Boston Condos for Sale and Apartment Rentals
Buying a second home before you retire
Second-home demand up 70% from pre-pandemic levels
Demand for second homes was up 70% from pre-pandemic levels in October, according to a new report from Redfin. This outpaced August’s 48% gain but was below January’s record 91% growth.
While demand for vacation homes is slightly lower since the beginning of the year, it is forecasted to remain above pre-pandemic levels as more Americans settle into work-from-home roles.
Home sales are on the rise as buyers are eager to lock in low mortgage rates on second homes before rates increase further.
“Many companies have solidified their remote-work policies, which is fueling continued demand for vacation homes,” said Daryl Fairweather, Redfin’s chief economist. “We expect this demand to stay strong as more employers establish permanent guidelines giving workers flexibility to live and work wherever they’d like.”
In March, a restriction enacted by the Treasury Department and Federal Housing Finance Agency limited the number of second-home and investment property loans Fannie Mae could purchase, according to the report. That restriction was removed in September, making it easier for second-home purchasers to get a low mortgage rate, which is likely also fueling demand for second homes, Fairweather added.
Boston Condos for Sale and Apartment Rentals
If you’re thinking about retirement or have already retired this year, you may be planning your next steps. One of your goals could be selling your house and finding a home that more closely fits your needs.
Fortunately, you may be in a better position to make a move than you realize. Here are a few things to think about when making that decision.
Consider How Long You’ve Been in Your Home
From 1985 to 2008, the average length of time homeowners typically stayed in their homes was only six years. But according to the National Association of Realtors (NAR), that number is rising today, meaning many homeowners are living in their houses even longer (see graph below):
When you live in a home for a significant period of time, it’s natural for you to experience a number of changes in your life while you’re in that house. As those life changes and milestones happen, your needs may change. And if your current home no longer meets them, you may have better options waiting for you.
Consider the Equity You’ve Gained
Additionally, if you’ve been in your home for more than a few years, you’ve likely built up significant equity that can fuel your next move. That’s because the longer you’ve been in your home, the more likely it’s grown in value due to home price appreciation. Data from the Federal Housing Finance Agency (FHFA) illustrates that point (see graph below):
While home price growth varies by state and local area, the national average shows the typical homeowner who’s been in their house for five years saw it increase in value by over 50%. And the average homeowner who’s owned their home for 30 years saw it almost triple in value over that time.
Consider Your Retirement Goals
Whether you’re looking to downsize, relocate to a dream destination, or move so you live closer to loved ones, that equity can help you achieve your homeownership goals. NAR shares that for recent home sellers, the primary reason to move was to be closer to loved ones. Plus, retirement played a large role for those moving greater distances.
Whatever your home goals are, a trusted real estate advisor can work with you to find the best option. They’ll help you sell your current house and guide you as you buy the home that’s right for you and your lifestyle today.
Bottom Line
Retirement can bring about major changes in your life, including what you need from your home. Let’s connect to explore your opportunities in our local market.
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Boston Real Estate Search
Buying a second home before you retire
Are you looking forward to your retirement? Open-ended days bursting with potential. No need to be anywhere unless you absolutely want to. Setting up a new home for yourself unencumbered by the needs of your children. If you are nearing retirement, this feeling maybe even more intense for you. Working on your savings and planning your life after you stop working is probably on your mind quite a bit these days. In order to set those plans in motion, many people decide to purchase a second property even before they have retired. Is buying a second home before you retire a good idea? Let’s review.
Should you buy your retirement home before you retire?
In most cases, this will obviously depend on your financial situation. There are a couple of things to bear in mind if you are not totally sold on the idea. Firstly, paying for a second home can put quite a strain on your finances. We are not just talking about the purchase itself. This includes all of the renovations, maintenance, decorating, and taxes that come after. Secondly, buying a property too soon might leave you stuck with a home out of step with your taste. Finally, your needs might change substantially in retirement. This does not just refer to space, but even to a house layout or the amenities, you will require.
Depending on how far you are from retiring, it might be a good idea to put off buying a second home before you retire for a couple of years. On the other hand, if your retirement is just around the corner, it might be a good idea to get it done in advance. This way you’ll be all set once the day comes.
The case for buying a second home before you retire
The main argument for buying a second home before you retire is that you are likely to be in a much better financial situation while you are still working. Firstly, it is much easier to qualify for a mortgage. Your income will be higher, giving you a more favorable debt-to-income ratio. You will also be able to use your retirement accounts as assets. In addition, you will have more money to decorate the interior of your second home just the way you like it. Not only that, but you will also have a lot of time at your disposal to conduct a search for the perfect place as well as any renovations that will need to be done. Finally, knowing your housing expenses in advance will make it so much easier to plan out your retirement finances.
How to go about it?
Buying a second home for retirement will definitely take a bit of planning and effort. All in all, however, it will take much less than if you were doing it frantically once you’ve already retired. You want to be able to start the rest of your life right away and in the right way.
Location location location
You may feel tempted to spend your retirement in your favorite vacation spot. Sometimes this can turn your life into paradise, but often it turns out to be a mistake. Namely, spending two or three weeks a year in your favorite coastal town is not quite the same as actually living there for months and years on end. What experts suggest when buying a second home before you retire is actually renting a place in the location you like and then spending some extensive time there. Even better, go out of season. This will give you a chance to really experience living in the town you have picked as well as investigate the neighborhood and wander around.
You want to ensure it’s not just a great spot for relaxing. It should also offer all of the amenities you expect from a luxury property.
Set your priorities
Before you start searching, you should know exactly what you want to get out of buying a second home before you retire. In order to determine what kind of property you would like, you need to figure out what you expect from your retirement lifestyle. Location is not the only piece of the puzzle. Some of the things people typically consider when it comes to retirement are:
Should I downsize?
Do I plan to travel a lot?
Should I stay near my children?
Do I need space for babysitting my grandchildren?
Will I have any special needs?
Do I want to live in a retirement community?
Knowing the answers to these questions, and others that will constitute your lifestyle will make it much easier to find a perfect home. This is another moment when renting rather than buying comes out on top. Especially if you plan to go for a luxury condo.
Hire a local real estate agent
The internet has really transformed the way we look for and buy our homes. However, hiring a reliable real estate agent is still very important. Even more so if you are buying a second home outside of the place where you currently live. The real estate agent will help guide you through the different neighborhoods and parts of town. Even if you are familiar with the locations, they will be able to show you unlisted properties that you would never come across online. This will definitely be the case if your interests lie in luxury properties. Many people do not wish to advertise their property for all to see. However, your real estate agent will be able to make the introductions if you are interested.
Final thoughts
Buying a second home before you retire is a great idea if you can make it work and know what you want. In many ways, it can even be looked at as another investment. Take your time to find the ideal place to spend your open-ended days of retirement. This is your chance to treat yourself, so get exactly what you want and what will bring you joy every day.
Photos used
https://pixabay.com/photos/woman-age-in-the-free-air-health-3186741/
https://pixabay.com/photos/single-family-home-houston-texas-2844960/
https://pixabay.com/photos/people-sitting-resting-waiting-man-1394377/
https://pixabay.com/photos/architecture-family-house-front-yard-1836070/
