Retirement Property is Attracting Younger Buyers Spurred on By Low Mortgage Rates and Home Prices

There is an interesting trend of younger buyers purchasing retirement property thanks to low mortgage rates and low home prices in the Sunbelt. Home buyers are sensing a great opportunity to buy a home now and the same is true when it comes to buying a retirement home. Home values have fallen over the past six years and in some states like Florida, prices have fallen 50 percent or more.

Retirement Property is Attracting Younger Buyers Spurred on By Low Mortgage Rates and Home PricesRetirement communities haven't been immune to the price declines. In fact, many of the older retirement communities in Florida have seen price declines along the same lines as new housing developments in Florida. Low home prices combined with the lowest mortgage rates in a generation is making home prices more affordable then ever.

Mortgage rates today on 30 year conforming loans can still be found as low as 3.25 percent with points. Current mortgage rates on 15 year conforming loans can be found ever lower at 2.25 percent with points. Even if you're nowhere near retirement, mortgage rates are so low you'll probably never get an opportunity to lock in a rate this low in the future.

The same may very well be true for home prices in the future, which makes buying now an even more compelling reason to do so. The retirement home can be treated as a second home, allowing you to take a tax deduction on mortgage interest. Your income is probably higher now than it will be in the future, so taking that mortgage interest tax deduction now instead of in the future may make financial sense.

If you already own a second home such as a vacation home, you're out of luck as far as the tax deduction. If you're planning on buying a second home as a vacation home, you probably won't want it to be in a retirement community. Therefore you should look into retirement communities that allow renting. That way, you can treat the retirement home as an investment property instead of as your second (vacation) home.

The average buyer's age in retirement communities is declining. The largest retirement community in the nation, Century Village in Boca Raton, Florida, has seen the average age of a new homebuyer drop from the mid-70s to the low 60s in the last year.

Ben Schachter with Century Village Real Estate Inc. told CNBC in an interview:
People are looking at this in terms of their long term future. They recognize that with the time value of money they are better off investing now, taking advantage of 20, 40, $60,000 price points, because if they look back just a half a decade ago, prices were 3-4 times what they are now. They're looking at the market as it increases, as the economy is strengthening, and they want to buy now while it's the best opportunity to do so.

Whether or not you decide to buy a retirement home well in advance depends on your current financial situation and your retirement goals. Home prices and mortgage rates are going higher in the coming years so if you already know what where you want to retire, now is definitely a good time to buy.
Author: Brian McKay
March 28th, 2013