Should I Buy a Retirement Home Now or Wait?
It's no secret that the housing market is in shambles — home prices continue to fall, and many homeowners are still living in homes "underwater," — meaning the cost of their homes is lower than the mortgage loans used to buy them.
But what does all this mean for your retirement?
What happens when you want to sell?
What about rising interest rates?
All these questions present a severe issue for many in their 50s and 60s who may wish to retire. So, where does the housing market go from here?
Higher rates mean higher monthly payments for buyers or homeowners refinancing mortgages. As the cost of buying climbs, demand typically cools, and prices soften. We're seeing signs that demand is cooling because of sharply higher mortgage rates combined with high home prices:
- Homebuilder optimism slumped in June, as did housing sales expectations, according to the National Association of Home Builders (NAHB). Traffic of prospective buyers has declined considerably since March.
- Existing home sales fell for the third straight month in April. Sales were down 2.4% from the prior month and 5.9% from one year ago, according to the National Association of Realtors. (NAR) The median existing-home sales price increased at a slower year-over-year pace of 14.8% to $391,200.
Posted by Grove Point Financial
Though we can't control what is happening in the market, it doesn't mean we necessarily have to put our desires on the back burner.
What moving forward could look like for you
Sometimes buying a home may be the right move—especially if you are trying to purchase in your retirement. Buying a home is hard enough, but it can be even more challenging when interest rates are high. If you're planning to buy a retirement home, you must consider all the factors that will affect your future finances.
Here are tips for preparing to buy a retirement home in this market:
Avoid making impulsive decisions
The first step in buying any home is deciding where you want to live. If you're in a rush, you may be tempted to buy the first house that comes along — but this can be disastrous if the location isn't suitable for your lifestyle or family needs.
Know what rate you want and what kind of loan you need
Buyers need to know precisely what loan they want — fixed or adjustable — so they can shop around for lenders that offer it. If interest rates have already gone up by the time you're ready for closing, make sure your lender isn't just offering a "teaser" rate that will rise sharply in six months or a year.
Consider down payment assistance
If you're shopping for a home outside your price range, consider applying for down payment assistance programs through the federal government or state agencies. These programs help low-income borrowers by offering grants or loans; they generally require repayment once the house is sold or refinanced.
Go a different route
Look at foreclosures or short sales as an option if necessary. Many people who need cash quickly sell their homes for less than they would usually get for them because they're in financial distress due to job loss or other factors.
Seek out solid advice
Get professional advice from real estate agents and mortgage brokers with experience selling homes in your area. They'll help you understand how much you can afford based on your income, the current market, and the type of property available at different prices and locations.
Create criteria for choosing a neighborhood
If several neighborhoods meet your criteria, create a list of must-haves so each community has an equal chance of being selected as your new residence after retirement. This way, if one neighborhood doesn't meet all your criteria, then it won't be considered for purchase unless there's no other choice left in town!
Deciding when to purchase the ideal retirement home can be difficult, especially if you're looking to take advantage of low-interest rates in today's marketplace.
Consider reaching out to experts, like a realtor who knows the market in your area and a trusted financial planner that can look at your whole financial picture and help you strategize how a buying a retirement home fits into your overall retirement plan.
At Medallion Financial Group, we believe financial planning is about Family. We have been helping families invest in the future since 1987 through a holistic planning approach. We recognize there are a variety of needs when it comes to retirement planning, plan rollovers, annuities, college planning, life insurance options, and investment management. It is easy to get lost in a sea of choices. Our financial advisors help with the basics and beyond to enable our clients to get the education, advice and management they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client’s expectations – because we have high expectations of ourselves.