Most people who are transitioning into retirement and contemplating relocating, recognize this downturn in the real estate market represents an opportunity for them. However, there are those retirees who also have seen the value of their homes in the north depreciate. Some retirees have taken the stance they are waiting for their values to ‘come back’ before they decide to sell their home and move southward.
We’d like to address this issue and the strategy of waiting for values to recover in the homes these retirees are currently in. In most cases, the homes are located in the northern states.
For those retirees who wait for their home value to return to the value it was at before the economic downturn, they may be waiting longer than they think. Higher employment and job growth will be necessary in their metropolitan area for real estate pricing to come back significantly. Areas such as the Northeast were hit hard by many of the financial firms suffering some of the biggest losses recorded in history. This has resulted in lost jobs, high paying jobs… and it could be a long while before the likes of Connecticut, New Jersey and New York see employment in the financial sector come back, especially at the pay levels these positions commanded. For those in the PA, Ohio, Indiana and Michigan area, the downturn in the auto industry and related businesses to the autos has plagued this area economically. This has resulted in lost jobs, companies going under…therefore lowering real estate values.
Without job growth, the northern cities and their real estate markets are going to have a difficult time rebounding to the euphoric levels these markets were at anytime soon. It’s simple. People do not migrate to the north naturally. People migrate to the north either because they are from there and want to move back to be near family and long time friends or they have taken a position in this area for their career.
Two reasons people naturally do not migrate to the north; taxes and weather. And these are factors that are not likely to change. Higher costs of living, higher property taxes, higher housing costs, long winters, long commutes if you are in a major metro area such as Chicago, New York, Boston, Philadelphia are some of the factors retirees need to consider when deciding where to spend their golden years.
What will drive real estate prices back up in the north? Job growth – which will result from a better economy and companies hiring again. Job growth leads to population growth as more will move into the area and buy homes. So, look around. See who the top employers are in your area and what their prognosis is going forward on employment growth. That is your indicator.
If real estate prices rise in the northern states due to the economy and unemployment figures improving, you can count on it that the southern states will also see a increase in their real estate values for those of you looking to relocate there. So, the strategy of waiting to sell your home on the upswing in the real estate market in the north and then look to buy a place in the south in the downturn…that is going to be difficult to accomplish now. Monday morning quarterback thinking shows the perfect scenario would have been for northerners looking to relocate at retirement should have sold their homes in 2005 to 2007 at the peak, gone into rental housing and be in a cash position now to purchase in this buyer’s market.
Real estate prices are dictated by supply and demand and there are many more retirees and Baby Boomers migrating to the South, coming from the North. Prices will reflect this increased demand and 2008 marked the beginning of the 78 million Baby Boomers beginning their retirement. Baby Boomers by definition are those born between 1946 and 1964. The first year of Boomers turned 62 in 2008. This demographic wave will provide a 20 year pipeline of buyers with their eyes set on various locations to relocate to. Studies show about half of them are looking to relocate and of that half, 40% have their eyes set on the Southeast.
Aside from the financial aspect of all this, let’s look at another feature which is just as important. Quality of life. Consider the idea of reducing your higher cost of living now straight across the board…cost of a comparable home in the South vs the North, reducing your property taxes significantly by moving to the south now and perhaps selling your snow blower and giving away your snow shovel to your next door neighbor. You won’t need either of these items in the south. Perhaps slowing down the pace of life, enjoying more days of sunshine and warmer temperatures, moving into a community that has other retirees and second home buyers as residents that you can get to know and establish friendships with. Swing the club more often, take up the outdoor hobbies that you’ve been waiting to enjoy and now you’ll have more days out of the year conducive due to the weather to accomplish and enjoy these activities and hobbies.
So as you run the numbers on staying or relocating, thing of the BIG picture. What is it going to cost you a year to stay in your home in the north while waiting and hoping prices come back? As opposed to seeing what your home is currently worth, attempt to sell and give yourself a ‘pay raise’ by relocating to a lower cost of living state, most likely a southern state and looking at retirement as a new chapter in your life to enjoy.
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