Homeownership continues to play a prominent role in the lives of retirees, according to the Census Bureau. Data recorded in their American Housing Survey showed one third of homeowners 65 and up had a mortgage in 2009.
Households of those aged 65 and over make up the largest portion of homeowners in the United States. Approximately 81% of individuals in this age group are homeowners, compared to 64% of people between 35 and 44 and only 38% of people younger than 35.
Age has no bearing on a borrower’s qualification for a mortgage. If an individual qualifies based on income and credit scores, age is not grounds for denial. The Equal Credit Opportunity Act (ECOA) prohibits discrimination based on age, race, gender and other characteristics.
There are, however, different requirements for retirees who may have multiple sources of income. When applying for a loan, older homebuyers need to gather documentation about:
- pension awards;
- Social Security awards; and
- statements from any Individual Retirement Accounts (IRAs) or 401(k) plans;
first tuesday take: Most retirees will sell the large family home that once housed their children in favor of a humbler abode for their golden years. However, almost all who sell will re-purchase. Homeownership is a concept engrained into the psyche of the Baby Boomers and will not likely retire as they do. [For more information regarding Baby Boomers, see the July 2011 first tuesday Market Chart, Boomers retire, and California trembles and the September 2011 first tuesday article, Aging generation, budding market.]
In California, retirees prefer condos in urban areas. City living affords Boomers access to public transportation, community amenities and the nucleus of culture. Further, condos shift the constant property maintenance and yard work necessary for a detached single family residence (SFR) to the homeowners’ association (HOA).
As this age group makes their transition into retirement, they will create new opportunities for multiple listing service (MLS) brokers and agents as well as builders of multifamily projects. They will influence sales volume both in the suburbs they leave (lower pricing) and the urban market they flood (higher pricing) from 2016 to 2035, peaking in influence around 2025.
Simultaneously, Generation Y (Gen Y) will be entering the work force peaking in household formation around 2020 and looking for similar urban residence. These two demographics will spark a Great Confluence in demand for urban housing. Brokers and agents will do well to prepare accordingly. [For more information regarding Gen Y, see the October 2010 first tuesday article, The demographics forging California’s real estate market: a study of forthcoming trends and opportunities – Part I and Part II.
Re: “Borrowing in Retirement” from the NY Times