Homeowners aged 70 and older are increasingly likely to receive lower sale prices for their properties compared to younger sellers, according to recent research. The disparity, which can amount to a significant financial loss, is prompting discussion about how older Americans can best prepare to leverage their home equity in retirement.
A research brief published in by the Center for Retirement Research at Boston College found that an 80-year-old homeowner typically receives 5% less for their home than a seller in their 40s or 50s, assuming the home has been held for approximately 11 years. Based on the national median home price of $405,400 in , as reported by the National Association of Realtors, this translates to a loss of $20,270.
This trend is particularly relevant given the demographic shifts underway in the U.S. Housing market. As of , the 65 million baby boomers – those born between and – represent 20% of the U.S. Population and a substantial 36% of all homeowner households, according to Freddie Mac.
While many boomers are choosing to age in place – with approximately 68% indicating they plan to do so, per a Freddie Mac report – a significant number will eventually need to sell their homes due to health changes, a desire for less maintenance, or a need to be closer to family. This increasing supply of homes from older sellers could further exacerbate the pricing disparity.
Deferred Maintenance and Off-Market Sales Contribute to Lower Returns
The research suggests several factors contribute to the lower sale prices experienced by older homeowners. One key element is deferred maintenance. Homes owned by older individuals are more likely to exhibit signs of neglect or lack recent upgrades, impacting their market value. Even after accounting for location and overall market conditions, this can significantly reduce the final sale price.
Another contributing factor is the tendency for older homeowners to sell their properties through private, off-market listings. These transactions, which bypass the public Multiple Listing Service (MLS) – the primary platform where most buyers search – limit competition and often involve sales to investors. The Center for Retirement Research briefing indicates that such sales are associated with lower prices.
The Boston College study utilized a detailed analysis of housing transactions from CoreLogic’s database, linked to voter registration records to determine seller ages. Researchers employed a repeat-sale analysis, comparing sales of the same properties over time using data spanning from to .
Home Equity: A Significant Retirement Asset
For many Americans, home equity represents a substantial portion of their retirement wealth. In , the median home equity for homeowners aged 65 and over was $250,000, a 47% increase from $170,000 in , according to a report from the Joint Center for Housing Studies at Harvard University. This equity accounts for roughly 50% of the median wealth held by households with individuals aged 65 or older.
Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors, notes that Americans are increasingly selling their homes later in life. “We’re seeing that [sellers] are making transactions at later ages than they used to,” she said.
Proactive Planning is Crucial
Experts emphasize the importance of proactive planning for retirees and those nearing retirement. Understanding these pricing trends is particularly critical for those relying on their home’s value as part of their retirement income strategy.
Joon Um, a certified financial planner with Secure Tax & Accounting in Beverly Hills, California, points to deferred maintenance and last-minute decisions as common drivers of lower sale prices. “Small fixes get delayed, then buyers notice everything at once and price it in,” he explained. He recommends setting aside funds for upkeep, decluttering over time, and integrating the home sale into a broader retirement and cash flow plan.
Small fixes get delayed, then buyers notice everything at once and price it in.
Joon Um
Certified financial planner with Secure Tax & Accounting
Involving family members or trusted advisors in the upkeep of an older loved one’s home can also be beneficial, according to Philip Strahan, coauthor of the Center for Retirement Research report. “To the extent that you have a relationship with an older person, protect their interests and make sure they’re taking care of their house,” he said.
When it comes to the sales process itself, understanding all available options and their potential impact on the final price is essential. While some sellers may prioritize a quick, private sale even at a lower price, others may benefit from a more traditional listing with a real estate agent. The key is to have a well-defined plan to maximize the value of the home as a crucial component of a secure retirement.
