Retirement Planning and Real Estate - Carroll Financial
April 28, 2021

Retirement Planning and Real Estate

Author: Chason Trahan, CFP®, CLU®

How rising property values in fast growing cities might factor into your retirement strategy

If You’re Planning for Retirement

Here is an alarming statistic, Barron’s reported a study (1) of 40 local markets around the US and home affordability. In that study, the median income needed to afford a home was at or above the long-term average in 80% of markets.  Charlotte was ranked second most elevated share of median income needed to make a monthly mortgage payment.  So even as interest rates go down, the income required to pay the mortgage bill has gone up. 

However, statistics can always be misleading.  Houses are bigger now than ever with less people living in them. For example, ask your parents how many bathrooms were in their childhood homes; plus, the average number of people per household has dropped significantly in the US from 3.33 in 1960 to 2.53 now (2). So, could it be that the pricing is higher not because of inflation and stagnant wage growth but rather a product of our changing priorities?  Perhaps these changes grew exponentially because of COVID; homes have become more than a place to eat and sleep but where we now work, exercise, and entertain.  

If you are thinking about buying a home, as with the stock market, take a long-term approach to your thinking. Timing the housing market is not only hard, but it’s also unpredictable.  Think about what is important to you and talk to your advisor about what you can afford. A good plan always starts with a good conversation.

If You’re Close to Retirement

The Federal Home Loan Mortgage Corporation, known as Freddie Mac, publishes mortgage rates going back to 1971 (3).  In 1971, the average 30-year fixed mortgage rate reached 7.73% and by 1981, that rate reached 18.39%.  Even in 2001, the average was above 7%. Fast forward to 2021 and your average 30-year mortgage rate dropped below 3.04%

I bring these statistics to your attention because debt and cash flow analyses are critical to planning for retirement. As you plan for retirement, your cost to carry debt (your mortgage payment) should be something to take into consideration and reviewed to see if you could improve your cash flow. On the other side of this equation, it might make sense for you financially to eliminate or consolidate debts. These decisions are easier made and can be easier to facilitate while you are earning an income. 

Discussing with your financial advisor your timeline to retirement and coming up with a plan, allows you the flexibility to review all of your options and come up with the best solution for your specific situation.   

If You’re In Retirement

The Wall Street Journal reported in January that there were more Real Estate Agents than homes for sale in the US (4).  Canopy Realtor Association analyzes local markets and has reported similar metrics outlined below (5)

Your home could be worth more now than it ever has been.  Retirees who have thought about downsizing, might review these options, and use the equity in their home to make this transition. For older retirees, it might be hard to spend the equity in your home like you would an investment portfolio, but it is still an asset to consider for estate planning purposes.

There are various ways to determine a market value for your home. Review the equity in your home and talk with your financial advisor about how you might want to treat this asset and how this asset is a part of your financial plan.

How we can help

If you have any questions about this article, please reach out to Chason Trahan, CFP®, CLU® at (704) 409-2587 or

(1) These Housing Markets Could Be Most at Risk of an ‘Affordability Crisis’ | Barron’s
(4) New Realtors Pile Into Hot Housing Market. Most Find It Tough Going. – WSJ
Estate Planning, Retirement Planning
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