Increased Housing Prices may Cause Allstate Employees to Rent in Retirement

In Retirement for Allstate employees - who are considering a move from homeownership to renting - it may be a way to preserve capital and reduce housing-related financial stress that (Advisor Name) of The Retirement Group, a division of Wealth Enhancement Group, suggests (Advisor Name) evaluate carefully in the face of rising market uncertainty.

As rising home prices squeeze retiree budgets, (Advisor Name) is a representative of the Retirement Group, a division of Wealth Enhancement Group, which helps Allstate retirees weigh the pros and cons of renting to determine if it fits their long-term financial plan and the current housing market complexities.

In this article, we will discuss:

1. Trends in housing and housing affordability for retirees today.

2. Rising interest rates affect potential buyers.

3. How to decide between renting versus owning a home in retirement.

So you're a retired executive from Allstate navigating rising costs, longer lifespans, high medical costs, and volatile markets. We naturally ask ourselves here whether it makes sense to cash in on our largest investment: our homes. With average U.S. house prices soaring to nearly USD 360,000 - a third higher than a few years ago - it may be time to sell and invest the proceeds instead in a rental property. The details of that decision are below.

Current Housing Market Trends

Analyzing the current housing market, Realtor.com says in 45 of 50 major U.S. metropolitan areas renting is cheaper than buying a starter home. In addition, the Atlanta Federal Reserve Bank reports national housing affordability is soaring like it was during the housing bubble of 2006-2007. These statistics are especially relevant for seniors: data show the average U.S. house price almost 17 times the average annual Social Security benefit - a ratio never before the 2008 Lehman Brothers collapse.

Historical Comparison of Home Prices & Rents.

As proof of concept, look at a 1987 comparison of average U.S. home prices versus rents. This graph illustrates how current house prices are far above rents - comparable to what existed before the housing bubble burst in 2006-2007. Realize that the economic advantage of homeownership is the elimination of rental costs. But renting may be financially feasible for retirees now.

Steady Interest Rates Affect Potential Buyers.

Even though many Allstate retirees own their homes outright or have older mortgages at lower rates, rising interest rates could affect potential buyers. Increasing borrowing costs may drop real estate values, so you could delay selling your home and lose gains that could not be recouped. It would take a decade before prices fully recovered after the last housing peak in 2006. Retirees selling their homes during this period could invest in lifetime annuities or watch stocks and bonds rise by about 80%.

Exploring Alternative Investment Options

In light of these observations, look into other investment vehicles such as real estate investment trusts (REITs). So you can sell your home and invest in publicly traded landlords with a mouse click. The Armada residential REIT ETF also invests in residential REITs - single-family homes, apartment-complex operators, and companies that operate manufactured-home parks and senior-living communities.

The Individual Decision to Sell & Rent.

Yet the decision to sell and rent is an individual one and involves several important considerations. Your dream location, potential sale price, tax implications, rental costs, plans to leave a property to heirs, and costs of moving. While traditional wisdom holds that owning a home in retirement from Allstate companies is better - ask a financial planner about your specific situation.

Renting in Retirement: Pros and Cons.

It helps financial planner Malcolm Ethridge recommend against renting during retirement because he wants fixed costs that go with a fixed retirement income. The landlord is liable for setting the annual rent increase, so you can hardly put money aside for other monthly costs. And according to Adam Wojtkowski, an adviser with Copper Beech Wealth Management, entering retirement with no mortgage is ideal because housing is typically the largest monthly expense. By owning your home outright you avoid the volatility of rents.

The Risks of Renting and Selling Now.

But renting involves some risk. As Brian Schmehil of the Mather Group points out, renting subjects retirees to the landlord's decisions and makes them vulnerable to financial pressures in high inflationary environments as they age. These arguments for homeownership are complex.

With housing costs so high now, Wojtkowski suggests renting for now at least. Putting off selling until the housing-market crash happens may result in an extended and uncertain waiting period. Schmehil also says selling when home values are historically high is advantageous. Capture the equity in your home and retire early without reverse mortgages or potential problems selling later in life.

Flexibility & Lower Responsibility of Renting.

Renting also allows for greater mobility in terms of location - closer to your children or grandchildren. A second benefit is less responsibility for home maintenance and repairs. Renters are relieved of the maintenance burden, financial planner Ann Covington Alsina says. Any problems such as broken appliances or a leaky roof pass to the landlord.

The Downsizing Option

Alternatively, downsizing frees up capital without driving up rents. You can sell a larger home and move to a smaller one and profit from high home prices while controlling your housing situation.

Renting in Retirement - Real Life Experiences.

The experiences of many baby boomers support selling and renting. For example, my late friend Vincent Nobile, who lived a great life as a homeowner, rented in his 80s. He liked not having to worry about home maintenance, property taxes, or investing his earnings - without the responsibility of property ownership. Asking him if he preferred owning a home he laughed and shook his head.

Making the Right Decision

The decision to sell or rent is ultimately a personal one. Seek professional advice from financial planners and consider current housing market trends. Examining financial advantages and disadvantages, weighing impact on retirement income planning and personal preference, Allstate retirees can make an educated decision that reflects their long-term goals and financial security.

In a study in the Wall Street Journal on May 15, 2023, more baby boomers are renting than owning homes because house prices are skyrocketing. The study says among those age 60 and older, renters have increased by 15% in the last five years. Those changes in housing preference reflect a financial prudential boomer trend to save for retirement and avoid homeownership amid skyrocketing real estate prices.

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Think of the housing market as a turbulent sea with rising tides. Your home is your ship as a retiree navigating the financial storms. However, rising house prices mean your ship is in rough seas and may capsize. Some retirees from Allstate are taking a new tactic to weather the storm. They're trading their ships for a rental lighthouse. Renters get stability and shelter from the volatile housing market so you can retire without the hassle of property maintenance and high homeownership costs. It's like a safe harbor from which to sail toward financial freedom and flexibility.

Sources:

1. Banaszak, Michelle. 'Should You Sell Your House And Rent When You Retire?'  Rocket Mortgage , 15 Feb. 2024.

2. Why Renting for Some Retirees May Be a Better Option.'  MassMutual , Sept. 2022.

3.'With House Prices This High, Should Retirees Sell Their Homes and Rent?'  MarketWatch , Aug. 2023.

 4. 'Should Seniors Sell Their Home and Rent?'  The Jenn Smira Team , Jan. 2025.

5. 'The Downsizers Choosing to Rent Their Way Through Retirement.'  The Times , Nov. 2023.