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Housing – Still in Recovery

Nine years after the housing bust, near retirees still hurting

If you’re close to retirement and still feel like you’re recovering from the housing bust, you’re not alone.

A recent report from the Center for Retirement Research shows that nearly 40 percent of all households ages 55 and over have not paid off their mortgages. That’s up from 32 percent in 2001.

It’s a significant number because home equity often represents the biggest supply of wealth other than pensions for most seniors. Retirees often finance their retirement years by either selling their home or getting a reverse mortgage, where the loan is not repaid as long as a homeowner remains in their home.

But the recession in 2008 battered the opportunity for many homeowners to pull value out of their property. Homeowners carried large mortgages fueled by the housing boom. Then, the bubble burst and values plummeted.

Because of the bust and the fact that many older households carry big mortgages, the report says that nearly 52 percent of working-age households stand to have a lower standard of living in retirement. If the housing bubble had never burst, 44.2 percent, not 52 percent, would be at risk, it says.

The good news is that home values are on the rise. They grew nearly 5 percent in 2016. They are expected to grow another 3.6 percent in 2017, according to the Zillow Home Price Expectations Survey. But the survey does predict a slower rise in home values over time -- 3.18 percent in 2018, 3.13 percent in 2019 and 2.91 percent in 2020.

What’s a nearly retired individual to do?

Consider working longer: It’s not an answer anybody wants to consider, but working a couple of years longer helps you save for retirement or pay off that mortgage and keeps you from dipping into your retirement funds. The national average retirement age is about 65, according to the U.S. Census Bureau.

Research a reverse mortgage: Paying off an existing mortgage is a common reason why many people consider this option,  but it also comes with drawbacks and restrictions. CESI’s certified reverse mortgage counselors can help homeowners evaluate whether this is the right option for them.

Downsize: Depending on how much you owe and how much equity you have built up in your home, it could make sense to sell a larger home and downsize to a smaller, less costly one. Not only could you decrease your mortgage payment, you also could save money on taxes for a smaller dwelling and on utility bills, for instance, to heat a smaller home.

Consult an expert: Look to experts such as those at the HUD-certified CESI Homeownership Center for help, especially if you worry that you won’t be able to afford mortgage payments once you reach retirement. The center provides counseling and education services, along with ongoing support.

And support is critical. After all, the housing bust may still have ripple effects across the country, but everybody deserves a retirement without worry.

If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. Contact us today for a free financial assessment with one of our certified credit counselors.

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1 Response to Housing – Still in Recovery

  1. It is unfortunate that there are individuals with large mortgages looming over their retirement years. Your article addresses many good options that retired/almost retired individuals can consider.

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