Age discrimination is not only a workplace issue. For example, recent research from Boston College Center for Retirement Research reveals that older home sellers have a lower rate of return on their housing investment.
A large data set of repeat home sales was examined, with holding periods of less than three years filtered out so as to exclude house flippers. Ages were included in the data. Because the acquisition price as well as the final selling price was included, a rate of return for the investment could be accurately determined.
The research suggests that the rate of return is roughly constant for home sellers until they reach age 70, when it declines. For the comparison between an 80 year-old and 45 year old the difference amounted to about 5%, which would be $20,000 on the typical $400,000 home. The typical home price in New Jersey is ~$550,000, and scaling up to a million-dollar home might mean a difference in sale price of $50,000! Although this seems shocking at first, looking deeper into the data does suggest it’s not as nefarious as age discrimination can be.
The first suggested reason is regarding upkeep. Homes owned by older adults generally are more likely to need repairs, perhaps because the owner is less physically capable of some upkeep jobs, or perhaps because people are less likely to make long-term improvements when they aren’t planning to live there for the duration of that improvement. For example, why replace a roof with one that will last for thirty years if you have a likelihood of staying in the home for only five more years before needing to move?
Sidenote – Many studies have shown that one of the highest concerns for seniors is staying in their homes for as long as possible. This would suggest upkeep of that home is worthwhile, as well as alterations to make it more senior friendly, such as grab bars in the bathrooms. These improvements can provide additional value to the selling price of the home too when an eventual move happens.
The second suggested reason is that older people are apparently more likely to sell their homes to private investors and less likely to sell through multiple listings. Selling into a smaller market with a single listing or to an investment group that makes an offer can mean fewer people know the property is on the market, less bidding, and a lower sale price.
Sidenote – Perhaps some older people find the convenience worth the lower home price, but it’s also possible they haven’t explored all the options. It’s also more likely that an event happens in our golden years that requires a quick sale of the home, so there’s not time for exploring all the options.
Revocable living trusts are designed so that a trust officer can step in and manage finances should incapacity strike, so Garden State Trust Company is familiar with the inflection point that happens to many retirees when they finally realize they need more care and can’t live alone. Too often there is a waiting list for the place you really want to go to receive that care, and too often a home might need to be sold right away to cover the cost of that care. Considering options such as long-term care insurance, and understanding how to adjust to our needs as we age may give more time to make sure we’re getting the best bang for our buck when it comes to what is for many families the longest-term investment they’ve made in their lives.
Garden State Trust Company understands the value of planning ahead more than most. Creating an estate plan is all about dealing with decisions earlier in life in order to mitigate distress later in life. A sound estate plan can help prevent “fire-sales” of homes at less than optimum value.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
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