Can Selling Your Home Pay for All the Senior Housing You’ll Need Later?

By on December 23, 2016

By Ben Hanowell, Lead Researcher at A Place for Mom─

Sooner or later, living independently without a caregiver may not be an option for you or your loved ones. Even if your health stays tip-top, you may want to downsize to a retirement community. Whether you’re looking for yourself or your loved ones, senior living is a major financial decision. Selling a home is not only a natural step toward downsizing, but often crucial to funding senior housing and care. Depending on your care needs, home equity, and where you live, selling a home could pay for all the senior housing you need and then some.

In a recent report, senior living referral service A Place for Mom and real estate brokerage Redfin looked at areas where a home sale would be worth the most (and least) years of senior housing. The report also examines how care type and home equity affect a home sale’s potential to fund senior living.

Cities Where a Home Sale Can Best Fund Senior Housing

While home prices and senior housing costs are both tied to local incomes, home sale prices vary much more by city than senior housing costs do. For that reason, there are big regional differences in the number of years of senior housing a home sale is worth.

For example, median senior housing costs in Cleveland, Ohio are about $55,000, only about five-percent lower than San Jose, California. Yet the median home sale price in San Jose is 12 times higher than in Cleveland. Use our interactive Senior Housing Costs and Home Prices Map to explore the senior housing value of home sale prices in your area.

10 Cities Where the Sale of a Home Finances the Most Years of Senior Living

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10 Cities Where the Sale of a Home Finances the Least Years of Senior Living

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Greater Care Needs Mean Fewer Years of Senior Housing

When planning for a move to senior housing, you should consider the living and care options that best suit your family’s needs. If you or your loved one are still active and looking to transition into a retirement community with dining and housekeeping services, independent living is right for you. For those who need help with day-to-day activities and personal care, assisted living is a good fit. For those needing specialized aid for Alzheimer’s or other cognitive impairment, memory care is the best option.

These options differ substantially in cost, which affects how much a home sale can help fund senior housing. Assisted living is 1.5 times more costly than independent living, and memory care is twice as costly. We found that a home sale is on average worth just over six years of independent living, but only about four years of assisted living, and less than three-and-a-half years of memory care.

Home Equity Matters, Too

So far, we’ve assumed you own your home outright. Yet in 2013, thirty-five percent of adults over 65 still owed on their mortgage. On average, someone with 90 percent home equity could use their real estate windfall to pay for about four years of senior housing. Someone with 50 percent equity could pay for only about two years. Use our Home Equity Scenarios tool to see how home equity affects the senior-living value of a home sale in 162 U.S. cities.

Do It Yourself

These findings apply to median sale prices, which may not represent your home’s value. You can estimate how many years of senior housing your own home may be worth by following these steps:

  1. Estimate your home value using an automated home value tool like the Redfin Estimate. Subtract the amount you still owe on your mortgage and about five percent of the home value for closing costs. When you’re ready to sell, have a qualified professional assess your home’s value.
  2. Estimate your annual senior housing costs using a tool like the Senior Living Cost Index, which shows median monthly costs for the major types of senior housing and care in over 2,000 U.S. cities and towns.
  3. Calculate how much senior housing your home is worth by dividing your home value (minus closing costs and mortgage debt) by your annual senior housing costs. You may want to factor in a three-percent annual increase in senior housing costs.

 

For more details, read the original report on the A Place for Mom Senior Living Blog and its summary on the Redfin Real-Time blog.

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Can Selling Your Home Pay for All the Senior Housing You’ll Need Later?