Have you always dreamed of retiring to sunny Florida, the desert views of Arizona, the excitement of Vegas or another dream location? These spots have been hit hard by the housing crash, and it might be time to stop dreaming and jump on the bandwagon.
As we’ve discussed before, the housing crash was inevitable, predicted and a sober reality for the last five years. Washington may have missed it, but we talked about it multiple times from 2006-08 right here in this column. Nationwide home prices are down 31 percent from 2006 per Case-Shiller. There could be even more downside to go as most bubbles end with a 50 percent contraction from their high. But in the retirement pockets, homes may never be this affordable again! There are two forces creating the current condition.
Fear and greed drive all markets, and many people have been scared out of their retirement dreams. Fear provides opportunity for some. Home ownership because of credit restraints and down payment requirements is out of reach for many Americans. This puts those with cash and credit in the driver’s seat. Your retirement “lifestyle” is available at a bargain price relative to a few years ago. Same house for a lot less cash! Don’t get carried away with great ambition and reckless abandon. But if you plan to buy a place for personal reasons — to use — the time to start shopping may be now.
In the warm and well-known retirement places, properties are beginning to move and sometimes with multiple offers. This is relatively new but it is taking place. The offers are below the listing price and cash is king so if that’s an option you’re in the driver’s seat. LIBOR’s is currently keeping mortgage rates low, so if you have good credit and money for the down payment you are in great shape.
But the end is near for the traditional 30-year mortgage. Qualified residential mortgages (QRMs) will require more than 20 percent down and stellar FICO scores. If Fannie or Freddie are eliminated or scaled back, the ability to even obtain a mortgage is in question. This would drive real estate prices lower. That is why I would only advocate buying a property you intend to use and not treat it as a store house of wealth.
Even if you’re not ready to move today, consider snapping up your retirement home while the pickings are good. Some families are even banding together to buy places. Make sure you know your partners! Semi-private use is better than no use at all.
If that’s not for you, these hard-hit areas have a rental shortage so new that home buyers are finding credit-worthy renters, sometimes the sellers themselves, for long-term leases until they are ready to settle in. Nationwide, rentals are expected to rise at least 15 percent in the next two years (SmartMoney).
This is not a suggestion but rather a thought to ponder. Just one more thing to consider!
Joseph “Big Joe” Clark is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.
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Big Joe Clark: Time to buy that retirement home?
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