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Home Ownership in Retirement

Homeownership is a central part of the American Dream. That dream begins with good education and a good job with benefits. It progresses to buying a home and paying it off by the time you retire so that you can enjoy your well-earned later years.

However, that scenario is changing rapidly.

The real estate market has been affected by the pandemic and rapid inflation. Prices across the US have increased markedly. In response, the Federal Reserve is raising interest rates in an effort to slow inflation, which in turn is damping down the fire in the housing market.

Since 2020, home prices have been on the rise steadily. For the past year, America has seen real estate prices soar across the nation. This has been put down to the fact that housing inventory is still incredibly low after the pandemic. Demand for homes has skyrocketed as folks realized they can work from home or change their work-life balance to shift in their favor.

Home prices have risen by 8.7 percent over the past 12 months and the median sale price for a home nationwide has jumped to $238,700. They are expected to rise another 6.5 percent within the next year.

If you are entering the housing market now, you’re likely to get a bad deal on both ends. You are dealing with more expensive homes, higher taxes, and high-interest rates.

“Be careful about buying a new home,” says David Neuwirth, Senior Vice President Investments for David Lerner Associates. “Downsizing might sound like a good plan, but if you are selling your home and having to borrow to buy a new one you could end up with a higher interest rate.”  

Research has shown that the average homeowner aged between 65 and 74 who downsizes sells a $270,000 home and purchases one for $250,000. Unfortunately, many retirees are looking for houses in a price bracket that pits them against first-time home buyers, making it competitive and pushing prices up even more. 

It makes sense to downsize and plan for a simpler life in retirement. However, in the current market, it could put you in a worse position financially. With house prices still going up, you could end up paying more for a smaller home.

Waiting longer to buy might also be the wrong move, as even with the cooling off of the housing market prices are not expected to fall much, if at all.

So, what is the answer? Well, that all depends on your personal financial scenario, and what part of the country you live in. Consult your financial advisor and discuss your options.






Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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