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Shrinking Inventory and Rising Mortgage Rates are Creating “a New Housing Crisis” for Boomers Looking to Downsize

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As today’s boomers hit retirement, more and more are grappling with the question, “Do we downsize or do we age in place in our current home?” As this just-published Bankrate article makes clear, the choice isn’t quite that clear. “Baby boomers are struggling to downsize,” the article warns, “and it could create the next housing crisis.”

Housing Crisis Triggered by High Prices, Short Supply

The article spotlights a couple in the Los Angeles area who sold a home and expected to use the proceeds from the sale to purchase a smaller home closer to family. Months later, they’re still renting – and still looking. Sky-high demand for homes has driven up prices and drained available inventory, and as interest rates rise (up more than a full point over the past two years) this couple, like thousands of others in markets across the country, has had to put their downsizing plans on hold while high rents drain their savings.

According to the Bankrate article, “[this couple’s] struggles are shared by a growing number of older Americans who wrestle with whether to downsize or age in place. The answer, as it turns out, isn’t so simple.”  Bankrate quotes a just-released AARP Survey of Home and Community Preferences which reported that more than three-fourths of Americans age 50 and older would prefer to remain in their current home in retirement – but fewer than half actually think they’ll succeed. “Rising mortgage rates, sky-rocketing home prices, and inventory shortages at the lower end of the market are converging to create a new housing crisis,” says Bankrate, “this time for baby boomers.”

Housing Crisis Made Worse by High Mortgage Debt

The baby boomers still represent a huge chunk of the American population, more than 74 million. By 2030, all the boomers will have passed the age of 60. “As boomers age, an alarming trend has emerged,” Bankrate reports: “they’re entering their golden years with mortgage debt. Americans over the age of 60 were more than three times as likely to carry mortgage debt in 2015 compared to 1980,” according to Census data. To make matters worse, this same analysis found that much of the increase in mortgage borrowing is taking place in senior households with lower than average incomes and assets, and no pensions, making these homeowners especially vulnerable to economic downturns and limited in their financial options.

“Generally,” says Bankrate, “past generations aimed to have their mortgage paid off before retirement to better manage their reduced incomes later in life.” Today this ideal has changed. An article in the Washington Post a few years back called mortgage debt “the new retirement time bomb” because mortgages put retirees in such a precarious financial position.  An analysis of statistics from the Federal Reserve Board, recently published here, shows that the number of homeowners 65 and older still carrying a mortgage or home equity loan has shot up from about 26 percent in 1989 to nearly 58 percent today. “Carrying mortgage debt may offer one explanation as to why many baby boomers prefer to remain in their current homes,” Bankrate speculates. “Other factors, such as retaining home equity, staying in familiar surroundings, or a lack of affordable options, also drive the decision to stay put.” But if the present home is ill-equipped for aging in place, a growing number of seniors may find themselves with limited choices.

“Baby boomers who plan to stay in their current communities are likely to have the upper hand in competing for a smaller, less expensive home if they’ve paid off or have significant equity in their current home,” the Bankrate article states. “The key question is whether they’ll find the right home for their needs amid inventory shortages in the lower end of the market. Seniors’ mobility could be impeded if they try to relocate to more expensive markets to be closer to family than where they currently live, especially given higher rates and rising prices.”  Indeed, says the article, “the crux of the boomers’ dilemma is the shortage of affordable homes on the market.”

Housing, Medical, Financial All Interconnected

Here at AgingOptions we were encouraged to see how the Bankrate article explains that housing issues and other elements of retirement planning – especially in the area of health care – are closely interrelated. “There’s a growing linkage between housing and health care, and being able to stay in your house longer,” says housing expert Jennifer Molinsky of Harvard University. The greatest barrier to seniors aging in place are issues of mobility and health. “Older homeowners may need to add amenities,” says Bankrate, “such as bathroom grip bars, walk-in showers, wheelchair ramps, and wider hallways and doorways to accommodate walkers or wheelchairs as their mobility declines. Some of these improvements are simple, but when you start redoing bathrooms, for example, remodeling projects can add up quickly.”

This is a big part of the reason why, as Rajiv Nagaich from AgingOptions puts it, “A housing issue quickly becomes a medical issue, which then becomes a financial issue.” As the Bankrate article warns, housing expenses will undoubtedly dominate the overall retirement picture for most people, which makes it imperative that you prepare a financial plan for retirement if you haven’t done so already.  A reputable financial advisor can develop a Retirement Dashboard for you and help you determine the options that will allow you to live comfortably while maximizing your retirement security.

In retirement planning, the bottom line is that all the essential elements of retirement have to fit together, like pieces of a puzzle.  Our unique approach to retirement planning does just that. It’s called a LifePlan from AgingOptions, and what truly makes it stand out is our comprehensive, multifaceted approach in which financial plans, legal protection, medical coverage, housing choices and family communication are all woven together seamlessly. With a LifePlan, you can be assured that your assets will be protected and that you’ll be able to avoid becoming a burden to your loved ones as you age. When it comes to true retirement security, there’s no plan more powerful than an AgingOptions LifePlan.

There’s an easy way to find out more: accept our invitation to attend a free LifePlanning Seminar featuring Rajiv Nagaich. We hold these in locations throughout the region, and you can get all the details concerning currently scheduled seminars by clicking here for our Live Events page. You can then register online for the seminar of your choice, or call us for assistance. It will be our pleasure to meet you soon at an AgingOptions LifePlanning Seminar near you.

(originally reported at


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