December 2, 2014 — It is a hard reality that many baby boomers are very concerned about not having enough money for an enjoyable retirement. Yet a comparison of two studies, one that ranks Metros by affordability and another that tracks the Metros that are attracting the most new 55+ residents, finds very little correlation between the top of both lists. Apparently, housing costs are not always the only drivers when it comes to deciding where to retire!
The first study, the NAHB/Wells Fargo Affordability Index (See the “Complete Listing by Affordability Rank” report) compares home prices to median incomes in in U.S. Metros. The result is an Affordability Index ranking, which, surprisingly, produces a list completely different than that from the second study, the William H. Frey Analysis of American Community Survey data. That study lists the highest population U.S. areas with the most net migration of people 55+. In this article we will provide the highest ranking Metros on both lists and speculate reasons for the disconnect.
First of all – the most affordable Metros
The NAHB/Wells Fargo Affordability Index compares the median income in U.S. Metros to the cost of a home in those markets. The resulting index represents the share of homes that are considered affordable to households who earn at least the median income. According to that list Kokomo (IN) and Cumberland (MD) are tied as the most affordable Metros in the country, with almost 95% of the homes there considered affordable. By contrast, the least affordable Metro is Napa, California, where only 10% of these wine country homes are affordable.
As you can see from the list below from the NAHB/Wells Fargo Affordability Index, homes in the 16 most affordable Metros are concentrated almost exclusively in the mid-west and upstate New York. These are ranked by the affordability index. The number following the Metro name is the 3rd Quarter 2014 Median Sales Price of a home in that Metro ($000s).
– Kokomo, IN $101
– Cumberland, MD-WV $89
– Davenport-Moline-Rock Island, IA-IL $103
– Mansfield, OH $91
– Springfield, OH $95
– Utica-Rome, NY $90
– Lima, OH $99
– Monroe, MI $130
– Binghamton, NY $108
Something to consider is that an Affordability Index is not a perfect measure for retirees. That’s because it is using the median income of everyone in the Metro, and presumably most of those people are working. You are probably retired, and have your own sources of income – which might be higher or lower. But it will give you some insight into the general cost of living in different places. See the entire NAHB/Wells Fargo list for how all U.S. Metros rank.
More 55+ people are moving to these areas
Net migration measures the change in the number of people moving to a region vs. those moving out. If more people move in than out, that area has a positive net migration. Here from William Frey’s analysis of Census data are the the top 15 areas of the country with the highest net migration of people 55+ from 2009 to 2012.
Note that although these hot retirement areas might not be the most affordable, they are not the most expensive either. According to the NAHB the median sales price of a U.S. home was $221,000 in 2014’s 3rd Quarter. So Jacksonville (FL), which ranked #100 for its affordability index (out of 226) with a median sales price in the 3rd Q (2014) of $156,000, looks like a good deal. Likewise Tampa (FL) is ranked #117 with a median home price of $138,000 in the period. Metros like those represent good news; there are some popular places to retire where you can avoid sticker shock!
1. Phoenix-Mesa-Scottsdale, AZ Metro Area – 18,401
2. Riverside-San Bernardino-Ontario, CA Metro Area 11,125
3. Tampa-St. Petersburg-Clearwater, FL Metro Area 8,028
4. Atlanta-Sandy Springs-Marietta, GA Metro Area 5,713
5. Denver-Aurora-Broomfield, CO Metro Area 3,966
6. Austin-Round Rock, TX Metro Area 3,500
7. Orlando-Kissimmee, FL Metro Area 3,495
8. Jacksonville, FL Metro Area 3,334
9. Charlotte-Gastonia-Concord, NC-SC Metro Area 3,128
10.San Antonio, TX Metro Area 2,998
11. Portland,Vancouver-Beaverton, OR-WA Metro Area 2,427
12. Las Vegas-Paradise, NV Metro Area 2,292
13. Sacramento–Arden-Arcade–Roseville, CA Metro Area 1,869
14.Dallas-Fort Worth-Arlington,TX Metro Area 1,820
15. Miami-Fort Lauderdale-Pompano Beach, FL Metro Area 1,411
An interesting fact about this list is the diversity of states liked by people 55+; 10 different states made the top 15! Another interesting comparison with the Frey list is the difference in net migration for 55+ people vs. millennial-aged folks (25-34). Most of the top 15 Metros are identical on both lists. While San Francisco, Seattle, and Minneapolis are obviously popular with millennials, they do not show up on the 55+ list.
What does this all mean
The differences between the most affordable and the highest net-migration lists are startling – there is no overlap! So what does that say about the choices that baby boomers make when they pick a place to retire. Here are some possible theories – we hope you will contribute your own in the Comments section at the end of this article.
– Although half of boomers are worried about having enough money for a comfortable retirement, they would rather stay where they are now than move to a bargain location with negative aspects like climate or location
– The Sun Belt is a powerful draw – if financially stressed boomers do move, they apparently do something creative like downsizing or searching for an affordable town to retire to get there
– Many boomers have considerable wealth. They can afford to move wherever they want
– There is a reason why some of the “most affordable” Metros are so inexpensive. In addition to cold climates, some (but not all!) have high tax structures, aging infrastructure, urban ugliness, crime problems, and declining populations. Of course another reason is that a lot of people want to move to the Sunbelt, the coasts, or the mountains – reducing growth and resulting demand for real estate in these regions
This might be good news for you, if you live in one of the affordable places and want to stay there. The same might be true if you have relatives there, or you have your eye on a great place to retire in one of these Metros. But if you are worried about money and are still determined to retire to one of the places that are attracting 55+ people, you will have to deepen your research to find the most affordable places in those regions. See “For Further Reading” below to links to our previous articles with more inexpensive ideas for places to retire.
Please let us know your theories for why the net migration list is so different from the most affordable list. Also, if you have any suggestions on inexpensive places to retire we would all love to hear them.
For Further Reading
11 Affordable Places to Retire on the Waterfront – Part 1
Affordable Places to Retire on the Coast – Part 2
10 Affordable, and Highly Livable, Places to Retire
8 More Affordable Places to Retire
2 New lists to Help You Find an Affordable Place to Retire
NAHB/Wells Fargo Affordability Index
William H. Frey Study of Net Migration
Pew Charitable Trusts: Retirement Moves Make a Comeback