fbpx

Caution: Falling Home Values

With home prices falling for nearly five years, many Americans must consider what to do with their homes should prices continue to collapse and the equity in their homes, if they are still lucky enough to have any, disappears completely. 

If you were counting on tapping the equity in your home to help finance your retirement, you may have reason to worry. A recent issue of SmartMoney points out, “With home prices falling for nearly five years, many American must consider what to do with their homes should prices continue to collapse and the equity in their homes, if they are still lucky enough to have any, disappears completely.” If you are a Baby Boomer with an eye toward retirement, your plans may be taking quite a beating right now. Warnings about shortfalls in social security and Medicare, rising health care costs, and the prospect of higher taxes now combine with disappearing home equity. No wonder so many Boomers say they plan to work through their “retirement.” So, what do the experts say you should do with your home? Should you stay put and wait it out, hoping that

home prices will eventually recover? Or should you bail out now, before you lose even more, and downsize?

“The answer is that it depends on the individual situation,” says Nicholas Paleveda, an adjunct professor at the graduate tax program at Northeastern University. “If you have plenty of assets for retirement, there may be no reason to downsize. If you do not have sufficient assets for retirement, then selling your home to live in a smaller home may be appropriate.”

Some options to consider include:

  • Multi-Generational Living. Think of The Waltons, with three generations living in one house. Multi-generational living was commonplace years ago, and is growing in popularity now. In fact the number of household comprising multiple generations jumped to 7.1 million, or 6.1% of all US households in 2010. Of course, things worked out well for The Waltons, but remember that was television … and even John Boy eventually moved out!
  • Pay Down the Mortgage. Depending upon your circumstances, it may be wise to pay down, or pay off, your mortgage before retirement to reduce your monthly expenses.
  • Downsize. In today’s market, it may actually make sense to sell your house, even if it is underwater, if you can purchase a smaller home at a particularly good price and low interest rate. The cost of paying off your current mortgage would effectively be added to the purchase price of your new, smaller home. In some instances, after the dust settles, you could still be money ahead in the long run.
  • Buy a Second Home Now. That may seem counter-intuitive, but if you have the means and can find a good price on a second or vacation home that will mesh well with your retirement needs, then you could basically lock in that price (and interest rate) now, and sell your primary home when the market recovers. 

Retirement planning has never been simple, and is even more complex in today’s economy. You are well-advised to seek qualified counsel before making any major moves involving your home.

Reference:  Robert Powell via SmartMoney (May 17, 2010) “For Retirees, a Real Estate Nightmare Looms

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment

LIKE THIS POST?

We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Coronavirus/Covid-19
Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.