majority of U.S. homes are not designed this way. As Business Insider reports, a Harvard study found that fewer than 4% of homes have the features needed for those with limited mobility. Boomers who want to stay independent but need a safer, more accessible home are stuck – their current homes aren't fit for aging and the right homes aren't available.
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Many boomers have also resisted changes in their neighborhoods over the years, opposing new developments and higher-density housing that could provide the accessible options they need now. This has directly contributed to a lack of suitable housing not just for themselves but also for younger generations.
Still, there is a potential opportunity for boomers who are in a position to buy. Compared to younger purchasers, many of whom are finding it difficult to save for a basic down payment because of rising living expenses, boomers who can make all-cash bids or sizable down payments have a major edge.
But for most boomers, the housing market today is a mixed bag. While they once benefited hugely from rising home prices, they now feel the pinch of affordability and a lack of suitable options as they age. The homes that once represented their biggest asset are becoming a source of financial stress and a daily challenge to live comfortably. There's no easy answer, but one thing is clear – the housing market has changed and boomers are facing a different reality than they imagined for their retirement.
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