Real estate quandary finds retirees staying put

It hasn't been the best of times for Americans on the verge of retirement.

The economy has not been kind. In 2008 and 2009, for example, the Bureau of Labor Statistics reported that one-quarter of people in the 45 to 54 age bracket filed for unemployment benefits.

If you are out of work, struggling to make ends meet, it's tough to save the zillion dollars that financial planners contend retirees will need to live comfortably.

The housing market has been even less kind, both to retirees and builders of the homes they have long expected aging boomers to buy.

Here's the problem. About 15 years ago, surveys by builders and others began suggesting that there was a vast potential market among 79 million aging baby boomers.

One, conducted in 1999 by Del Webb, which became part of Pulte Homes, indicated that a large number of leading-edge boomers would be moving into active-adult or "age-qualified" developments.

"A majority of the boomers surveyed said they were more prepared financially and emotionally for retirement than their parents," according to the survey.

Fast forward to 2011. Residential builders are finding that these same boomers are hesitating to make a move to the housing that has been designed to meet their needs.

Paul Emrath of the National Association of Home Builders said in a presentation at the group's January meeting in Orlando, Fla., that the primary reason for this reticence is that "buyers think they cannot sell their existing home at a favorable price."

John McIlwain, a fellow at the Urban Land Institute in Washington, says that older boomers who have not yet sold their suburban homes are finding themselves trapped as falling home prices have left their homes worth less than the mortgage - or mortgages - on them.

"It will take years before home prices rise sufficiently to restore their lost equity," McIlwain said.

So those who were eager to move as recently as 2007 are staying where they are.

Eighty percent of those 65 and older responding to a poll of 1,616 adults ages 45 and up last July for AARP said just that.

Eighty-two percent said they had a full bath on the main level of their homes, and 81 percent had first-floor spaces that could become bedrooms if the need arose.

"Far too often, a person has to break a leg or contract a serious illness to discover that the home they love could restrict their comfortable lifestyle," said Elinor Ginzler, AARP senior vice president for livable communities.

Emrath said buyers surveyed believed that it would be difficult to obtain financing.

This would have not been an issue before the housing bubble burst. Data show that relatively few buyers in these communities take out mortgages, preferring to use equity in their present homes.

In 2005, the sale of a previous house accounted for 100 percent of active-adult sales, data show, while in 2009, it had fallen to 54 percent.

Jacquelyn M. Basso, a financial planner and certified public accountant in Downingtown, said that retirees, especially the recent ones, are discovering that they didn't have the equity they thought.

The median price of a house in the Philadelphia suburbs has declined almost 19 percent, according to economist Kevin Gillen, but that is an average. Some areas have seen prices drop more.

There aren't that many buyers for these homes, either. Right now, a house in the eight-county Philadelphia region remains on the market 115 days, on average, and sales are off 30 percent from the same time last year.

Other sources of money?

In 2005 and 2007, the National Association of Home Builders/MetLife Mature Market Survey reported that no active-adult buyers acknowledged having to tap cash or savings to buy a house.

In 2009, 45 percent of the typical buyer's down payment came from cash or savings. In 2003, it was 9.7 percent, and during the boom years of 2005-2007, it was zero.

Emrath's survey said respondents believed that the employment and economic situation were continuing to deteriorate, which makes them less likely to dig into savings to help buy a house.

That, said Basso, is what is prompting many of these buyers to take on a mortgage, since they need their savings to live on and despite recommendations that they reduce their debt levels.

A large number of people in the survey Emrath quoted said they were delaying a purchase because they believed that prices of these new homes would decline more.

Data show that, nationally, prices of age-qualified housing did fall, but the percentage was about a third of the price decline overall.