Here’s wishing you a very Merry Christmas and Happy Holidays from AARC! Hopefully you’ll have time with family relaxing and perhaps contemplating the future. What better time to envision your future retirement destination? Is it beside a crackling fire in a cabin in the Smokies? A sunny beachfront home in the Carolinas? A golf course villa? Your retirement destination is your decision! How do you want to choose to live “Life 2.0”? You’ve done what you had to do, now it’s time to do what you want to do!
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Jeff Fleming Chair, The AARC
Older Americans Buoy Housing With High Ownership RatesBy Alexis Leondis Bloomberg
“I’m on boards and commissions and I enjoy that brain activity, so no, I don’t want to move to South Carolina or Florida,” said Braswell, 69, a retired federal civil servant, who lives alone in a four-bedroom Tudor home in Arlington. “I’m thinking of putting an elevator in so I can stay.”
Older homeowners have emerged as the pillar of the housing market following the collapse
in 2008. The homeownership rate for Americans age 65 and over has remained at 80 percent while dropping for every other age group. Seniors typically have less mortgage debt than younger homeowners, more wealth than they had four years ago, and longer lifespans than a generation ago. So they’re staying in the housing market rather than downsizing into rentals or moving to independent senior centers.
“This group has been a ballast for the market,” said Chris Herbert, acting managing director at the Joint Center for Housing Studies at Harvard University. “If not for them, we would have seen a much lower homeownership rate overall, more homes on the market and more weakness.”
The homeownership rate — the number of owner-occupied homes divided by the number of households — was 80 percent in the third quarter for those 65 and over, little changed from the same period in 2008, according to Census Bureau data. Those under 35 have seen the biggest decline in homeownership, with a 12 percent drop to 36 percent, the data show. In 1982, the homeownership rate of every age group was higher than it was in 2013 — except for those 65 and over.
These Americans better withstood the financial crisis. They were more likely to have paid off their mortgage, less likely to face a job loss since many were retired, and positioned to reap gains in the rising stock and bond markets.
“Older homeowners on average got less caught up in subprime,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.
The median net worth for those 65 to 74 increased 5 percent to $232,100, the biggest gain for any age group, from 2010 to 2013, according to the Federal Reserve’s Survey of Consumer Finances.
“They have a quadruple bonus — they benefited from real estate, the best in equity and bond returns, plus higher GDP per capita growth well before the crisis during the 1980s and 1990s,” said Amlan Roy, head of global demographics and pension research for Credit Suisse Group AG’s investment bank in London. “It’s unlikely to repeat.”
The percentage of older homeowners with mortgages has increased in the past decade, as has the amount they owe, partly because of refinancing and making smaller down payments, the Consumer Financial Protection Bureau said in May. In 2010, about 40 percent of those over 65 were making house payments compared with more than 70 percent of homeowners age 50 to 64, according to a report earlier this year by the joint center for housing.
As home prices have increased 21 percent since 2012, more older Americans are able to sell and buy another home rather than rent. The biggest jump in buyers this year was for the 65- to 74-year-old group, rising to 13 percent from 10 percent of all buyers from a year earlier, data from the National Association of Realtors show.
“They want to remain as homeowners now because it represents stability so they don’t have to deal with generating fluctuating payments for rent,” Mayer of Columbia said.
More seniors are opting for homes within walking distance of urban centers that don’t require a car, said Michelle Winters, a visiting fellow for housing at the Urban Land Institute. And they want to be in places that are multi- generational and not just dedicated to retirees, she said.
Braswell, the former civil servant, said he wants to stay in his home because of the connections he has in his community. He’s been retired for 11 years and receives Social Security as well as a pension from the federal government. He paid his mortgage off about 20 years ago.
Last year, 75 percent of remodelers said they’re helping seniors stay in their homes by installing grab bars in bathrooms and higher toilets, said Stephen Melman, director of economic services at the National Association of Home Builders.
“As health is improving, people are able to stay in their own homes longer with these adjustments, whereas before we might have seen them moving out to nursing homes or in with family members,” said Danielle Hale, director of housing statistics at NAR.
In 2000, someone who was 65 was expected to live another 17.6 years compared with 19.2 years for someone that age in 2010, Census Bureau data show.
While older Americans are propping up the homeownership rate, they’re not helping the housing recovery as much as younger people would, said Celia Chen, a housing economist at Moody’s Analytics Inc. First-time buyers are more likely to stimulate homebuilding and economic activity, she said.
If more first-time buyers don’t return to the market, older owners or their estates could be stuck with homes when they finally try to sell, said Dowell Myers, a demographer and professor at the Sol Price School of Public Policy at the University of Southern California. First-time buyers accounted for about 33 percent of home purchases this year, the lowest share since 1987, according to a NAR survey released last month.
“The younger generation at present isn’t up to the task,” Myers said. “Too often we think millennials have their own problems, but they’re a problem for everyone older than they are.”
Braswell, who was in the Navy and still swims five days a week with a team and a coach, said he plans to live in his house for at least another decade.
“It’s going to be a while yet before they come and tear this house down,” he said.
To contact the reporter on this story: Alexis Leondis in Washington at firstname.lastname@example.org To contact the editors responsible for this story: Vincent Bielski at email@example.com Rob Urban
Gains in the Senior Market are a key part of the housing sector’s recovery. Demand for hosing will take many forms
By Robert Dietz, Economic Intelligence
The housing market has continued to improve during 2014, and one sector that has faed well is the housing sector for those 55 years of age and older. The National Association of Home Builders 55+ Housing Market Index – a measure of single-family builder confidence in the senior housing development market – rose to a level of 59 during the third quarter. The index is constructed on a 0 to 100 scale, with any reading about 50 indicating more builders reporting positive conditions than poor.
The third quarter survey marked a nine-point rise from the year prior and represented the 12th consecutive quarter of annual gains. All three subcomponents of the index increased: present sales, expected sales for the next six months and prospective buyer traffic.
The similarly constructed 55+ Housing Market Index for multifamily condos was also up year-over-year, rising during the third quarter to 41 from 37 a year ago. Total condominium development has lagged in the overall housing recovery, so it’s not surprising that this measure is trailing the senior single-family register. Nonetheless, these gains speak to the general health of housing demand among older Americans.
Of course, part of the reason for these improvements is the growth in the senior population in the United States. According to census numbers, from 1980 to 2010 the number of Americans aged 65 and older expanded by 58 percent to a total count of more than 40 million. Population projections suggest that by 2025 this count will grow an additional 60 percent to 65 million.
Demand for housing services among older Americans will take multiple forms, including the need for new construction as households relocate for their retirement years. Alternatively, many baby boomers are expressing the desire to remain in their existing homes, otherwise known as aging in place. According to AARP, 89 percent of homeowners aged 50 or older want to remain in their own homes. Such aging in place will create need for remodeling, including making structural changes to homes (such as improved lighting, open floor plans and master bedrooms on first floors), as well as improving residential energy efficiency to hold down utility costs for households on a fixed budget.
Gains for the senior housing market also reflect where we are in terms of the overall housing recovery. The housing market expansion has been relatively greater among higher-end buyers, for whom wealth gains have boosted economic prospects and improved housing demand. For example, increases in home prices have increased household wealth and enabled some existing homeowners to put their current homes on the market in order to relocate.
In contrast, the housing market continues to lag among younger buyers, who have faced more challenging labor market conditions, growing student loan burdens and disappointing income gains. As a result, according to census data the homeownership rate for those 65 and older stood at 80 percent during the third quarter of 2014, compared to 36 percent for those under age 35. It is important to keep in mind that homeownership rates always differ by age, with older groups faring better. However, the changes in recent years have produced lagging growth in homeownership for younger Americans.
Developments in homeownership among all age classes are important given the critical role housing plays in determining household wealth. As an example, for households aged 55 and over who earn $35,000 to $60,000, typically just under half of household net worth is due to housing wealth. Delays in homeownership among younger households can have far-reaching consequences.
While the recovery has not progressed as quickly as many in the industry would have liked, this year’s employment growth, household balance sheet repair, near historic levels of housing affordability, and growth in home building (especially for multifamily) suggest a positive new year ahead.
One area of policy that the 114th Congress could use to improve the housing market for all age groups would be to tackle an unfinished piece of business from the current Congress by enacting important reforms to the U.S. housing finance system. The new Congress could advance the Johnson-Crapo housing finance reform legislation adopted by the Senate Banking Committee earlier this year and named after its co-authors, Sens. Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, chairman and ranking member, respectively, of the Senate Banking Committee.
The Johnson-Crapo legislation represents a bipartisan framework approved in committee that would boost the role of private capital in housing finance, while ensuring a robust, national market with a federal backstop. Such an approach would provide certainty to lenders, builders and prospective homebuyers in all age groups going forward.