Buying a retirement home now could be an excellent strategy
Retirement planning problematical
When we're young, few of us take seriously the prospect of retirement. But sooner or later the day dawns when we realize that we could spend a very long time not earning, and that we need to develop strategies that will keep our golden years as golden as possible.
The trouble is, we live in very uncertain times, and it's becoming increasingly difficult to devise those essential strategies. On January 20, 2011, The Omaha World-Herald ran a feature that highlighted this phenomenon. It pointed to the growing number of companies that are discontinuing products such as variable annuities and long-term care insurance policies. Of course, it's still possible to buy these, but some think that deals may become less attractive as players leave the market, and competitive forces lose their potency.
Lowest mortgage rates make real estate attractive
The day before that feature appeared, SmartMoney, which is published by The Wall Street Journal, suggested an alternative form of investment for those with an eye on their leisure years: buying much earlier than usual the home to which they wish ultimately to retire.
The argument goes like this: We currently have among the lowest mortgage rates in history, alongside house prices that some believe may be about to bottom out, so long term real estate investment could turn out to be a seriously smart move.
Mortgage calculators are fun!
Clearly, this option isn't open to everyone. Unless you have a low or zero mortgage on your existing home, and sufficient liquid funds for a downpayment, you're unlikely to find a mortgage for a retirement property. However, if you are in that happy position, you might want to explore the idea further.
A good place to start with that is one of the mortgage calculators on this site. Now, up until today you may have thought that mortgage calculators are about as much fun as an outbreak of gastroenteritis on a long-haul Greyhound bus trip. But actually, they're quite addictive. Work out the price of the property you can afford by indicating the monthly payments you're likely to find comfortable. See how much you could save compared with the sorts of higher mortgage rates that most analysts expect to arrive over the next year or two. And don't forget to check different terms; you may be surprised by the savings you could realize if you opt for a 15- or 20-year mortgage instead of the usual 30-year ones.
Retirement home prices set to rise?
Nobody has that elusive crystal ball that foretells how current mortgage rates will move, or where house prices will be in a few years. But it feels as though increasingly more experts are predicting a turnaround in house prices during 2011. If they turn out to be correct, prime retirement areas--which may be less vulnerable to short-term economic adjustments than mainstream neighborhoods--could be among the first to start to rise.
SmartMoney talks about Palm Beach, Florida where real estate agents say that property sales rose 39.3 percent in 2009, and Hilton Head, S.C. which had an increase over the same period of 13.6 percent. Meanwhile, Resort Life, which is published by the National Association of Realtors®, carried a feature in September 2010 under the headline "Second-home market offers first-rate deals for boomers" that tipped Arizona as a particularly bargain-laden state. This was mostly about vacation and investment properties, but then your retirement home could be both of those, at least until you come to move in permanently.
If all this moves you to start searching for your dream retirement home, happy house hunting.
