Dealing with the declining value of their clients' homes, financial advisers are adjusting retirement plans and coming up with new ways to compensate for the wealth loss.
Gail M. Simons, an adviser with The Highbridge Financial Group Inc. in Tarrytown, N.Y., which manages about $100 million in assets, reminds clients to consider their house as a home, and not as an investment. However, she said, many of them still deem the house an important investment psychologically.
Ms. Simons is helping clients refinance in order to get lower mortgage rates, encouraging them to appeal property tax bills and be cautious about selling.
"If they really have their heart set on moving, they'll take a hit, but they may be able to pick up a great buy somewhere else," she said.
Watching housing values fall is crushing to many baby boomers or retirees who have already seen their investment portfolios drop anywhere from 25% to 60%, said Carl George, chief executive of Clifton Gunderson LLP in Peoria, Ill., and chairman of the National CPA Financial Literacy Commission of the American Institute of Certified Public Accountants in New York.
"So many sellers are waiting because they think the market's going to rebound to 2006 or 2007 appraised values," he said. "I worry people are going to be really surprised when that doesn't happen."
In fact, 66% of Americans surveyed in a recent study said they thought that their homes had declined in value.
Of those, 23% estimated that the decline was greater than 30% in the previous two years, while 58% estimated a 10% to 29% drop. Just 12% thought that their house had declined less than 10% in value.
The study, conducted by telephone March 4-8 by Rochester, N.Y.-based Harris Interactive Inc. on behalf of the AICPA, also found that 79% of the 1,011 respondents in-tended to hold off buying or selling a house for the time being. Of those, 70% planned to wait one to two years or more before entering the market.
That so many consumers are taking a wait-and-see approach about the housing market is alarming, Mr. George said.
Jordan Amin, a CPA with the Edison, N.J.-based accounting firm Amper Politziner & Mattia LLP, noted a common response to falling house values.
"For some of our clients, it has meant pushing off retirement. Most are afraid to make an important decision like retirement in a market like this," Mr. Amin said.
In locations where housing values haven't grown quickly, the decline hasn't been as hard on clients, said Bryan Place, adviser with Place Financial Advisors, which manages $100 million in assets.
"In central New York, we didn't have a big run-up in prices, and we didn't have a big drop," said Mr. Place, whose firm is located in Manlius, N.Y., a suburb of Syracuse. Some of his clients are using the downturn as an opportunity to buy vacation homes.
"We're seeing people who are slowly starting to show interest in buying lakefront property and Florida property because now it's affordable," Mr. Place said. "It's unbelievable when you couple the low prices with the low mortgage rates; it makes for incredible deals."
E-mail Lisa Shidler at [email protected].
