My husband and I own a second home on Lake Erie. When we bought it, we figured that it was unlikely we would ever spend our retirement there because it is too small and not configured very well for old people.
Here we are, verging on being old people, and the value of real estate in our part of the Rust Belt has cratered. We're not sure what to do about this piece of property. We have talked about it so much that when the subject comes up, my husband rolls his eyes and says his head hurts.
We are clearly not the only people in this situation. Many of us are facing the same expensive choices and it is having an impact on our retirement planning.
Sell. Someone would snap up our lakefront property if we drop the price enough, but it really pains me to take a $100,000 bath.
Walk away. People in our situation with big mortgages are more and more willing to just mail the keys back to the lender. According to a survey released in September by the Pew Research Center, 21 percent of people between the ages of 50 and 64 and 13 percent of those 65 and older agree that walking away is acceptable when you are overwhelmed by a big mortgage and sinking home values.
Hold. Holding is expensive, even if you don't have a big mortgage. Property taxes, insurance and maintenance can all add up. And besides, spending my retirement living in this place doesn't sound like fun.
So none of these options -- or permutations of them -- is good, and for a lot of people, it is painful to choose.
At our house -- where the crystal ball is permanently fogged -- this is what we have decided. This week, at least. My very fiscally conservative accountant husband thinks that this crisis will pass. If you look at the rising population over the next 10 years, there's every reason for optimism about real estate. More than 75 million people were born between 1977 and 1998 -- almost exactly the same number as were born during the baby boom years. The youngest of these Millennials will be 21 years old in 2019 -- nine years from now.
Despite what it feels like to some of us who gave birth to these people, this generation isn't going to live forever in Mom's basement. As demand for housing increases, property values will almost certainly increase along with it.
Retirement planning that takes into account real estate is a very individual thing. In the end it is a question of where you want to live and how far you can stretch your money. But one thing is almost certainly true, panicking over housing values is unlikely to serve anyone well in the long term.