Fifty-something first-time buyers

September 5, 2019

Tom Hehir grew up in San Francisco and knew he'd never be able to afford to buy a home there. Even though he has a good job as a management consultant, he watched as the housing bubble took home prices into the stratosphere.
Then the bubble burst and everything changed. Hehir and his partner purchased a three-bedroom, one-bath home in the city's Sunset neighborhood this fall. The first-time home buyer is thrilled with his large back yard, the cozy bedroom. But Hehir, 49, is less charmed by the knowledge that he'll carry this mortgage till he's nearly 80.

"I just laughed about that," he says now. "It's very clear that I will be paying off that mortgage until well into my senior years. God only knows what the economy or what my health will look like by then."

Hehir isn't alone. While the majority of first-time home buyers continue to be 20- and 30-somethings, the housing slump, combined with the $8,000 first-time home buyer tax credit, is ushering in a whole new type of first-time buyer: older folks. Fifty- and 60-somethings who thought home ownership was unattainable are now signing mortgages and buying starter homes that may be their last homes. But buying at a later age brings with it surprising differences, say these new homeowners, and require a different kind of financial prudence than faced by younger first-time buyers.

The hardest balance to strike is between saving enough for retirement and taking on the burden of a mortgage, said Anthony Webb, a research economist at the Center for Retirement Research at Boston College.

"The ideal is to be a homeowner without a mortgage at the time of retirement," said Webb. "If you're a homeowner with a mortgage in retirement, you are putting yourself at a lot of risk if you're unable to meet the payments. If you're a renter and you fall on hard times, one can always downsize. It's much harder if you're a homeowner. And it's an expensive process to sell a home."

Prospective older homeowners also must ensure that investing in housing doesn't prevent them from also having enough cash on hand for retirement and emergencies. For most homeowners, their home is their greatest financial asset. But for people on a fixed income, putting all your money into a mortgage makes it impossible to put that money into savings or investments you can access quickly in case of emergency.

"We all have to face up to the fact that not everyone can quit working at an age of their own choosing," Webb said. "I'm in my 50s, and my health and employment are holding out. But for many people, employment opportunities disappear, health breaks down. The problem is that it's not foreseeable."

On the other hand, he said, having a mortgage at least locks in the cost of housing for the foreseeable future, and frees you of the unpredictability of the rental market.

That's the main appeal of home ownership for 53-year-old Karen Newcomb. After decades in San Francisco's out-of-reach real estate market, Newcomb moved back to Florida. She rented until her landlords tried to raise her rent and her accountant urged her to move her money from stocks to real estate. She found she could afford a house in Deerfield Beach, Fla. – a two-bedroom place with room for an office for her copywriting business. In the end, her mortgage, including taxes and insurance, is $200 less than her rent.

And it's the combination of the drop in the market and the federal $8,000 tax credit that's made Sheila Moore into a first-time buyer at 61.

Moore, a single mother and a records clerk at Vanderbilt University in Nashville, was so busy working and raising her son she didn't consider buying a house. Now she's waiting to close on a three-bedroom brick house she says will not be fancy, but will be hers.

"For me, this is the right place at the right time," she said. "When have you ever in U.S. history known the government to give you eight grand just for you to buy a house? This is the chance of a lifetime for some people and I'm one of those people."

While Moore knows she may not live long enough to pay off the house, she's hoping to pass it on to her son as a way to build future wealth. Plus, she looks forward to calling the shots in her home.

"I'm excited because I feel like it's mine to do with what I want to do," she said, "whether I play it up or play it down, dress it up or leave it alone."

Source Inman


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