Housing developers have been looking at the Baby Boom generation as it aged and anticipating the gold mine of developing retirement housing for Baby Boomers. We are seeing signs that it may not work out that way:
- The general housing market is going to need to recover significantly before the retirement housing sector can take off, because as we’ve noted in a previous article, households wishing to move into a retirement lifestyle must first dispose of their current home. Not only are housing values depressed in markets across the US, but demographics are such that there are fewer potential buyers for the homes that Baby Boomers must sell in order to move. As a result, many households must postpone or scale back their retirement plans.
- The prevalence of homes developed over the last 30 years with first-floor master bedrooms makes it that much easier for senior households to stay in their homes – especially when combined with the extended availability of services designed to keep seniors in their homes, such as home health care and “condominium”-type maintenance services for single-family home owners.
- The dip in the stock market over the last several years has also made a significant dent in retirement income for many households. While the market has gone up over the last few months, the Dow Jones Industrial Average has yet to recover to its October 2007 high of over 14,000. A lot of seniors lost a lot of their equity from which they were to derive a retirement income.
- The increase in ranch condominiums designed for empty-nesters has expanded the options for “independent living” beyond the options available twenty years ago.
- The unemployment rate for workers over 55 is the highest it has been in years. Households which find themselves out of work may be forced to dig into retirement savings, thus affecting their retirement options down the line.
So, to put it all together, Baby Boomers on the verge of retirement are likely to have less equity in their home and less equity in their investments (with a resulting decrease in income) with which to finance retirement. The decreased equity they have in their home will be more difficult to access because it will likely take longer to sell their existing home, and so they might find themselves unable to participate in a time-sensitive option (an opening in a popular retirement community, or a fast-turnaround home closing ). In addition, they are likely to already be in homes suitable for aging in place (first-floor master), so they have less incentive to move.