The Best Place to Retire? Why Boomers Are Staying at Home

It’s a largely held belief that baby boomers are downsizing, seeking to trade in their suburban single-family homes for urban multi-family residences when they approach retirement as “empty-nesters.” However, that’s not always the case. While this cohort is experiencing a number of life transitions, one key metric of boomer housing consumption hasn’t changed: the proportion of the population living in single-family detached homes, according to a Fannie Mae study. In fact, the percentage of baby boomers residing in single-family homes was at least as high in 2012 as at any time since the onset of the housing crisis, the study shows. “Housing is an emotional purchase,” says Jeffrey Christakos, senior advisor at New Jersey-based Christakos Financial Group. “There’s always an emotional tie to it, and there’s a tendency to want to hold on to it.” For this reason — and others — boomers show little inclination to leave behind their single-family detached homes. The following are some of the additional drivers impacting their decisions: Aging in Place Preferences The proportion of all boomers who are householders residing in single-family detached homes actually increased slightly between 2006 and 2012, the Fannie Mae study shows. Even leading-edge boomers, who have experienced the largest changes in household makeup and labor force participation, experienced a slight uptick in the per capita rate of single-family housing occupancy during that time. Why? Christakos suggests the notion of “aging in place” can have a significant impact on boomers’ decisions to move or stay put. As defined by the Center for Disease Control, aging in place is “the ability to live in one’s own home and community safely, independently and comfortably, regardless of age, income or ability level.” For some, aging in place goes back to the idea of having emotional connections with a particular house, Christakos says. “The idea is that you want to retain memories by holding onto a house,” he says. “You might have raised your kids there, so there’s an emotional tie, and it becomes an attraction for the family to congregate.” Drop in Home Values Another reason some boomers are electing not to move is that economic and housing market conditions have forced – or at least encouraged – them to remain put even if they would prefer to move and change their housing situation, the Fannie Mae study suggests. One constraint is the substantial decline in boomers’ home values during the housing bust. Between 2006 and 2012, the average value of an owner-occupied single-family detached home with a boomer householder declined by 13%, the study shows. “If you’re missing a big part of the equity in your home, you can’t necessarily sell when you want to,” Christakos says. So what exactly will drive boomers to move? For some, it has to do with their children leaving their homes, and for others it has more to do with finances. Empty-Nest Syndrome As the empty-nester theory goes, once children leave the family home, boomers will no longer have a need for the abundant living space, quality schools and other amenities typically associated with single-family suburban residency, the Fannie Mae report states. Between 2006 and 2012, the proportion of leading-edge boomer households consisting of a married couple with at least one child under age 18 declined from 10% to just 3%. Younger boomers have also begun to experience this transition, with the share of nuclear families among this group falling from 35% to 20%, the study shows. Still, this theory may not shake out, as Christakos suggests empty-nesters may be finding their children moving back in down the road. “The old notion of kids moving out and staying out is not necessarily true anymore,” he says. “As a result, either the kids have come home and [boomers] can’t make the decision to move, or they haven’t come home and they’re not comfortable with their home’s value.” “Rightsizing” in Retirement Exiting the labor force for retirement could lead to a downshift in housing consumption if boomers adjust their housing costs to match the reduced earnings of retirement, Fannie Mae writes. Instead of “downsizing,” Christakos suggests people “rightsize” — that is, to adjust their lifestyle in order to live within their means. To rightsize, people should periodically check their retirement expectations and their cash flow, making sure the two align. Doing so early on will increase the likelihood that they don’t fall short in retirement. “People don’t make decisions until they have to, and in the economic cycle, it’s usually when they retire,” Christakos says. If you want to know if you are right sized right now or not, try a retirement calculator. Considerations When Moving If you’re one of the few either downsizing or rightsizing in retirement, be sure to have a plan ahead of time. Before jumping into a housing market, research locations you’re interested in and consider renting first, Christakos says. “A lot of people say, ‘I have to own a house,’ — there’s a connection to being a homeowner,” he says. “But there’s a difference between going to a place on vacation and actually living there. So my suggestion is to sell your house and test out different locations by renting an apartment, a townhouse or a house.” Additionally, keep in mind the need for health care down the road. Make sure you live near medical facilities, he says. When in doubt, consult a financial advisor. Start searching for one today.