Timing might not be everything as the popular adage suggests, but it certainly plays some role as Baby Boomers plan their retirement. The pandemic urged many boomers to throw in the towel and retire. Forbes reports that 3.2 million seniors made the decision to retire during 2020, citing researchers’ beliefs that the pandemic was a key contributor to this increase.
Retirement means a change of scenery for many Baby Boomers. While some boomers decide to age in place, keeping and maintaining the family homestead, there are many who decide to sell instead to begin a new life.
Below are some major reasons why boomers are selling their homes.
1. Baby boomers cash in on windfall profits during real estate bubble.
Realtor.com reports median profits of $66K on homes sold between July 2019 and June 2020, representing an increase of about $6K over earlier years. These figures are based on a survey of 8,200 new homeowners.
Forbes reports that as of the fourth quarter of last year, in 2020, the U.S. housing market showed a median price increase of 14.9% with 88% of markets around the country boasting double-digit appreciation. Baby Boomers are taking advantage of the sellers’ market.
Listing real estate agents field multiple offers for most homes that result in bidding wars in many cases. This type of buying frenzy that results from a housing shortage fuels higher prices and bigger profits for sellers. It makes sense that many boomers view this type of market as the perfect time to cash out to make the most of their home investment.
It is common for buyers to get their asking price or higher. Most well maintained homes take three weeks or less to sell. Savvy Baby Boomers who have experience buying and selling homes over a lifetime recognize this unique market as their best opportunity to earn as much as possible. It’s no secret that the next hot market might be too far in the future.
2. Retiring Baby Boomers sell home to start a new life adventure with more options and freedom.
Retirees with an open mind and adventurous spirit find options galore as they approach retirement. It can be overwhelming to evaluate all the possibilities.
After selling a home and eliminating all of the demands homeowners face, many baby boomers experience a sense of relief from the ongoing maintenance issues and toll that homeownership can take. With the added time freedom retirees enjoy, some decide to buy an RV and travel the country. Another group moves to a favorite vacation destination to enjoy nice weather.
Adventure-hungry retirees may decide to rent in different locales they have always dreamed about instead of buying again, while earning interest on their sales proceeds. It’s no secret that overseas living options attract U.S. retirees looking for places to stretch their retirement dollars.
3. Baby Boomers decide it’s time to downsize.
MassMutual reports survey results claiming that half of the retirees who move do so to downsize. There are many financial and lifestyle reasons people decide to move to a smaller home or condo.
One practical reason baby boomers elect to buy smaller homes is so they can lower their expenses. Sticking to a fixed income that is often less than their previous salary forces many seniors to cut corners where they can.
Senior living communities also encourage boomers to move in by offering excellent amenities. After spending a lifetime mowing the grass and shoveling snow, many retirees appreciate shedding most of the responsibility of keeping a home maintained.
Downsizing often includes finding a more suitable home to age in. One-story properties are especially popular. Climbing steps can be difficult for boomers suffering with mobility issues.
4. Baby boomers sell to move close to family during retirement.
Realtor.com reports that the top reason boomers decide to sell their property is to move to a home closer to family members. If anything, the pandemic made families want to live closer to one another.
The isolation Covid-19 caused psychologically impacted many people making it even more apparent how important connection to family is. Seeing your grandchildren and children frequently has proven to significantly improve the mental and physical health of seniors.
Yet another interesting development attributed to the pandemic is the uptick in multigenerational living. The Wall Street Journal reports that 26% of Americans live in a family household that spans three generations. Overall, this type of arrangement appears to be working with 79% of those surveyed claiming that living with relatives has been a positive experience contributing to both mental and physical health.
5. Retirees sell their home to become renters.
There are many advantages to renting if you desire a carefree lifestyle where you can travel more and stop worrying about yardwork and keeping up a home. While there are many variables to consider before deciding to buy or rent, renting can be cheaper in many cases.
MarketWatch cites a report published by LendingTree about the financial benefits of renting as compared to buying. The report claims that renters pay an average of $606 less than buyers in the 50 largest metropolitan areas. It is no surprise that boomers on a tight retirement income might consider cashing out their home equity and renting.
Adventure-hungry retirees may decide to rent in different locales they have always dreamed about instead of buying again and being stuck living in one place. Selling in a hot market means you are likely to spend all of your sales proceeds to buy again in that same sellers’ market. It’s financially impractical to buy in a hot real estate market that favors the seller.
Takeaway
There are many reasons that retirees decide to finally sell their homes. CNBC reports that 64% of seniors plan to move during retirement. Baby Boomers continue to redefine what retirement life is as many continue to adapt to having more time, and in most cases, less income.