How Does the Skyrocketing Cost of Housing Impact Adults in Retirement?

home value retirement

Even with the recent cooling of the real estate market, home prices have been on an impressive trajectory for the last several years. If you are a senior in retirement, what impact might a substantial increase in your home value have for you in retirement?

If you purchased your home even just a few years ago, its value has likely increased significantly. In just the period from 2019 – 2021, many markets experienced annual home appreciation of between 20% to 30%. And, if your home is one you’ve lived in for decades, you might be surprised at its current value. While the median new-home price nationally was just $84,300 in 1985, it had risen to $450,600 by the spring of 2022. And those figures are just national averages. Depending on your home’s particular market, the appreciation could be even higher.

While a fully paid off mortgage is certainly a benefit for retirees living on fixed incomes, an appreciating home can bring some unwelcome additional costs.

Consider the financial impact of real estate taxes. Even if you are not purchasing a property, the annual taxes on your home likely will continue to rise. In the wake of the recent pandemic that was marked by shuttered stores and businesses, taxing agencies are often looking at residential properties to fill the revenue gap they left behind. This is placing even more pressure to shift the taxing burden to homeowners through higher rates. The result can be an unpleasant shock in the form of a letter from the town or county assessor. Beyond that, not all states or communities are taxing at the same rate. New Hampshire happens to be the third highest state in the country for real estate taxes. 

A significant rise in your home’s assessed taxes can put a real dent in your budget. As a retiree on a fixed income, it pays to understand how your home’s taxes are calculated and what you can do to mitigate the impact of higher taxes.

To calculate your annual taxes, an assessor determines a value figure or assessed value to use for your home.  You then pay a percentage of that assessed value in taxes. It’s important to note an assessed value is not the same as a market value appraisal and is only used to determine taxes. You should receive notification of any change in assessment in addition to your annual tax bill. Staying on top of these notifications will help avoid unpleasant surprises.

You do have some possible avenues to lessen your real estate tax burden, including appealing your assessment through an abatement application with the local assessor’s office. You can also apply at the local level for any exemptions you may qualify for such as a senior,  veteran, or disability exemption. These exemptions, if you qualify, will exclude a portion of your property’s value from being taxed.

Understanding the tax implications of your rising home value will help you plan for and mitigate any possible financial impact. Also, consider enlisting the help of a knowledgeable financial advisor to help you stay in control of your finances in retirement.

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