Low Cost Retirement in Mind? "Step Away From the Coasts"!

Low Cost Retirement in Mind? "Step Away From the Coasts"!

Most of the experts think that our economic mess could continue for the next few years. If you have just retired and are trying to figure out how to adjust to life with a smaller portfolio, this article might help with some perspective. That is, if you get over what was our first reaction to the crisis, wanting to just stay home and mope!

At Topretirements we spend a lot of time looking at prices and conditions in various retirement towns around the country and outside the U.S. When we do this research we are always struck by the way real estate markets differ from one area to the next. We see 2, somewhat related phenomenon going on as 2009 gets off to a terrible start.

1) Prices in some markets are being annihilated, while other markets are only off slightly – in spite of all the bad news broadcast every day.
2), A similar house can sell in some markets for a fraction of what it would cost in others. Which leads us to the question – is it really worth paying 2 or even 3 times more just to live in a certain area?
Speaking of price declines, the Las Vegas, Los Angeles, and South Florida are prime examples of our disaster markets. Prices in those areas are just plain terrible for sellers – and great for buyers. In Fort Myers, FL real estate prices have fallen from the 2005 bubble prices of a median $322,200 to $106,900 in December, 2008 (Source: Florida Association of Realtors). In other words, a house in the Fort Myers Metro is worth 33% of what it was just 3 years before.

To compare how different prices for similar homes can be from market to market we have prepared a short comparison. You will see that in most cases bargain towns do happen to be near a coast, but a few expensive places (e.g.; Boulder) are nowhere near a coast. But in general the further inland you get in the U.S., the better the real estate bargain.

Our match-up of comparison markets below is somewhat arbitrary, but we hope interesting. We are struck by the difference in the Boulder vs. Colorado Springs vs. Albuquerque comparisons – all beautiful towns in the mountains with lively infrastructure. Similarly the comparison of Miami to other non-South Florida areas is convincing. Most people would probably not compare Honolulu to Charlotte on many aspects, but the price comparison is interesting.

Price Comparison by Markets (Prices are in $000’s, shown for the 3rd quarter of 2008)
Boston $373 vs. Austin TX $191 or Knoxville TN $152
Boulder $361 vs. Colorado Springs $208 or Albuquerque $193
Miami $287 vs. Daytona Beach $162 or Tallahassee $159
Honolulu $615 vs. Charlotte $211
Los Angeles $391 vs. Cape Coral Ft. Myers $163 or Saginaw $66
NY/White Plains $525 vs. Mobile $139
Portland/Vancouver $278 vs. Boise ID $187 or Columbus OH $144
San Jose $650 vs. Pensacola $152 or Ft. Wayne IN $96
Seattle $350 vs. Oklahoma City $132, Greenville SC $157, or Spartanburg SC $128

U.S. Average home price in 3rd Quarter 2008 was $200,500. The average price decline was 9% vs. year ago.

Conclusio

The happiest situation for a new retiree who wants to make a move is to sell in a high cost market (New York or Boston) and buy in a low cost one. For example you could move from Boston to a similar house in Charlotte and theoretically pocket $162,000 for your retirement funds. Moving from Beantown to Mobile or Pensacola would not only provide you with a lot warmer winter, but would give you $234,000 or $221,000 additional (and you could afford to watch the Sox on satellite TV). Not to mention other cost of living improvements such as lower heating costs, fewer taxes, and possible better recreational opportunities. While you might have to trade moving away from family members and living in an unfamiliar area for this extra cash, it could make the difference between a comfortable retirement and a life of scrimping.