Retirees' homes

NY Times -  Homeownership has historically been the most common way for families to grow wealth and pass it on. Homeowners aged 70 and older hold $13 trillion in housing wealth, or roughly one out of every four dollars’ worth in the country, according to a March analysis by the real estate platform Redfin.

With the youngest baby boomers now 62 — the earliest age for claiming Social Security retirement benefits — many expect that wealth to keep them financially secure as they age, acting as a source of capital to fall back on if they need it.

This can be a risky strategy, new research shows.

A paper from the Federal Reserve Bank of Philadelphia found that older homeowners, particularly those 70 and up, earn lower prices when they sell than their younger counterparts. The gap increases with age; an average 80-year-old seller would likely get paid 5 percent less than a 45-year-old, all other factors being equal.

In the most extreme scenario, a home that fetches a significantly lower price can limit people’s future living options, if they wish to downsize a large house or need nursing care, according to real estate professionals and financial advisers. “The real question is, where are they transitioning to?” said Dan Sudit, wealth adviser and partner at Crewe Advisors in Salt Lake City.

A lower sale price could mean the difference between buying into a retirement community versus renting, or a smaller apartment. “It might not be a two-bedroom or a one-bedroom, but might wind up being a studio-type unit,” Mr. Sudit said.

One reason behind the age-price gap identified by researchers is that, compared with younger homeowners, older homeowners don’t invest as much in their properties. This can take the form of less renovation, more deferred maintenance and higher rates of disrepair. About 25 percent of the difference in sale prices is attributable to this discrepancy