Blog Post

The Importance of Home Equity in Retirement Planning

  • By simplify
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  • 22 Jun, 2017
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We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can […]
We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can be in retirement planning.
Craig Copeland, Senior Research Associate at EBRI, recently authored a report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth , in which he reveals:

“Individual account retirement plan assets, plus home equity, represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions. Those families without individual account assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses.”

The report echoed the findings of a working paper, Home Equity Patterns among Older American Households , authored by Barbara Butrica and Stipica Mudrazija of Urban Institute. Fannie Mae highlighted these findings for their blog The Home Story this past winter, quoting Butrica and Mudrazija:

 “For most adults near traditional retirement age, a home is their most valuable asset — dwarfing retirement accounts, other financial assets, and other nonfinancial assets. Although relatively few retirees tap into their home equity, having it provides financial security… In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources — Social Security, pensions, and savings — is incomplete because it ignores the home.”

USAToday interviewed two area experts to comment on the EBRI report. Randy Bruns, a private wealth adviser with HighPoint Planning Partners, agreed with the findings:

“Social Security and home equity are major pieces of the retirement puzzle.”

Wade Pfau, Professor of Retirement Income at The American College of Financial Services and author of “ Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, ” said having the equity without a plan to use it won’t help:

“Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning.”

Bottom Line

Whether you use the equity in your home through a reverse mortgage or by selling and downsizing to a less expensive home, it should be a crucial piece of your retirement planning.

Why Are So Few Homes for Sale?

By Karen Parnes • 15 Jan, 2018

There is no doubt that the largest challenge in today’s housing market is a lack of housing inventory for sale. This challenge has been defined  as an “overwhelming lack of supply,”  and even a “straight up inventory crisis.”

First American  just released the results of a survey  which sheds light on the reasons for the current lack of supply.

The survey asked title agents and real estate professionals to identify what they believe are the top reasons for this lack of inventory in their markets. Here are the results of the survey:

  • 47% - existing homeowners are worried that they will not be able to find a home to buy
  • 5% - first-time buyer demand is absorbing a large share of available homes
  • 3% - existing homeowners’ mortgage rates are lower than the current rates
  • 6% - insufficient or negative equity in the home
  • 6% - foreign buyer demand is absorbing a large share of available homes

As the survey revealed, there is a shortage of current homeowners willing to put their homes on the market for one of three reasons (see numbers 1, 3 and 4 above).

Is this an opportunity for some homeowners?

The report on the survey explains:

“The crowd has spoken, and it seems in many markets home buyers and sellers alike are ‘imprisoned’ by the lack of housing inventory."

That leaves a tremendous opportunity for every homeowner not facing these concerns. If you can put your home on the market today, you are subject to far less competition than at any time in recent history. That will result in your home selling quickly and for the highest possible price.

Bottom Line

While many homeowners are feeling imprisoned for multiple reasons, those who are not handcuffed by these concerns have a once in a lifetime opportunity to sell their houses at a peak selling time.

Thinking of Selling? Now is the Perfect Time

By simplify • 15 Jan, 2018
It is common knowledge that a great number of homes sell during the spring-buying season. For that reason, many homeowners hold off on putting their homes on the market until then. The question is whether or not that will be a good strategy this year. The other listings that do come out in the spring […]

The Impact Staging Your Home Has on Sales Price [INFOGRAPHIC]

By simplify • 12 Jan, 2018
Some Highlights: The National Association of Realtors surveyed their members & released the findings of their Annual Profile of Home Staging. 50% of staged homes saw a 1-10% increase in dollar value offers from buyers. 77% of buyer’s agents said staging made it easier for buyers to visualize the home as their own. The top rooms to stage in order to attract more buyers are the living room, master bedroom, kitchen, and dining room.

93% Believe Homeownership Is Important in Attaining the American Dream

By simplify • 11 Jan, 2018
Americans continue to believe that homeownership is important in achieving the American Dream. A recent survey by NeighborWorks America reported that: “Owning a home remains a core element of the American Dream.” When asked “How important a part of the American dream is owning a home?” 18% of those surveyed said it was the most […]

FICO® Scores on Approved Home Loans Drop Again

By simplify • 10 Jan, 2018
According to Ellie Mae’s latest Origination Report, the average FICO® Score on all closed loans dropped to 722 which is its lowest mark since April. The average includes all approved refinance and purchase loans. FHA and VA loans showed the most opportunity for millennials looking to enter the market with low down payments and even […]

The Impact of Tight Inventory on the Housing Market

By simplify • 09 Jan, 2018
The housing crisis is finally in the rear-view mirror as the real estate market moves down the road to a complete recovery. Home values are up, home sales are up, and distressed sales (foreclosures and short sales) have fallen to their lowest points in years. It seems that the market will continue to strengthen in […]

712,000 Homes in the US Regained Equity in the Past 12 Months!

By simplify • 08 Jan, 2018
CoreLogic’s latest Equity Report revealed that “over the past 12 months, 712,000 borrowers moved into positive equity.” This is great news, as the share of homeowners with negative equity (those who owe more than their home is worth), has dropped more than 20% since the peak in Q4 of 2009 (26%) to 4.9% today. The […]

4 Reasons to Sell This Winter [INFOGRAPHIC]

By simplify • 05 Jan, 2018
Some Highlights: Housing inventory is still under the 6-month supply needed to sustain a normal housing market.

Time on the Market Drops to New Low in 2017

By simplify • 04 Jan, 2018
According to recently released data from the National Association of Realtors (NAR), the median amount of time a home spent on the market hit an all-time low of only three weeks in 2017. Strong buyer demand, a good economy, and a low inventory of new and existing homes for sale created the perfect storm to […]

The Benefits of Homeownership Go Beyond the Financial

By simplify • 03 Jan, 2018
Homeownership is a major part of the American Dream. As evidence of that, 91% of Americans believe that owning a home is either essential (43%) or important (48%) to achieving that “dream.” In a market where some people may be unsure about the benefits and possibilities of buying a home, it is important that we […]
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