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A New Home For Retirement? Test-Drive Before You Buy

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September 26, 2016
Try before you buy: How retirees can test-drive a potential new home before buying.

Many folks nearing retirement are looking to downsize from the family home. Who needs three empty bedrooms, a big house to clean, and all the maintenance and yard work that comes with a suburban nest?

There’s a new trend in the homebuilding community: offering potential buyers a chance to test drive a home before buying. After all, would you buy a new Tesla without taking it for a spin first?

Del Webb, a subsidiary of PulteGroup Inc. (PHM), develops active adult communities for the 55 and above set. The company has several communities that offer day and overnight passes to live in furnished homes with stocked kitchens. The Explore Del Webb program enables potential homebuyers to buy a day pass or overnight pass that can include staying in a fully furnished home with a fully stocked kitchen, the opportunity to explore the community in your own golf cart, happy hour, lunch or dinner with a resident, or the chance to hit a tennis ball around and try a fitness class.

Sounds like a vacation to me.

60 Is the New 50, Right?

As life expectancy rates keep rising, that means more time in retirement for leisure and fun. The near-retirement population today is more likely to be healthy, physically fit, and active. Boomers today, it turns out, are big buyers of things that will help facilitate youthful aging. Think yoga pants, health supplements, exercise equipment, golf clubs, and gym memberships.

These new active retirement communities offered by a number of national homebuilders are not your parents’ retirement homes. Some of the brochures read like a cruise line, and the communities often offer social amenities including photo clubs, cooking clubs, pottery classes, yoga classes, and of course golf and tennis.

Financing Your New Place

For investors considering a move, interest rates remain at historical lows. Through late August, 30-year fixed rate conventional loans stood at 3.5%, according to TD Bank. Despite forecasts over the last several years that mortgage rates would begin to rise, the slower-than-expected pace of Federal Reserve interest rate hikes have kept mortgage rates down. For instance, in 2015, the National Association of Realtors forecast 30-year mortgage rates to be north of 5% this year.

The traditional 30-year mortgage rate is tied in part to the rate of the U.S. Treasury 10-year note yield. As of late August, the yield on the 10-year note hovered around 1.57%, off its recent post-Brexit low at 1.33%. For some perspective, this yield is a far cry from the 8.16% yield seen on the 10-year note way back in 1994. For now, Janet Yellen and team are giving the gift of historically low mortgage rates to home buyers.

All market cycles eventually shift. So, don't count on these low rates forever. It just might be time to book that mini-vacation and try before you buy.

Hands-On Retirement Planning

Retirement planning isn’t a set-it-and-forget-it proposition. Your plans take thoughtful care and the help of professionals.