June 5, 2018 — Almost half of baby boomers, unfortunately, have not saved enough money for retirement. That means they face a cut in the quality of their lifestyle. But for many fortunate folks who own a valuable home, particularly in a hot real estate market, a potential rescue is at hand. For example, retirees in coastal California in places like San Francisco, San Jose, Los Angeles and San Diego have the option to sell their home, buy or rent a home better suited to a retirement lifestyle elsewhere, and pocket hundreds of thousands of dollars in the process. People with valuable homes who live in New York and its close-in suburbs, as well as other affluent markets, can catch a similar lifeboat. This article will explore where some of the refugees from America’s hottest real estate markets are moving.
According to a recent report on the Trulia Blog, coastal California Metros are the perfect example of real estate good luck. In San Francisco, San Jose, Los Angeles, and San Diego homes on the market averaged $720,000 in March 2017, almost triple the $250,000 reported nationally. New York registered high median listing prices too, nearly $440,000. While these high real estate prices are not good for first time buyers in those markets, they are a potential gold mine for retirees looking for greener pastures.
Finding a better place to retire, and put money aside in the process
Baby boomers exiting pricey real estate markets have many cheaper options. Florida and the Carolinas attract many of them. Arizona, Colorado, Washington, Oregon, and New Mexico are also popular. And the middle of the country offers great bargains. If chosen carefully, someone selling their suburban home in New Jersey, Connecticut, DC, or Massachusetts can easily end up cash positive after buying their new home. We know boomers who have migrated to Delaware, Colorado, the Carolinas, Tennessee and Florida. All seem very happy with their new lifestyle, and their reduced cost of living is a big plus.
Our advice if you own a home and have a budget shortfall
1. Use your home to improve your financial situation. Even if your current home is not particularly valuable, you still can make changes to improve your economic situation. For one, if you live in a house in the suburbs, the sooner you can get rid of it the better. You are paying to heat, maintain, power more square footage than you probably need. You have to drive everywhere for your shopping and other needs – biking and walking are probably not options. While the neighborhood might have been great when you had kids, it is probably not ideal for your life in retirement, where social interaction is often in short supply.
2. Decide what kind of move to make. If you decide to move in retirement then you need to figure out where to move to, and what type of home you want. Because there are so many options, that takes some planning and thinking. For example, do you want to live in a 55+ community, active adult, a city, a small town, a regular neighborhood, etc. Do you want to buy or rent? Fortunately the reviews of towns and 55+ developments on this site can help you with all of that.
3. Decide how much to spend for your new home. After analyzing your finances, do you know how much extra income you need so you can maintain your pre-retirement lifestyle? The answer to that question will help you to decide how much to budget for your new home. If you don’t need much extra, you can spend about what you realized from the sale of your current home. But if the shortfall is big, then you better plan on banking/investing a bigger part of the proceeds to help finance your comfortable retirement.
4. Set a budget for post retirement. It might be exciting to suddenly have a hundred thousand or so in the bank after a sale. But if you spend it all too quickly, you are back in the same situation. Better to consult your financial planner and figure out a safe way to use it.
Where They’re Moving
To find out where they are moving, Trulia.com analyzed home searches on its website for people of all ages leaving coastal California metros. Overall, the most popular searches were for large metros like New York, Atlanta and Chicago. The high job-growth centers of Seattle, Denver, Dallas, and Portland (OR) were also popular, probably more for younger people than retirees. Less expensive Sun Belt markets popular with retirees such as Las Vegas, Tucson, and Phoenix also elicited high interest.
Comments? Are you contemplating moving from a market to take advantage of your home equity? Please share your thought process along with what you are looking for in your new home.
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