Baby boomer homeowners are sitting on a ton of equity right now. According to the Federal Reserve, they hold $17.3 trillion in home equity, roughly 50% of the country’s total equity. This is in large part due to so many of them — 83% of homeowners with a fixed-rate mortgage — having let their property build equity over time.
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Unfortunately, many boomers are facing a new problem, and that’s the current U.S. housing market. As of quarter three of 2024, the average home sold for just over $501,000. According to a 2022 Redfin report, nearly 30% of all “large homes” (those with at least three bedrooms) belong to empty-nest boomers.
Between high housing prices and a lack of smaller, more accessible homes to downsize to, many boomers are aging in place. For those who might have wanted to move to a more manageable home or somewhere less expensive altogether — a common drive for retirees on fixed incomes — it’s just not feasible.
So, how can boomers manage this new retirement problem? How can this generation find affordable housing, and what should they consider when making the plunge?
Here are a few things boomers should keep in mind when looking for affordable housing.
It’s no secret that finding affordable housing is a serious problem, and not just for boomers.
“Finding affordable housing is very daunting right now — many real estate markets are still running hot. While inflation has cooled, prices are still high. Property taxes in many states are increasing and the cost of insurance is also on the rise,” said Christine Coley, certified financial planner and wealth advisor at SteelPeak Wealth.
“A lot of people, of all ages, are seeing drastic increases in the mortgage payment due to increases in property tax and the cost of insurance,” Coley continued. “Homes they could comfortably afford are now moving out of reach with these increased costs. In areas where real estate has surged, people who own their home or are still making payments are having trouble keeping up with the increase to taxes and insurance.”
For fixed-income boomers who’ve paid off their mortgage, property taxes and insurance are serious financial concerns. The average cost of property taxes is $1,815, while typical homeowners insurance runs about $1,754 a year. Larger, more expensive homes tend to have higher taxes and premiums.
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Affordable housing is still out there. It just might be harder to find. Boomers who are considering making the move from their current house to a smaller or more manageable one, or even to a different state, should start by asking themselves a few questions.
