Smart Moves

Early this year, an engineer in Minneapolis lost her job at a large tech firm. But at age 67 and ready to retire anyway, she wasn’t crestfallen. An extrovert who relishes sociability, as well as tennis and golf, she soon plotted an active retirement in which she could indulge her favorite pastimes.

But COVID-19 threw a wrench in her plans. As a single woman living alone, she’s spent months in isolation, rarely able to see friends and family. Fed up with the restrictions and anticipating early access to a COVID vaccine, she’s now accelerating her plans for 2021 to make up for lost time.

What does the engineer have in mind for a robust retirement? Though her house is paid off and she never expected to buy more real estate, she’s now pondering the purchase of a second home in a large Florida retirement community. That way she could escape to warmer weather when the Minnesota winters prove too harsh.

“I’m exhausted with the limits I’ve gone through with COVID. It’s time to reinvent my life,” she says.

One reason the engineer can buy a second place is because her lakeside Minneapolis place, located in a popular suburb, has skyrocketed in value. That will allow her to tap a small portion of her equity with a new low-rate mortgage to buy a Florida place.

Obviously, not all Americans have the luxury of buying even a first home due to the economic issues now facing the nation. Many renters are now facing the very real prospect of eviction, and many retirees who own homes but depend on fixed Social Security payments must sell their homes to simply maintain their standard of living.

“The economic rebound has been sharp but is by no means complete. It has created distinct winners and losers among sectors in the economy,” says Danielle Hale, the chief economist for Realtor.com, the national real estate listing company.

Margie Casey, a real estate author and broker, says that in seeking a second home, many retirees want to retain the original place where they raised their family.

“A retiree’s primary place is usually near their base roots -- ideally close to family and longtime friends. The second is often just a small condo or a detached ‘villa’ in a resort setting like the beach or mountains,” Casey says.

Years ago, ownership of two homes was solely for the wealthy. But now more middle-class retirees are able to buy a second residence in a separate state.

“These aren’t rich people. Many were teachers, nurses or government workers. Yet many have traditional pensions that give them enough income to support homes in two parts of the country,” Casey says.

Here are a few pointers for retirees considering a second home purchase:

-- First, seek out advice from a financial planner.

Casey, who reviews retirement communities on her website (realestatescorecard.com), says anyone considering two-home ownership should first discuss the financial implications with a professional adviser.

In theory, it should be no more expensive for retirees to own two homes, as long as their mortgage payments are limited. But in reality, dual homeownership can have hidden costs -- after taking into account homeowners' association fees and travel costs.

Property taxes are also a key element, especially if a local government is running a budgetary shortfall and may have to raise taxes.

“Once you investigate the taxes, you may decide to live one state away from your grandchildren, assuming that lowers your cost of living,” Casey says.

-- Make sure you’d be comfortable with condo living.

Michael Crowley, a real estate broker and past president of the National Association of Exclusive Buyer Agents (naeba.org), says buyers contemplating the purchase of a condo as a second home should exercise caution.

“Compared with living in a standalone house, a condo-apartment is a big change. It’s just personal taste, but some people never adjust well to condo living,” says Crowley, who’s worked with buyers since 1993.

As he notes, there are other options for small-scale living that provide many of the worry-free features of a condo.

For instance, in many “planned unit developments,” you can buy a one-level detached unit that comes with exterior maintenance, including lawn service.

-- Don’t overlook transportation access before buying a second place.

Many a retiree has selected a second home without taking into account airport access, which can be a major error.

Depending on an out-of-the-way airport makes it harder to travel to distant locations for vacation or to see your kids. It can also add to your airline bills.

“Try to live near an airport that’s a hub for one of the major carriers. That can save you a ton on travel costs,” Casey says.

Another transportation factor to consider is proximity to major roadways, including interstates.

“Many retirees hope to live within a two-hour drive from their children,” Casey says.

-- Temper your expectations about visits with your offspring.

“Living near the grandkids is a top consideration for lots of retirees,” Casey says, but she advises realism about how often you’ll see family, no matter how close they live.

“Your kids have busy lives. ... Sure, you hope to see them often. But don’t focus your whole retirement on this factor. What’s equally important is to choose a lifestyle that works for you,” she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

A couple in their 60s -- a social worker married to a coffee shop owner -- vowed to never let go of the brick ranch house in suburban Maryland that they’d owned for 39 years. Indeed, they joked with friends that the “starter house” they bought soon after their wedding would one day become their “terminal house.”

But that was before the social worker was diagnosed with early stage Alzheimer’s disease. The couple decided she’d be better off if they sold the house and moved near their grown daughter in North Carolina. The medical need wasn’t urgent. Still, they reasoned that from a financial perspective, 2020 was the best year to sell.

As it turned out, the couple’s decision to hasten their property sale proved advantageous. The day their place went on the market in late November, it attracted four offers -- all well above the asking price. The one they chose was all cash with zero contingencies. Their deal closes in mid-December.

Of course, no one knows for sure how the currently robust housing market will play out in the coming year. With the new administration in Washington, D.C., mortgage rates are likely to remain low. Yet economists are fearful an increasing number of would-be buyers are getting priced out of the market.

“The housing market is still hot, but we may be starting to see rising home prices hurting affordability,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor). He notes that pending home sales slid slightly in October, which could be a sign of a cooling real estate market.

Many potential home sellers are now raising questions with their listing agents about timing their sale. Should they rush to list in the immediate future, or perhaps wait until the traditional springtime home-selling season? Opinions vary.

Fred Meyer, an independent real estate broker and appraiser in Massachusetts, acknowledges that current conditions are favorable to sellers. Even so, he advises that sellers with ample time to wait might benefit from delaying their sale until the post-pandemic period.

“My guess is that six months from now, home prices will be a heck of a lot higher -- especially in well-valued suburban communities. Americans will be a lot more cheerful. Many who’ve lost jobs will regain them and qualify to own a property,” Meyer says.

But he expects that in 2021 -- as usual -- there will be wide variations in real estate markets on a neighborhood-by-neighborhood basis.

Here are a few pointers for sellers:

-- Monitor neighborhood inventory levels before targeting a sale date.

In most desirable neighborhoods, a shortage of available homes is a strong signal that many prospective sellers are holding off in hopes of an uptick in property values later on.

“In nearly all cases, you can count on low inventory as a sure sign that the community is coveted and owners can command excellent prices,” says Dorcas Helfant, a past president of the National Association of Realtors.

You may also be observing other indications of pent-up demand for property in a community, such as people driving through trying to spot “For Sale” signs and letters left for residents from wannabe buyers.

If you’re anticipating a springtime surge in nearby listings, don’t wait until the floodgates have opened for sellers.

“Too few sellers consider inventory levels before timing their sale,” Helfant says.

-- Wait until repairs are done to put your place up for sale.

Are painters laboring to finish their work at your home? Are your bathroom renovations still incomplete? Have you yet to finalize the sorting and boxing of books in your huge collection?

If so, make sure all this work is done before giving the listing agent a green light to market your home. Home shoppers often show little interest in a place where renovation work is only half done.

Likewise, a cluttered house can be hard to market to prospects, who often have difficulty picturing the space free of excess furniture and cardboard boxes.

-- Choose a midweek day to launch your listing.

“No one should obsess about the day of the week their home goes on the market. But I favor a Wednesday or a Thursday if possible,” Helfant says.

When a property appears on the Multiple Listing Service by Thursday, agents representing buyers have ample time to schedule a visit to the place during the popular weekend home-shopping hours.

“People who wait until Friday to list typically get little attention until the following Monday. But rest assured that buyers in a popular area with scarce inventory will discover your home no matter when it’s listed,” Helfant says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

After the COVID crisis hit last spring, Bernadette Joy and her husband began plotting their move to the popular mountain retreat of Asheville, North Carolina, from their cramped city place two hours away, in Charlotte. By September, they’d topped off a 20% down payment and bought a spacious condo in their dream location.

Joy, an influential blogger who heads her own financial education firm, says many in her millennial age group could also achieve homeownership if they approached their debt reduction and savings goals more systematically.

“There’s so much guilt and shame about money and budgeting for our generation. This causes people to avoid facing financial issues squarely,” says Joy, who provides personal finance pointers through virtual courses and her website: crushyourmoneygoals.com

Obviously, not all would-be homeowners are now in a position to consider a purchase, let alone contemplate a large down payment, says George Ratiu, a senior economist for Realtor.com, the real estate listing service.

“There are still over 20 million Americans receiving unemployment benefits across all programs. And, worryingly, about 12 million of them are scheduled to run out of benefits in December, unless Congress takes action,” Ratiu says.

Even those currently able to contemplate a home purchase are facing headwinds, with property prices continuing to ascend in the majority of metro areas. Year-over-year price gains are now exceeding 6%.

On the other hand, the pandemic has helped keep mortgage rates temptingly low. This has worked to the advantage of wannabe buyers who’ve retained their jobs and can telework, thereby helping them build down payment funds.

“With COVID, people are saving a lot by reducing commuting costs, travel and restaurant meals,” Joy says. “There are fewer opportunities to spend and more chances to cut back debt and save.”

Joy has long been a saver. For instance, she managed to pay off more than $70,000 in student debt for her MBA program in just two years. Together with her husband, the couple also zeroed out their credit card balances. In addition, they accelerated their down payment program by scaling back from two cars to one, thereby scoring significant savings on lease payments, car insurance, gas and repairs.

“Having just one car felt awkward at first. But we soon became comfortable with the change, which is far easier now that we’re both working from home,” she says.

As Joy points out, not all millennials are motivated to save for a property purchase. But many who are find it less demanding than they imagine. Here are a few pointers for buyers:

-- Adjust your attitudes about spending.

Shawn Koch, a planner affiliated with the National Association of Personal Financial Advisors (napfa.org), says many homebuying aspirants “come to financial planners hoping for a miracle. But we’re not miracle workers.”

Though many young buyers face financial constraints -- including student debt and salary limitations -- many also confront bad money habits, such as impulse spending on designer clothing or other luxuries.

One approach to helping overcome emotional barriers to saving is by reading up on the topic. “Money Harmony” and other books on financial psychology co-authored by therapists Olivia Mellan and Sherry Christie are good places to start.

“The reality is that most people have to get into ‘hunker down’ mode before they can become serious savers and that means an adjustment in attitudes,” Koch says.

-- Start with an inventory of your current spending.

A major impediment to saving is uncontrolled everyday spending. But before you can decide how to reallocate your funds, Koch says you need to review where all your money has gone for at least one to three months. This can be done either with pen and paper or with such online personal finance tools as Mint or Quicken.

Doing an inventory of spending is laborious because you must sift through both credit card and checking account statements. And for cash expenditures, you’ll probably need to make estimates, an arduous exercise. Though the entire process can take the better part of a weekend, Koch says it’s an essential element in your search for potential areas of savings.

-- Consider cutting your core expenses, including phone costs.

Koch says phone charges “are among the fastest growing items in the budgets of many young people. Many think they need the newest phone upgrade as soon as it comes out.”

Creating a working budget that saves on such routine expenses isn’t an intellectually demanding exercise. But for those who could use guidance, Koch recommends the latest edition of “The Budget Kit: The Common Cents Money Management Workbook” by Judy Lawrence.

-- Make sure to enroll in an automatic savings plan.

Are you one of the millions of Americans who live paycheck to paycheck? If so, you might think it impossible to get by if a chunk of money is taken out every time you get paid.

But financial planners say automatic withdrawals are the answer for many who aren’t methodical savers. And surprisingly, they say those who have direct debits taken from their pay rarely miss the money. Meanwhile, their savings accounts grow quickly.

“The idea of an automatic savings plan is that the money rolls in without any proactive steps on your part. That’s a huge advantage for anyone trying to save for a house,” Koch says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)