For retirees, homeownership may not be the asset it used to be

Retirement planning is a source of stress for many people. More than half of Americans are worried that they won’t be financially secure after their work life ends, and about a quarter of those over 50 say they don’t expect to retire at all. And to make matters worse, certain assets that are meant to be boons late in life, like homeownership, may have challenges of their own.

Paula Span writes the column “The New Old Age,” for The New York Times. She joined “Marketplace” host Amy Scott to talk about why aging in place nowadays might feel more like being stuck in place.

An edited transcript of their conversation is below.

Amy Scott: You start your piece with a story of a retired couple in New Hampshire who are kind of stuck. They’d like to move but find it’s not so easy. Tell us about their situation.

Paula Span: Well, they did what, traditionally, people do when they can: They bought a house when they were younger. They paid off the mortgage. And then you have your ATM, your piggy bank — you have this appreciated asset that you can sell and downsize if your kids leave, or you can sell to fund assisted living if you need it. Or you can stay in it and borrow against the house to fund your retirement when your income drops. The problem with these folks in New Hampshire is that as their house gained value from rising housing prices, so did everything else around them. And they found it hard to find a place to move into — a place that was smaller, a place that had fewer steps and where they didn’t have to shovel snow or mow the lawn. So there’s a question of where do you go? And that led an economist from the Urban Institute to say to me, “Are folks aging in place? Or are they stuck in place?” Because this traditional pattern has shifted.

Scott: And of course, there is probably a young family that would love to buy that couple’s house and move into it. How is this gumming up the housing market?

Span: Well, a couple of things have shifted. First of all, this idea of your house as an ATM requires that you’ve mostly paid off the house. But the number of older Americans who still have a mortgage has been climbing fairly sharply for several decades. So it was 24% in 1989, and now it’s well over 40%. And people owe more also adjusted for inflation. So even though their own housing equity has risen sharply, it still may not be enough to fund their retirement if they don’t borrow against it.

Scott: We’ve talked about how builders just aren’t building a lot of entry-level housing, period. But sometimes that so-called entry-level housing is actually what older homeowners are looking for, right? Smaller homes, less space, and as you mentioned, fewer stairs.

Span: Yes, so this older couple, they did finally have a happy ending, by the way, Amy. I heard from them a couple of days ago. They did find a house. It was a two-floor house, but there was a bedroom and a bathroom on the first floor. But they said the competition was intense. The price was a little stomach-churning. They had to make a cash offer. That is not an option that’s available to a whole lot of older homeowners looking to downsize.

Scott: You write that for Black and Hispanic homeowners, more of their wealth is tied up in their houses as opposed to the stock market or in savings.

Span: That’s right. A lot of their wealth is tied up in this house, and they may struggle to hold on to it. And that’s because, historically, Black and Hispanic workers were lower paid — steered into lower-paying occupations. Now their Social Security checks are lower because of that. So these houses are not going to be likely to fund their retirement, and they are more likely to be cost-burdened than white homeowners.

Scott: What are some solutions from the experts you talk to?

Span: Well, there are some things that policymakers could do. For one thing, lenders really ought to be broadening their criteria for creditworthiness. I’ve written in the past about people who own multiple properties. They have big retirement accounts, they have plenty of money, but they get turned down for mortgages because their income is lower. I mean, that’s just not really sensible. Overall, is it still better to be a homeowner than a renter? Well, yes, overall, it still is. You are less likely to be cost-burdened, and you’re less at the mercy of the landlord. But there is this sort of logjam of older people with lots of equity looking to get out of their houses and younger people needing houses, and a lot of people — not just older, but younger ones — feeling stuck where they are.