Although the market is improving in some places, the overall value of real estate owned by U.S. households fell to $17.65 trillion in 2012 from $22.7 trillion in 2006, according to the Federal Reserve. Much of that decline hit boomers the hardest, since most were in their peak earning years when the financial meltdown occurred and were living in the largest homes they would ever own.

Financial planners now face a challenge: how to help clients chart a future that will meet their housing and health needs while preserving as much of their assets and capital as possible.

Here are 7 strategies for advisors to consider as they adjust real estate holdings to address changing health care needs of their aging clients.


A number of research firms track home price appreciation, which is influenced by a number of factors, including job growth, inventory levels and foreclosures. Though no firm can project future appreciation perfectly, their projections can give some sense of where prices are heading.

Zillow, a national home and real estate marketplace, predicts that home values will rise in 210 of the 258 markets it tracks by the end of 2013. Some of the strongest appreciation is expected in California cities — including Riverside (12.5%), Sacramento (11.9%), San Francisco (7.3%), Los Angeles (7.3%), San Diego (6.7%) and San Jose (6.6%) — but many of these cities also have high home prices. More moderately priced homes can be found in Phoenix (8.5%), Miami-Fort Lauderdale (4.6%) and Portland, Ore. (3.9%) — all places where, conveniently, the climate and culture tend to appeal to retirees.

A number of colder and older cities are not expected to fare as well. Zillow predicts home values will stay virtually flat or rise only incrementally in Eastern cities such as New York, Philadelphia, Baltimore and Pittsburgh — as well as Midwestern metropolises like Chicago and St. Louis. Ohio in particular is expected to remain static, with Cincinnati, Cleveland and Columbus expected to show little growth in prices.


Another option: Move to a state with lower taxes. The Tax Foundation, a nonpartisan tax research group based in Washington, has analyzed the tax burden on individuals on a state-by-state basis, based on a number of factors — including income, sales, excise and property taxes.

By their measure, the state and local tax burden per capita in 2010, the latest year available, was the lowest in Mississippi, followed by Tennessee, Alabama, South Carolina, Louisiana and New Mexico. Fortunately for aging adults, these sunny states are also home to a number of senior-living developments.

If your clients are still working and have substantial incomes, they also may be interested in the seven states that don’t levy income tax, namely Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. However, governments have to get their revenues somewhere, so remind clients that those states may feature pumped-up sales, fuel and property taxes — or curtailed services — to account for shortfalls.


The average monthly cost of assisted living is $3,300 for a single room with a single occupant, according to Genworth Financial, an insurance holding company that surveyed 15,300 providers across the country. Costs for a single bedroom in an assisted living facility rose 4.26% in 2013 from 2008. However, Genworth also discovered a wide variation among different states — ranging from an annual average of $31,200 in Alabama to $72,000 in Alaska.

Nursing home costs have also risen — they’re up 4.45% over the past five years for a private room. There’s a wide geographic disparity here as well, ranging from an annual average of $55,360 for a private room in Oklahoma to $255,891 in Alaska.


Clients who own their homes and don’t want to move can live in their existing homes longer by following the principles of “universal design” to make it more accessible for seniors who may have vision or mobility problems. Among the tips and specifications offered by North Carolina State University’s Center for Universal Design: Widen doorways, vary cabinet heights, put the dishwasher, washer and dryer on platforms, install handheld showerheads, replace round doorknobs with lever handles and increase the color contrast on stairwells to help prevent falls.

Another factor that could help clients stay in their home: Many states give property tax breaks to citizens who are over the age of 65 or disabled.


If the need for care is imminent, consider installing so-called ECHO housing — temporary prefab units designed specifically for seniors — on a relative’s property. Although not every jurisdiction’s zoning allows it, these housing units are typically much cheaper than a room addition and can be leased or financed, perhaps by using the equity in the elderly person’s existing home. The existing home can then be rented out, providing income and preserving the asset for heirs.


The collective home equity of homeowners aged 62 and older fell to $3.2 trillion in the fourth quarter of 2012 from $4 trillion at the end of 2006. Yet older homeowners who have lived in their homes since the start of 2000 have seen their total equity rise by more than 50%, according to the National Reverse Mortgage Lenders Association. For some, then, a reverse mortgage may be a good way to fund the cost of long-term care. Homeowners can borrow against their accrued equity in a lump sum, as a line of credit or in fixed monthly payments, for as long as they live in their homes. The loan must be paid, with interest, when the borrowers die, move or sell the property. (The loan also may be called if the borrowers fail to maintain the home or pay property taxes and homeowner’s insurance.) If there is money left over after the loan is satisfied, the proceeds go to the borrowers or their heirs.

Al Rodriguez, president of Goldstar Financial in Longwood, Fla., says that he is seeing an uptick in reverse mortgage applications in his market , even though home values have declined. Rodriguez notes that many applicants are starting to apply for the reverse mortgage lines of credit at a younger age (though they must still be over 62), when they can afford the hefty closing costs and have other sources of income — even though they don’t plan to borrow against the line for a number of years.

As a financial planning tool, this makes sense, Rodriguez says, because the amount that can be borrowed rises every year by the interest rate of the note plus the mortgage insurance premium — even if the home hasn’t actually risen in value by that amount. Meanwhile, until the clients actually take the money, they don’t have to pay the interest or premium.


Investing to recapture some of a client’s lost wealth could be a riskier proposition than many older people want to take, but could be the only way to make up the shortfall. Walter Pardo, managing partner of Wealth Financial Partners in Basking Ridge, N.J., suggests that clients invest not just in the “salt, pepper and sugar” of traditional investments such as stocks, bonds and annuities, but also in alternative investments to generate income and uncorrelated returns. These investments include non-traded real estate investment trusts, managed futures, equipment leasing, oil and gas projects and hedge funds.

The least amount he suggests allocating is 5% and the most 25%, with no one investment consisting of more than 10% of the portfolio. He also recommends that clients put at least a portion of their qualified assets — 401(k)s, IRAs and simplified employee pensions —into a Roth IRA to mitigate their future tax burden, as well as their heirs’.


June Fletcher is the author of House Poor and writes the weekly online House Talk column for The Wall Street Journal.

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