More Boomers Are Choosing To ‘Upsize’ Their Homes In Retirement
Americans in retirement are doing a 180 on housing, as more choose to upsize their residences and enjoy the fruits of their savings labor.
According to a recent Del Webb survey conducted among 50- to 60-year-olds, 22% are looking to move to bigger homes.
The pandemic has played a role in forcing retiree perspectives to shift.
With age comes increased frugality.
As people reach retirement age, it’s been common practice to get rid of what you don’t need, including personal items, extra expenses and oversized, hard-to-manage properties.
For years, the average American retiree has charted a predictable course through retirement, choosing smaller, more manageable homes, condos or retirement communities built for people aged 55-plus. Why pay for taxes and upkeep on a home that no longer fits you?
Things have changed in the last few years, however, and a new trend has emerged.
Rather than downsizing or right-sizing, retirees are starting to upsize. They are moving to bigger homes in their golden years.
According to a recent Merrill Lynch and Age Wave retirement study of more than 3,600 respondents, 49% of retirees didn’t downsize in their last move, and 30% actually ended up moving into larger homes.
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And they are doing it for all sorts of reasons — from finding a home that better suits them to buying a home with room for a live-in parent or visiting family members.
According to a recent Del Webb survey conducted among 50- to 60-year-olds, 22% are looking to move to bigger homes. The study also found that 43% want to remain in their existing home or move to a new location with comparable space.
This change marks the first time such a significant majority of retirees have gone against real estate norms. Let’s take a look at the reasons behind this culture shift and the financial considerations that come into play if you intend to upsize your home.
So, why now?
What’s behind the shift, and why are retirees changing their spending habits? While the reason is ultimately a matter of personal choice that differs from person to person, a perfect storm has converged to make conditions more favorable.
Let’s look at interest rates: 2020 was a record-breaking year for interest rates, specifically those tied to mortgages. Over the last 12 months, interest rates have hit an all-time low 16 different times. They fell to a three-year low of 3.51% at the start of the year, and home sales began to surge.
Over the next business quarter, rates continued a steady downward trajectory, falling to 3.23% by April. Fast forward to year-end, when rates would decline to an unbelievable 2.66% just before Christmas. At the start of 2021, we saw the bottom with rates landing at 2.65%. Now, they are marching back toward 3%, making it the optimal time for established homeowners to refinance or purchase a new property.
The strength of the stock market is always a factor. We’re nearing the end of a bull market that’s lasted about a decade. Ever since the 2009 financial crisis, market performance has moved upward at a steady and predictable pace. In 2009, the intraday low fell to a gut-wrenching 666 but has since regained more than 300%, making this the longest growth-oriented market since the 19th century.