ORLANDO, Fla. – Due to today’s economic realities – including the recent Great Recession – along with the usual health challenges, many of today’s mature adult homeowners may face financial and housing-related challenges as they reach retirement.
Over 10,000 Americans turn 65 every day, the largest number in history. Because they have the highest homeownership rate of any age group, their homeownership decisions could impact U.S. housing.
Over the past decade, the number of mature adult homeowners still burdened with mortgage debt has doubled. The average amount of their mortgage debt also increased a whopping 82 percent.
Many are forced to borrow earlier in retirement than they’d anticipated. Because mature adults today are living longer than ever before, they now face an increased possibility of outliving their money.
At the same time, many are finding their income is significantly less than what they’d anticipated, often due to recent unemployment or under-employment as well as slower wage growth. Moreover, historically low interest rates have translated to lower earnings from savings.
The combination of less income and more debt is forcing over a third of those over 80 to cut back on food, medications and other basic expenses. These factors only serve to reinforce the importance of government housing policies that many homeowners rely on for financial security.
For example, the capital gains exception allows Americans to sell their homes and retain up to $500,000 ($250,000 for single homeowners) of the proceeds for retirement without having to pay capital gains tax. Some mature adult homeowners may rely on the availability of reverse mortgages, which enables them to tap into their home equity without having to sell their homes.
With so many mature adult homeowners facing decisions regarding the financing and sale of their homes, as well as choices over the type and location of alternative housing they will need after a home sale, the U.S. housing sector is likely to feel the impact on housing supply, demand and home values.