Our neighbor across the street sold her bungalow last month and moved a few blocks south to a co-op apartment complex for seniors. She’d retired a couple of years earlier and had been looking to downsize, so the move wasn’t surprising. But I was shocked to hear that she got more than $400,000 for her modest abode. I don’t know how much equity she was sitting on or how much she’s paying for her new place, but it seems likely that she made a pretty savvy move.
Turns out, she’s one of the lucky ones.
America’s seniors are facing a serious housing crisis, according to a recent report from Harvard University’s Joint Center for Housing Studies (JCHS). Rising home prices may be an aging seller’s dream, but a nightmare looms when you subsequently discover that buying even a tiny fixer-upper is beyond your means.
It’s a vicious circle: Older homeowners tend to prefer aging in place until forced to consider a move by circumstances beyond their control. Only 5 percent of U.S. seniors moved between 2016 and 2021, researchers note. This inactivity suppresses housing supply amid rising demand from younger house-hunters, thus ramping up prices and making it unaffordable for older folks eager to downsize.
“A lot of people express a desire to stay in their communities, even if not in their specific, long-term home,” Jennifer Molinsky, PhD, director of JCHS’s Housing an Aging Society Program, tells Bloomberg News. “And yet, many of the communities where older people are — suburbs, exurbs, rural areas — don’t have too many options besides single-family houses.”
And for those who wish to stay put, the economics of home ownership have become increasingly fraught. Nearly one in five U.S. households headed by seniors spent more than 30 percent of their income on housing in 2021. That was the highest proportion of housing “cost-burdened” seniors on record. “As we see more people entering their 80s and beyond,” Molinsky explains, “I expect that we’ll see those numbers of people who are cost-burdened grow.”
Meanwhile, 31 percent of octogenarians remain saddled with mortgage payments, compared with only 3 percent 30 years ago. That’s partly due to a surge in refinancing loans during the pandemic when mortgage interest rates dropped precipitously. Those deals pushed payoff dates far into the future and have left seniors — many on a fixed income — with record levels of mortgage debt. Between 1989 and 2022, that burden soared by 750 percent: from an average of $9,000 to $79,000 when adjusted for inflation.
My Lovely Wife and I are among the 41 percent of U.S. homeowners between the ages of 65 and 79 who are still lugging around a mortgage. We refinanced in 2021, which lowered our interest rate and allowed us to add a second bathroom to our 95-year-old bungalow, but the 15-year deal means we’ll be on the hook for a monthly house payment midway into my 80s.
It’s still a better value than most downsizing options in the local real estate market, though, so we’re content to stay put, continue to build some equity, and hopefully leave it to the kids when we’re gone. Unlike four in 10 U.S. seniors, we don’t have to make ends meet solely on a monthly Social Security paycheck; as long as I’m able to hold down a job, we can manage our household expenses and even sock away a little dough in case of emergencies.
That’s the idea, anyway. But who knows what the future brings? The JCHS study notes that about 70 percent of U.S. seniors will need long-term care at some point and only 13 percent would be able to handle the costs. And a mere 14 percent could afford a daily visit from a healthcare worker. “That was really a big surprise,” says Molinsky. “First of all, that those two things are so equivalent in price — they may not be equivalent in what you get out of them — and second, just how few people could afford them.”
Government programs can help, of course, but a notable segment of people 75 and older — about 30 percent — report income that is too high to qualify for aid and yet too low to afford long-term care services.
Combine that financial reality with an aging housing stock typically designed for younger, more ambulatory residents (one 2011 survey found that fewer than 4 percent of U.S. homes featured single-floor living, no-step entries, and wider doorways) and a vast number of seniors now find themselves stuck in a hazardous situation with limited options.
MLW and I will probably never know whether our former neighbor was having trouble navigating the stairs after her knee surgery or if there were other forces that contributed to her decision to sell. She made no announcement and packed up her belongings with minimal fanfare. If we see her around the neighborhood in the months ahead, maybe she’ll fill us in on her decision and let us know how she’s doing in her new space.
I suspect, however, that there was a good deal of planning that went into her decision. She never seemed to be one to rely on fortune’s foibles when taking some action. But I also wouldn’t be surprised if there’s some small part of her that realizes she was luckier than most to be able to make the move when she did. Just as MLW and I are luckier than most to be able to stay put.
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