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.
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