Lets Hope 2009 Brings Happier Retirement News

As 2008 draws to a close and fond memories of the holidays begin to recede, here’s a wish for much better retirement and retirement community news next year.

This past year featured retirement news which went from bad to worse. Early in the year, housing prices completely hit the skids in south Florida, California, Arizona, and Nevada. Most other parts of the country saw double digit declines as well. Folks approaching retirement who held out for 2006-type prices found they could not sell their existing homes. So their dream to move to an active adult community, college town, CCRC, or retirement destination went un-fullfilled. More than a few experts, including this one, predicted that real estate prices might finally be getting close to bottom - only to see them sink lower. November’s housing prices fell at the fastest rate in 40 years, and the number of sales went down as well. Condo and cooperative apartment sales - the usual housing choice for retirees - were even worse than those of single family homes.The Jim Lehr News Hour had a feature on Christmas Day showing nice homes in Stockton California being auctioned off for $40,000. The good news there - prices don’t physically have much lower to go than that! And of course another item to celebrate - if you are buying and don’t have to sell to do so - prices are low!

Meanwhile all eyes are on our new President-to-be. Can he return our confidence to us, encourage those with resources to start spending again, and prime the pump with federally financed infrastructure projects? It’s been a long-time since such so much hope was pinned on a new President. Personally, we think he has what it takes. So we are hopeful that at this time next year we will all be feeling better about our stock portfolios, able to sell our existing homes, and looking forward to moving into our dream retirement home (which we purchased at an outstanding price in early 2009!)

Feel free to post your own opinion as a comment on this story.

Don’t Miss Out - Confirm Your “Best Places” Subscription

The conversion of the Topretirements weekly Best Places to Retire eNewsletter to a new email provider is now complete. Our new service should provide greater reliability and graphics - IF - you confirm your subscription. That’s because our new provider (aweber) requires that every name from our subscription list confirm that they really intended to subscribe.

It’s a good system that ensures better deliverability. Unfortunately with people as busy as they are, many of our long-term subscribers have not yet clicked on the “confirm” link. Special thanks to all our subscribers who have already confirmed!

What Can You Do to Keep Your Issues Coming?
If you haven’t done so already, click on the “Confirm Your Subscription” link we emailed you about a week ago. And if you can’t find that email or accidentally deleted it, just use this link and sign up again on this page (you will get a confirm email from that action that you must click on).

What’s So Great About Our Newsletter?
Well, we think it’s pretty good, and hope you will too. Every week we highlight practical articles about how to choose the best retirement town, have 2 or 3 profiles of retirement towns we think are worth investigating, and point out the most interesting Forum posts of the week. So if you haven’t already signed up for (it’s free and you can easily cancel anytime), sign up today! While you’re on that page, check out some of our back issues and see what we are talking about.

Remodeling and Renting Increase as Retirement Living Options

Regardless of when the economy turns back around, the financial crisis has put just about everyone’s retirement lifestyle picture a little bit askew. If there is any silver lining, it just might be that it forces us to look at the retirement paradigm in a new way.

Remodeling
Common wisdom and AARP surveys show that at least 80% of people would like to retire right where they live now. The problem is, most of us moved into our homes with different lifestyle requirements than what we have now. Whereas we were once looking for more room for our families, a smaller footprint (with reduced energy consumption and property taxes) might be more appropriate today. Another consideration is that our future mobility will not be what it once was. So if we are to stay in our homes, remodeling them to fit our future might be a good idea.

The downturn in the housing market presents an opportunity for those with the means to remodel now. There are plenty of contractors looking for work, and materials prices have fallen considerably - it’s a good time to be remodeling. Interest rates are near historic lows for qualified borrowers. Plus, if you have the resources, it’s a patriotic gesture to make!

Remodeling a home for a dream retirement will differ from person to person, but building a first floor master suite would be at the top of most retired people’s lists. New kitchens and bathrooms are usually the top remodeling projects in every home, and they make sense for retirement homes as well. Making the home more accessible - removing steps and level changes, changing out door knobs for handles, widening door openings, etc. - are universal improvements that make sense for any home. Converting spare bedrooms to offices or hobby rooms, planting easier to maintain landscaping, changing to easier maintain exterior materials, installing energy efficient appliances and solar hot water systems - these are smart options to make your house more livable while reducing future work and expense. Remodelormove.com has an interesting remodeling vs. moving calculator you can use to help you determine which option makes sense for you (worth a look just for the questions it asks you).

Renting
In our opinion renting in an active adult community or retirement town has always been a good idea. For a relatively small investment you get the experience of living in a community without any risk. If you love it, you get insight into what and where you will buy. If it seems like there are greener pastures, it’s nothing to move on. As with remodeling, there has never been a better time to rent. So many homes are sitting on the market that rents are competitive and the choices are numerous. You can to places like forrentbyowner.com or vacation rentals by owner and find great selections just about anywhere. Or you can contact active adult communities directly.

Rent-to-Own
Another option, rent-to-own, was announced recently by the luxury home builder Toll Brothers. In their efforts to introduce new buyers to their communities Toll Brothers will now rent homes with an option to purchase in several markets. With no or limited complications, you get the advantage of living in a condo or town house before you decide to buy it. The program is available in New York City, Singer Island (FL), and Scottsdale AZ. You can always try to negotiate rent-to-own with other builders and see what happens. Many individuals who are stuck with an second or third home will also consider rent-to-own. The deal you strike is only limited to your creativity and negotiating skills.

Step Away from the Coasts - For a Low Cost Retirement

Most of the experts think that our economic mess could continue for the next few years. If you have just retired and are trying to figure out how to adjust to life with a smaller portfolio, this article might help with some perspective. That is, if you get over what was our first reaction to the crisis, wanting to just stay home and mope!

At Topretirements we spend a lot of time looking at prices and conditions in various retirement towns around the country and outside the U.S. When we do this research we are always struck by the way real estate markets differ from one area to the next. We see 2, somewhat related phenomenon going on as 2008 comes to a close:

1) Prices in some markets are being annihilated, while stability reigns in others – in spite of all the bad news broadcast every day.
2), A similar house can sell in some markets for a fraction of what it would cost in others. Which leads us to the question – is it really worth paying 2 or even 3 times more just to live in a certain area?

Speaking of price declines, the Las Vegas, Los Angeles, and Miami metros are prime examples of our disaster markets. Prices in those areas in 2008’s 3rd quarter are off respectively: -28%, -35%, and -17% vs. the year ago quarter. If you compare 2008 prices to 2006, the declines are usually even higher. But compare those markets with Charlotte (-4% but ahead of 2006), Oklahoma City (+1.6% and ahead of 2006), and Austin (TX) (+1.6% and well ahead of 2006). All prices in this article are courtesy of the National Association of Realtors’ median prices of single family homes by Metro for the 3rd quarter of 2008.

When it comes to comparing how different prices for similar homes can be from market to market, we have prepared a short comparison for your review. You will see that the headline of this article is a bit of hyperbole, because in fact some bargain towns do happen to be near a coast, and a few expensive places (e.g.; Boulder) are nowhere near a coast. But in general the further inland you get in the U.S., the better the real estate bargain. Our match-up of comparison markets below is somewhat arbitrary, but we hope interesting. We are struck by the difference in the Boulder vs. Colorado Springs vs. Albuquerque comparisons – all beautiful towns in the mountains with lively infrastructure. Similarly the comparison of Miami to other Florida areas is convincing. Most people would probably not compare Honolulu to Charlotte on many aspects, but the price comparison is interesting.

Price Comparison by Markets (Prices are in $000’s)
Boston $373 vs. Austin TX $191 or Knoxville TN $152
Boulder $361 vs. Colorado Springs $208 or Albuquerque $193
Miami $287 vs. Daytona Beach $162 or Tallahassee $159
Honolulu $615 vs. Charlotte $211
Los Angeles $391 vs. Cape Coral Ft. Myers $163 or Saginaw $66
NY/White Plains $525 vs. Mobile $139
Portland/Vancouver $278 vs. Boise ID $187 or Columbus OH $144
San Jose $650 vs. Pensacola $152 or Ft. Wayne IN $96
Seattle $350 vs. Oklahoma City $132, Greenville SC $157, or Spartanburg SC $128
U.S. Average home price in 3rd Quarter 2008 was $200,500. The average price decline was 9% vs. year ago.

Conclusion
The happiest situation for a new retiree who wants to make a move is to sell in a high cost market (New York or Boston) and buy in a low cost one. For example you could move from Boston to a similar house in Charlotte and theoretically pocket $162,000 for your retirement funds. Moving from Beantown to Mobile or Pensacola would not only provide you with a lot warmer winter, but would give you $234,000 or $221,000 additional (and you could afford to watch the Sox on satellite TV). Not to mention other cost of living improvements such as lower heating costs, fewer taxes, and possible better recreational opportunities. While you might have to trade moving away from family members and living in an unfamiliar area for this extra cash, it could make the difference between a comfortable retirement and a life of scrimping.

25 Best Retirement Towns at Topretirements

Top 10 Tax-Friendly Towns

Every so often US News & World Reports goes through its database and comes up with another “Top 10″ List. This time their efforts have produced one dear to all tax-fearing hearts, the 10 most tax-friendly towns in America. After all, you can’t do anything about federal taxes, but you can vote with your feet and move to a low tax town or city.

The US News list is an interesting one, will almost all of the towns in the west. Most made the list because there is no state income tax or some other tax absence.

* Billings Montana
* Cheyenne, WY
* Doral, FL
* Henderson, NV
* Juneau, AK
* Manchester, NH
* Nashville, TN
* Sioux Falls, SD
* Spokane, WA
* Stafford, Texas

Tennessee and New Hampshire only tax dividends on interest and dividend incomes, which is partially why Nashville and Manchester made the list. Stafford, Texas has the unusual distinction of having abolished its property tax, in addition to not having an income tax. Nashville is an example of a city with a good property tax relief program for seniors (it freezes them at a base level), along with the entire state of Florida.

Any town in a state that doesn’t have an income tax or a sales tax is going to be tax-friendly. There are 7 states that don’t charge an income tax, and 5 with no sales tax. Only 1 state has neither tax, and that one is Alaska (a state that actually pays residents to live there, thanks to its enormous natural resources). Cities sometimes impose one of these taxes even if the state does not have it. Property tax is the other tax that really whacks retirees, since this one is not related to income in any direct way. Some states offer significant freeze programs and other types of tax relief for seniors - they can be extremely valuable.

Of course being tax-friendly is not the entire picture. If you have to move far away from friends and family just to save some money, it might not be worth it. For many folks, watching their grandchildren grow up is worth the extra expense. For another, other expenses can more than make up for taxes. Juneau Alaska is very expensive (as is everyplace in Alaska), although the cost of living comes out to about average when you factor in paying no taxes and actually getting a tax payment.

Bad Economy Means Active “Younger” Adult Communities

The press has been filled with reports of financial troubles in the retirement housing and real estate markets.

Faced with unsold units, vacant lots and empty condos, the reaction of some active adult communities has been to try to expand their base. The obvious way to do that is to let in younger buyers. Many active adult communities are age-restricted to at least one resident who is at least 55 years of age. Typically, unless the community has at least 80% of its population 55+, they do not meet federal regulations that allow developments to exclude children. At the many other active adult communities that have no official age restrictions, the fact is that most of their residents are 55 or better.

On the one hand letting in younger buyers might be able to fill more units, but it could have ramifications on the other side. Existing residents, for example, often chose to live with people their own age; away from noisy children and rushing commuters. Neighboring towns that lobbied to attract these active adult communities feel betrayed, since the communities were let in with the expectation that their older residents would pay taxes, but not demand expensive services like schools.

One of the communities profiled in a recent Wall Street Journal article was Sun City Grand in Surprise, AZ. This Sun City lowered its minimum age to 45 from 55, although children under 19 are still not permitted as permanent residents. The plan seems to work, as some younger people are attracted to these communities for their recreational opportunities. Many residents are pleased as well with the additional financial support younger people bring to the community, citing excess capacity when aging residents gradually stop using communal facilities. Leisure World in Mesa, AZ is another community that has lowered its age requirements; many others are considering the change. Century Village in Deerfield Beach, FL, one of the nation’s oldest and biggest active adult communities (it has 254 condominium buildings), has people talking about making the change. Two of the biggest reasons to change are falling prices and unsold units - proponents of the change think that sales to younger buyers could prop up a devastated market, while detractors say the change would be unfair to existing residents who bought with the understanding they would be living with people their own age.

Meanwhile in housing for older seniors
Continuing Care Retirement Communities (CCRCs), asssisted living, and retirement homes have been hit hard because older seniors haven’t been able to sell their homes. That sale is usually necessary to allow seniors to come up with the equity necessary to buy into these facilities or make the hefty monthly fee payments. Entry fees to CCRCs can easily go over $300,000, depending on the unit and luxury of the community. Monthly fees can go over $10,000, although typically they are about $3000-5000. Two of the biggest operators were profiled in the New York Times last week (“Debt Struggles and Elderly Living”)

Two of the biggest names in senior housing appear to be having some serious financial difficulties. The Times reported that Sunrise Senior Living is “trying to stave off bankruptcy”. Brookdale Senior Living “is considered likely to resolve its short-term difficulties, but it faces a mountain of debt…”. Brookdale manages 51,847 assisted living and retirement units, while Sunrise has 50,235. The stocks of both firms have been pummelled, dropping from the $32 share price area to in Sunrise’s case, less than a $1 per share. The odd thing about the company’s troubles is that occupancy rates aren’t that bad - about 90%. While Sunrise apparently had some other poor investment decisions affecting its financial state, Brookdale’s troubles indicate the tight margin that these companies operate on. Fortunately, there have been no reports of the companies cutting services to try to “save” their way out of trouble, and seem to be enjoying the continuing support of many of their customers.

But for all of the negative reports on senior housing, others are more bullish. Saying that moves to nursing homes and assisted living facilities are usually not optional, the demand will be there. There has also been very little building in the past 5 years. Investors Business Daily has an interesting article on the business prospects of senior housing.