In a discussion of the number of Americans approaching retirement age, one economist briefly mentions one issue: the expectation some retirees had that their homes would be retirement vehicles may be misguided.
“The fact of the matter is that this aging-but-not-yet-aged segment of the baby boomer class can’t afford to retire,” said David A. Rosenberg, the chief economist of Gluskin Sheff, a Canadian firm, noting that overall household net worth was 15 percent lower than at the prerecession peak. “Dreams of the 5,000-square-foot McMansion being a viable retirement asset have morphed into nightmares of a deflationary ball and chain.”
This is indicative of a larger shift: with the ongoing housing crisis, homeowners can’t expect to cash out their homes in the same way they might have in the late 1990s and early 2000s. McMansions are emblematic of people taking out large mortgages and then having difficulty in paying off their mortgages or moving (“downshifting”) to a cheaper residence because of the reduced value of their homes. Of course, this shift moves housing back to its historic role as a dwelling but not necessarily as a golden nest-egg for retirees.
I would be interested in knowing at which age people tend to purchase McMansions or other large homes. For example, buying a McMansion in one’s 50s might not be the best idea if someone wants to retire at 65. If a homeowner is willing to live in a home for a longer period of time, say more than 10-15 years, then such a purchase might not be as unreasonable as the homeowner can pay off more of their mortgage. Living in a home long-term may not be possible for everyone given changing job circumstances as well as the general mobile nature of American society but there are ways to help ensure one could make more money off of selling a large home.