At first glance, the headline doesn’t make a lot of sense. Why would all-cash home sales increase if mortgage rates were hitting new lows for the year?
Not only that, but why would all-cash sales rise when distressed homes sales are down and institutional buying is lower?
Two separate reports came out today with the same basic message, that cash is still king despite the low rates and lack of investor activity.
The National Association of Realtors noted today that all-cash purchases increased to 33% in the first quarter of 2014, up from 31% in 2013 to 29% in 2012.
More than half of all homes purchased in Florida were paid for with cash, while roughly four out of 10 sales in Arizona, Nevada, and West Virginia were all-cash transactions.
At the same time, the distressed home sale share fell to just 15% in the first quarter, down from 17% in 2013 and 26% in 2012.
Over at RealtyTrac, all-cash sales hit a record high of 42.7% of all residential property sales in the first quarter, up from 37.8% in the fourth quarter and 19.1% from a year earlier.
That coincided with a large drop in institutional investor purchases, which fell to the lowest level since the first quarter of 2012.
Such buyers, which are defined as those who purchased at least 10 properties in a calendar year, accounted for just 5.6% of residential sales in Q1, down from 6.8% a quarter earlier and seven percent a year ago.
In large metros, all-cash sales made up more than half of all transactions in Atlanta, Detroit, Las Vegas, Miami, and New York.
The highest percentage of all-cash sales in cities with a population of at least 500,000 were all in Florida:
Additionally, 15% of all-cash purchases in the first quarter were in the foreclosure process, while 10% were bank-owned properties.
Interestingly, these numbers were released on the same day rates on the 30-year fixed-rate mortgage hit 4.21%, which is the lowest point it has been all year. And not really that far off from record lows seen in late 2012.
Why Are There So Many Cash Buyers If Rates Are Still Very Low?
For one, inventory is still tight, so paying with cash is the best way to get your offer accepted, even if you can qualify for a mortgage. Think bidding war.
But NAR also noted that mortgage lending standards remain too restrictive, though they always say that, and would say that even if you could get a mortgage with no money down with just your credit report.
They also pointed to cash sales coming from aging baby boomers, who are trading down or using retirement cash and/or years of home equity to get the job done.
Then there are foreign investors, who tend to use cash, and a recent trend of pulling money from the stock market (now near record highs) to put into real estate. Simply put, it has become an attractive investment again.
RealtyTrac attributed the trend to strict lending standards as well, coupled with low inventory, which gives cash buyers the upper hand when making an offer.
They looked at the brighter side of things, highlighting the fact that individual investors, second-home buyers, and owner-occupants have quickly filled the void left by institutional investors.
Because of that, home prices have continued to appreciate fairly rapidly, though at a slower pace than a year ago.
However, it is somewhat unfortunate that most home buyers can’t even take advantage of the low mortgage rates because they can’t get an offer accepted when competing with a cash buyer. Go figure.
U.S. counties most prone to flooding saw 384,000 more people move into them than out of them over the past two years, a 103% increase during that time. Similar trends are being observed in areas prone to wildfires and excessive heat as home prices have remained generally elevated well after the pandemic-driven homebuying boom.
This is according to data from Redfin, which conducted an analysis of migration patterns sourced from the U.S. Census Bureau cross-referenced with climate risk scores from the First Street Foundation, a research-oriented nonprofit that aims to define the risks of climate change in the U.S.
A combination of an explosion in remote work combined with record-low interest rates during the height of the COVID-19 pandemic has caused people to search for more affordable housing, fewer taxes and warmer weather. This pushed migration into states like Florida, Texas and Arizona, despite the fact that these states carry higher levels of risk from extreme heat, wildfires, drought and storms.
“It’s human nature to focus on current benefits, like waterfront views or a low cost of living, over costs that could rack up in the long run, like property damage or a decrease in property value,” said Redfin Deputy Chief Economist Daryl Fairweather. “It’s also human nature to discount risks that are tough to measure, like climate change.”
While the U.S. continues to reckon with issues related to housing supply, disaster-prone areas generally have a higher pool of available homes, leading to reduced prices. But a lot of building activity is also concentrated in areas associated with higher climate-related risks.
“America is increasingly building housing in places endangered by climate change; more than half (55%) of homes built so far this decade face fire risk, while 45% face drought risk, a separate Redfin analysis found,” the data explained. “By comparison, just 14% of homes built from 1900 to 1959 face fire risk and 37% face drought risk. New homes are also more likely than older homes to face heat and flood risk.”
Homeowners and renters may not have felt the full impact of climate-related disasters since, oftentimes, they do not end up directly paying for renovations or repairs necessitated by an adverse climate event, Fairweather said.
“Insurers and government programs frequently subsidize the cost of rebuilding after storms hit, and mortgages mean homeowners are ceding some risk to lenders—especially if their house goes into foreclosure after a storm,” he explained. “But with natural disasters intensifying and insurers pulling out of disaster-prone areas including Florida and California, Americans may start feeling a greater sense of urgency to mitigate climate dangers—especially if their home’s value is at risk of declining.”
Which, for many Americans surveyed by Redfin, is a concern. According to a survey of roughly 2,000 U.S. residents commissioned by Redfin and conducted by Qualtrics in May and June 2023, nearly half (48.7%) of respondents who moved within the last year believe that an increasing frequency or intensity of climate events like natural disasters, excessive temperatures and/or rising sea levels will “likely impact home values in their area in the next 10 years,” the data said.
Among the top migration destinations most impacted by climate risk, coastal Florida has seen nearly 60,000 more people move in than move out over the past two years. This includes to areas like Lee County, which includes Fort Myers and Cape Coral. The area was most recently ravaged by Hurricane Ian in September.
Meanwhile, inland California, Utah and Arizona have seen their populations swell as the risk of wildfires has only grown, Redfin found.
Recently, prominent insurance companies have exited some of these areas. Farmers Insurance announced earlier this month that it will cease providing coverage in Florida, while State Farm and Allstate are pulling back on types of coverage in California. All the exiting companies have cited climate risk in explaining these decisions.
It has now been roughly seven years since the devastating housing crisis rocked our great nation.
Between 2007 and 2014, foreclosure activity ran well above historical norms after exotic lending and sky-high home prices eventually brought down the entire real estate market.
But the foreclosure rate has since fallen to pre-crisis levels as problem loans were dealt with in one way or another. For some, a loan modification has meant a second chance to erase past mistakes.
For many others, the outcome wasn’t as positive. Their homes were lost via short sale or foreclosure and they must start anew. Of course, this may have been deliberate in some cases thanks to a phenomenon known as strategic default.
Regardless, many of those who lost their homes will now be able to get another crack at homeownership over the next several years. These folks are known as “boomerang buyers,” and are primarily Gen Xers or Baby Boomers.
Why Now?
Well, foreclosure waiting periods enforced by Fannie Mae, Freddie Mac, the FHA, and so on generally bar previously foreclosed homeowners from obtaining mortgages for seven years. For short sales, the wait is only four years in many cases.
Yes, there are exceptions to the rule that shorten these windows, and even programs that allow for mortgages just one year after such a negative event (or even one day!). There are also those who can buy a home with cash.
But generally it takes a considerable amount of time to bounce back and improve your credit history, regardless of the rules that are in place.
Seeing that it’s now 2015, the potential pool of boomerang buyers is growing in numbers.
A new analysis from RealtyTrac reveals that some 551,000 individuals will be able to buy a property again this year, assuming they still favor homeownership.
The number of boomerang buyers is expected to rise year after year until 2018 when the number peaks at over 1.3 million, then slowly decline through 2022, just as foreclosure rates have done.
This means the housing market might get an unexpected boost in demand at a time when supply is still low. Hello higher home prices?
Where Are All These Boomerang Buyers?
As you might expect, the areas hit hardest by the crisis should have the largest number of potential boomerang buyers.
That explains why Phoenix, Arizona leads the nation with nearly 350,000, followed by Miami with 322,000 and Detroit and Chicago each with over 300,000.
The largest share of potential boomerang buyers (as a percentage of total housing units) can be found in former foreclosure hotbeds such as Las Vegas, Merced, Stockton, Cape Coral-Fort Meyers, and Modesto.
Of course, in order for a potential boomerang buyer to become an actual homeowner the conditions need to be just right, kind of like conditions here on Earth.
RealtyTrac notes that the “trifecta of market conditions” includes an area where a high percentage of homes were lost to foreclosure, where home prices are still within reach to median income earners, and where the population of Gen Xers and Baby Boomers has held steady or increased.
The company found 22 metros (with a population of at least 250,000) meeting these criteria. The top five are Las Vegas, Tampa, Orlando, Cape Coral-Fort Myers, and Charlotte.
Phoenix wasn’t on the list because it’s Gen X/Baby Boomer population fell by 2.64% from 2007 to 2013. Miami isn’t ideal either because its housing payment to income ratio is over 28%.
In any case, the toughest part will be convincing these individuals to buy again seeing that home prices are already back near peak levels.
With existing homeowners locked into their low-rate loans, the proportion of home-seekers looking in a different metropolitan area from where they live is larger than ever, a report by Redfin says. The vast majority want to abandon coastal cities for the Sun Belt.
A whopping 25.4% of Redfin users looked at listings in a new city, up from 23% last year and below 20% before the pandemic.
In San Francisco, New York and Los Angeles, Redfin recorded more home searchers looking to leave than those looking to move there, a difference of more than 20,000 searchers each.
Prospective homebuyers are looking for spacious, sunny cities instead. Phoenix, Las Vegas and Miami ranked the highest in search demand. Redfin saw more users looking to move there than leave, a difference of around 6,000 per city.
This increase in out-of-city searches occurs despite challenges that come with living in Sun Belt cities. Phoenix, which saw the highest re-locator search volume, just announced a residential construction freeze because of a diminishing groundwater supply, which experts say will push up prices and choke supply in its suburbs.
Florida, which saw high search volume in Miami, Tampa, Orlando, Sarasota and Cape Coral, is struggling with rising home insurance prices. Seven residential insurers have failed since last February and the state government’s financial stability unit is monitoring 24 more, according to the Insurance Information Institute.
A loophole in Florida allows for high legal fees in homeowner insurance claim lawsuits. Florida made up 76% of the nation’s claim-related lawsuits, despite making up only 7% of actual homeowner insurance claims.
Redfin chief economist Daryl Fairweather said people want to move to Phoenix and Florida despite these issues “because even though Sun Belt home prices soared during the pandemic, those metros remain a bargain for people relocating from expensive coastal cities.”
The median home sale price in San Francisco is currently $1.4 million, according to Redfin. In New York it’s $819,900 and in L.A., it’s $950,000. In Phoenix, it’s only $439,950.
Because remote work remains prevalent, employees can often choose where to work without worrying about an impossible commute. Remote work accounts for 34% of U.S. employees worked at home last year, according to the Bureau of Labor Statistics.
Redfin’s report noted that the total number of homeowners looking to move is not increasing: it has gone down 7% in the past year. With high mortgage rates and rising home prices, home searches on Redfin are at an all-time low.
It is no secret that housing inventory is low. As of June 2, there were 433,104 single family homes on the market nationwide, according to data from Altos Research.
And while this situation is certainly far from ideal, according to a report published Thursday by the National Association of Realtors and Realtor.com, even with the existing level of homes available for sale, the housing affordability and inventory shortage issues wouldn’t be so severe if there were enough homes for buyers at all income levels.
In April 2023, data from NAR and Realtor.com showed there were roughly 1.1 million homes listed for sale. Of those 1.1 million properties, 25% had a price lower than $256,000, which is the maximum price of a home that households earning the national median income of $75,000 can afford.
Over half (51%) of U.S. households earn $75,000 or less, meaning that in a balanced market, 51% of the homes for sale would be affordable to buyers in this income bracket.
Based on the report, the housing market needs an additional 319,460 listings priced under $256,000 in order for the market to be balanced. In other words, the U.S. needs to add at least two homes that are affordable for middle-income buyers (up to $256,000) for every home that is listed above $680,000.
As income levels increase, however, the disparity decreases between current inventory and the inventory needed for a balanced market. For example, buyers earning $250,000 can currently afford to buy 85% of listings compared to 93% in a balanced market.
This situation has only gotten worse over the past five years. In April 2018, there were about 810,000 listings that middle-income buyers were able to afford, just 150,000 listings shy of a balanced market.
El Paso, Texas; Boise City, Idaho; Spokane, Washington; Cape Coral, Florida; and Lakeland, Florida round out the top five metropolitan areas with the larges supply shortage of homes with a price lower than $260,000. In El Paso, buyers earning $75,000 can afford to buy 16% of listing, when in a balanced market they should be able to buy 66% of listings. In Boise City, they can afford just 2% of listings when a balanced market calls for them to be able to afford 50% of listings.
On the other side of the spectrum, in the Youngstown, Ohio-Pennsylvania market, buyers earning $75,000 can afford to buy 72% of listings, when a balanced market calls for this cohort to be able to afford 66% of listings.
Akron, Ohio (where 61% of listings are affordable and 58% are needed for balance); Toledo, Ohio (where 61% of listings are affordable and 60% are needed for balance); Cleveland, Ohio (where 59% of listings are affordable and 58% are needed for balance); and Syracuse, New York (where 54% of listings are affordable and 55% are needed for balance) round out the top five.
When parsed by race and ethnic groups, NAR and Realtor.com found that Black Americans are the group that is furthest away from equilibrium out of any cohort. Two-thirds of Black Americans earn $75,000 or less, and these buyers can only afford 22% of homes for sale.
Meanwhile, 48% of white Americans fall into the same income bracket, and they can also afford to buy 22% of listings. This means that Black Americans would need 20% more listings with a value of up to $256,000 than white Americans in order to be at equilibrium.
By comparison, Hispanic Americans need roughly 11% more homes listed for sale than what white Americans need to reach equilibrium. When broken out by metro area, McAllen and El Paso in Texas; Oxnard and Riverside in California; and Tucson, Arizona are the areas with the smallest housing affordability and availability inequalities among white and Black households earning less than $75,000. The report attributes this to these areas being expensive for all racial/ethnic groups
While rising property values have continued to defy expectations, could it be the end for home price appreciation after nearly a decade of gains?
There’s been talk of frothy home prices for years now, with affordability stretched even as mortgage rates hit new all-time lows.
One new forecast says the good times in the red-hot real estate market might finally be over.
At least, that’s the call from data analytics firm CoreLogic, which is predicting a 1.3% drop in home prices from April 2020 to April 2021.
Home Prices Expected to Post an Annual Decline in 2021
Home prices were up 5.4% in April compared with April 2019
Property values increased 1.4% month-to-month from March to April
Month-to-month gain expected to be just 0.3% from April to May
Annual price decline of 1.3% predicted from April 2020 to April 2021
While home prices have still gone up both year-over-year and month-over-month lately, the gains are projected to decelerate and eventually turn negative.
Home prices rose 1.4% from March to April of this year, contributing to the 5.4% annual gain, but the CoreLogic HPI Forecast calls for just a 0.3% gain from April to May.
That could represent one of the few remaining (or last) of the monthly gains for a while since they expect home prices to decline 1.3% by April 2021.
If CoreLogic is right, it would mark the first yearly drop in more than nine years, when home prices bottomed around 2011/2012.
The good news is it’s only a small annual decline, and that’s if they’re right to begin with. The pundits have been predicting higher mortgage rates and lower home prices for years now.
And they’ve been wrong year in and year out, which again speaks to how difficult it is to call a bottom or a top.
Further throwing their forecast into question is the fact that the typical spring home buying season has been pushed back a few months, so we could see home prices rise in coming months.
Cities Driven by Tourism or Oil Industry Expected to Fare Worst
Miami and Las Vegas hurting due to less travel and fewer visitors
Houston and West Virginia suffering from oil/gas industry slowdown
Home prices expected to be down in 41 states by next April
One winner is Philadelphia thanks to NYC migration related to COVID-19
CoreLogic chief economist Frank Nothaft said their forecast has home prices down a year from now in 41 states, despite record low mortgage rates and limited housing inventory.
He added, “If unemployment remains elevated in early 2021, then we can expect home prices to soften.”
As always, when looking at home prices you have to consider the local market, not just the nation as a whole.
CoreLogic expects some metros to be hit more than most, and others may actually buck the trend and see even more gains thanks to shifting demographics.
For example, already overvalued markets such as Las Vegas and Miami are expected to decline by 7.2% and 4.4%, respectively, by April 2021.
The same goes for Cape Coral-Fort Myers and North Port-Sarasota-Bradenton in Florida, and Prescott, Arizona.
In these tourist-rich destinations, the economy has taken a big hit thanks to COVID-19, which could lead to increased foreclosures and fewer eligible home buyers.
And perhaps less appetite for investment properties if not as many individuals are vacationing or moving to those cities.
CoreLogic expects a decline in property values in these metros as visitors decide instead to stay home, which could lead to the sale of vacation rentals at discounted prices.
Similarly, home prices are under pressure in Huntington, West Virginia and Houston, Texas, both of which have suffered from a collapse in the oil and gas industry.
On the other side of the coin, Philadelphia has seen a boom as New Yorkers relocate “in search of more space and privacy,” thanks to the distancing effects of the coronavirus.
The Philly metro exhibited the biggest year-over-year increase in single-family detached home prices, which surged 10.6%.
Nationwide, homes price gains are outpacing condo price gains, with single-family attached units (condos, duplexes) up 4.3% year-over-year in April 2020 compared to a 5.7% increase for single-family detached properties.
This plays to the new trend of wanting/needing more space, just like why the suburbs are apparently hot again after falling out of favor with home buyers.
Zillow seem to be on the same page regarding 2021 home prices, though they expect a drop this year followed by a recovery in 2021 resulting in no real material change.
It’s too early to tell what’s going to happen, though if you’re modeling home price gains and losses based on COVID-19, assume it’s flimsy since the pandemic still presents many more questions than answers.
I still think this housing market has legs, possibly for several more years, even if there are some expected (or unexpected) hiccups along the way.
The cyclical prediction is home prices peaking around 2024, which continues to makes sense.
While it may feel close to a top, it always takes longer to play out than anticipated. Just look at home prices on the way down, or the meteoric stock market rise over the past several years.
The mortgage landscape has changed a ton over the past several years.
Mortgage lending guidelines have firmed tremendously since the housing crisis took hold, and mortgage rates have fallen to new all-time lows.
Meanwhile, home prices seem to have bottomed, and decent home price appreciation is in the forecast.
This has created an interesting environment for both prospective and existing homeowners.
Determining Your Homeownership Horizon
When to buy real estate and take out a mortgage
You need to determine how long you plan to keep the property
And in that same sense, the home loan that goes along with it
As it will dictate loan choice, paying points, and more
Perhaps one of the biggest changes in thought is that those who take out a mortgage today will keep it for as long as they own their home.
In the past, this wasn’t the case, with mortgage rates very high, and then in a downward trend for many years since.
That allowed existing homeowners to refinance and tap home equity via cash out refinances and HELOCs, while also reducing monthly mortgage payments.
Even recent homeowners were able to refinance just six months or a year after purchasing their homes, thanks to the precipitous drop in interest rates.
[The refinance rule of thumb.]
But that march downward seems to have come to an end, and could in fact reverse course, which will equate to slower prepayment speeds and far fewer refinances.
After all, no one will be keen to lose your super low mortgage rate, even if they do need cash.
It also makes the question of which mortgage to get more difficult. Additionally, one really has to question whether they should buy down their mortgage rate.
Why Homeowners Sell Their Homes
People sell their homes for all types of reasons, and many do so well before their mortgages ever reach maturity.
The most common reason all homeowners move is to obtain a better home, this according to data from the 2017 American Housing Survey (AHS).
It’s also pretty normal to sell a home in order to buy in a better neighborhood, or for a first-time buyer to sell in order to form a household (think more space).
Other reasons include being closer to family, shortening a commute, relocating for a job, reducing housing costs, being forced to move, or simply because of a change in household.
You should consider all these reasons before you decide on a particular type of home loan. It might sway your decision.
Most People Keep Their Homes for Six to 10 Years
Prior to the housing crisis the median tenure was around six years
Meaning millions of homeowners took out 30-year loans
But kept them for a fraction of the time
Nowadays tenure is climbing as homeowners hunker down
Take a look at this chart from the National Association of Realtors Profile of Home Buyers and Sellers.
The median tenure for a home seller over the past two decades has been just six years. I guess forever homes are a thing of the past.
As you can see, tenure increased after the mortgage crisis, mainly because underwater mortgagors had no choice but to wait it out.
But many of those who persevered have now listed their homes, just as they are getting their heads above water.
The point I’m trying to make is that very few mortgages are actually held to term, or anywhere close to it.
For one reason or another, mortgages just don’t last that long, despite many being 30-year fixed mortgages.
When looking at this chart, one could reasonably wonder why more homeowners don’t take out short-term adjustable-rate mortgages, such as 5/1 or 7/1 ARMs. The savings would massive.
Both offer lower mortgage rates than their fixed-rate cousins, which would result in a lower monthly payment, less interest paid, and more principal accrued.
Yet most homeowners seem reluctant to go with an ARM, perhaps because it’s difficult to predict the future.
[30-year fixed vs. adjustable-rate mortgage]
Still, the numbers don’t lie – scores of homeowners are on the move in just six short years, whether they hold 30-year fixed mortgages or whatever else.
Will You Keep Your House Longer Now?
As you can see from the graph above homeowners are staying put longer
Thanks to lower interest rates and high home prices
The latest data says homeowners are sticking around for about 10 years on average
So that may affect your mortgage decision too
As I noted, the landscape has changed quite a bit. So will the same trend hold true going forward, or will more homeowners choose to stay put for longer?
I’m sure the average homeowner tenure will increase somewhat, but probably not by that many years. There will still be tons of homeowners that sell in a short period of time for a bevy of reasons.
And so homeowners will continue to take out long-term fixed mortgages that don’t do them much good, aside from the peace of mind of knowing their rate won’t change.
More recent data suggests an average holding period of about a decade.
Sure, it’s slightly longer, but since most mortgages come with terms of 30 years, it should still make you question why you’d pay to lock in a rate for triple the time necessary.
Of course, rates on fixed mortgages and ARMs aren’t all that different at the moment, so it’s not a terrible mistake to make, if you can even refer to it a mistake.
Still, you might be able to save some big bucks if you go with a 10/1 ARM as opposed to a 30-year fixed over the course of 120 months, not to mention build equity a bit faster.
Where Homeowners Stay the Longest
El Paso, TX (99 months)
Albuquerque, NM (98 months)
Oxnard, CA (97 months)
Greensboro, NC (97 months)
Philadelphia, PA (96 months)
Cleveland, OH (95 months)
Seattle, WA (94 months)
Baltimore, MD (93 months)
Rochester, NY (93 months)
Jacksonville, FL (92 months)
In the cities listed above, tenure is the longest, per updated data from NAR for 2018. In El Paso, Texas, a full 99 months go by between sales on the average home there.
While it sounds like a long time, it’s still just over eight years. A 7/1 ARM would cover most folks there, and even if the rate adjusted higher for one year once it became adjustable, the savings realized during the first seven years would likely eclipse any payment increase.
Where Homeowners Stay the Shortest
Providence, RI (33 months)
Cape Coral, FL (35 months)
Greenville, SC (36 months)
New Orleans, LA (44 months)
Madison, WI (47 months)
Grand Rapids (51 months)
Knoxville, TN (54 months)
Boston (57 months)
Omaha, NE (66 months)
Augusta, GA (66 months)
As you can see, lots of homeowners in the cities above could benefit from the short-term financing afforded with an ARM. In most cases, a 5/1 ARM would mean a fixed rate during their entire stay.
What’s even more worrisome is that some homeowners are paying to refinance, or paying mortgage points at closing to obtain a lower rate.
Unfortunately, many of these homeowners won’t hold their mortgages long enough to benefit from the future savings. So use a refinance calculator if you’re thinking about doing this.
After all, the trend to sell in 10 years or less is one that will be hard to shake, even in light of the unprecedented situation we find ourselves in today.
Still, you should definitely ponder the fact that the mortgage rate you receive today will likely be the lowest you’ll ever have – that may sway your decision to part with it so soon.
Did you know that the average American has a nearly 70% chance of needing some form of long-term care upon reaching age 65? But did you also know that you may be able to prepare for the event by purchasing long-term care insurance? That’s why we’ve prepared this guide of the 7 best long-term care insurance of 2023.
Before getting into our reviews of the seven best long-term care insurance providers of 2023, scan the table below to see which company you think will work best for you:
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Our Picks for Best Long-Term Care Insurance
Dozens of insurance companies offer long-term care insurance, but below is our list of the top seven, and what each is best for:
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Best Long-Term Care Insurance – Company Reviews
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Maximum Benefits: Varies by provider
Benefit Period: Varies by provider
Waiting/Elimination Period: Varies by provider
GoldenCare, also known as National Independent Brokers, Inc, is a privately held long-term care insurance brokerage firm, and one of the leading such firms in the industry. They provide policies from the top-rated insurance companies in the industry. The company is based in Plymouth, Minnesota, and has been in business since 1976. Their plans are available in all 50 states.
The list of companies they work with includes the following:
GoldenCare also offers critical illness insurance, Medicare supplements and Medicare Advantage plans, prescription drug plans, life insurance, annuities and final expense policies.
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Maximum Benefits: Varies by provider
Benefit Period: Varies by provider
Waiting/Elimination Period: Varies by provider
Like GoldenCare, LTC Resource Centers is also an insurance brokerage specializing in long-term care insurance. Based in Cape Coral, Florida, the company has been in business for more than 40 years. They provide long-term care insurance, short-term care, linked or combination products, Medicare supplements, life insurance, critical illness, and annuities.
A specialization they offer is what is known as asset-based long-term care. It’s a strategy that uses a whole life insurance policy or annuity to provide long-term care coverage, which eliminates the need for an expensive, dedicated LTC policy. A pricing comparison is presented in the screenshot below:
As a broker, they work with multiple long-term care insurance providers. That means to get detailed information you’ll need to set an appointment with a long-term care insurance specialist and make the request. The company’s licensed to operate in all 50 states.
Maximum Benefits: Up to $400 per day or $10,000 per month
Benefit Period: Up to 5 years, or unlimited lifetime benefit
Waiting/Elimination Period: 0, 30, 60, 90, 180 or 365 days
Mutual of Omaha is one of the top individual providers of long-term care insurance. They offer some of the best plans in the industry, including lifetime benefits coverage, multiple elimination periods, and inflation protection. They are a full-service insurance company providing coverage in all 50 states, providing virtually all types of insurance policies.
Mutual of Omaha also offers premium discounts. For example, you can save 15% when you purchase a policy for both you and your partner. You can also save 15% if you’re in good health. There’s even a 5% discount if you are married but your spouse does not purchase a policy.
Maximum Benefits: Up to $7,000 per day, up to a $250,000 lifetime maximum
Benefit Period: Up to maximum daily or lifetime limit
Waiting/Elimination Period: One-time deductible of $4,500 up to $21,000
Like Mutual of Omaha, New York Life is a large, well-established and diversified insurance company. In addition to long-term care policies, they also offer virtually every other type of insurance policy available. Also like Mutual of Omaha, New York Life is a mutual insurance company, which means it’s owned by its policyholders, not shareholders. The company partnered with the American Association of Retired Persons as a preferred provider of long-term care insurance policies.
New York Life provides their NYL My Care long-term care policy. The basic parameters are as follows:
Like other direct insurance providers on this list, New York Life also offers annuities and whole-life insurance policies with long-term care riders.
Maximum Benefits: Up to $750,000 maximum lifetime benefit
Benefit Period: Up to 7 years
Waiting/Elimination Period: 90 days
Nationwide is one of the leading providers of long-term care insurance in America. With a maximum lifetime benefit of up to $750,000, they provide the highest lifetime maximum benefit on our list. They also offer a single, simple, 90 calendar-day elimination period. You can choose between two years and seven years for a maximum benefit period.
The policy will also cover home healthcare, hospice, adult day care, household services, home safety improvements, and even family care. And in a unique twist, nationwide also provides international benefits. If you live out of the country during the benefit period, the policy will pay 50% of the maximum monthly benefit.
Maximum Benefits: Up to $250,000 maximum lifetime benefit
Benefit Period: Up to maximum lifetime benefit limit
Waiting/Elimination Period: 90 days
Brighthouse Financial is an insurance provider that offers two types of products, annuities and life insurance. Either is available with a long-term care rider. The company has $254 billion in assets, serving about 2 million customers.
Brighthouse Financial provides long-term care insurance through its SmartCare plan. It’s a combination plan that adds a long-term care provision to a whole life insurance policy. You’ll get the benefit of long-term care if it’s needed, but you’ll also have a life insurance benefit to pay to your beneficiaries if it’s not, or if there are any funds left over after your long-term-care stay.
The policy will cover adult day care, hospice, and home healthcare, in addition to nursing homes and assisted living facilities, and skilled nursing care.
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Maximum Benefits: Varies by provider
Benefit Period: Varies by provider
Waiting/Elimination Period: Varies by provider
CLTC Insurance Services, or California Long Term Care Insurance Services, is a long-term care insurance aggregator, based in San Francisco. Aggregator is a fancy word for an online insurance marketplace. As an aggregator, CLTC will give you access to a large number of long-term care insurance companies. You can then choose the one offering the plan that will work best for you. The main limitation of this provider is that they offer policies only in the state of California.
In addition to long-term care insurance, they also offer annuities and life insurance policies, both with long-term care riders. These types of policies eliminate the need for a dedicated LTC policy, since the cost of long-term care is paid out of the proceeds of the annuity or life insurance. CLTC also offers critical illness insurance.
Long-Term Care Insurance Guide
What is Long-Term Care?
When an individual reaches a point where they can no longer care for themselves, long-term care becomes necessary. That care can be provided by anyone from family members to nursing homes.
The need for long-term care generally applies when the individual can no longer perform one or more of the six activities of daily living (ADL). This can include inability to dress, groom, go to the bathroom, bathe, eat, or even to move about freely.
In most cases, long-term care becomes necessary after a major health event, like a heart attack or stroke. But it can also be the result of an ongoing, degenerative health condition or simply advancing age.
In most cases, long-term care is provided by a family member. But institutional care may be necessary if the individual is unable to perform several ADLs, which may overwhelm the ability of family members to provide ongoing care.
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How to Purchase Long-Term Care Coverage?
We recommend contacting any of the seven best long-term care insurance providers in this guide. Otherwise, do a search and identify insurance companies that offer long-term care coverage. But be aware that not all insurance companies offer it, precisely because of the many variables. It involves.
When purchasing a policy, be aware of the following:
Like life insurance, it’s best to purchase LTC insurance when you’re young and healthy. That’s when the premiums are lowest.
Consider purchasing a long-term care insurance alternative, like a life insurance policy or an annuity with a long-term care rider (see below). It’s generally much less expensive.
Pay close attention to the maximum benefit paid, whether daily, monthly, annually, or lifetime. It should approximate nursing home costs in your area. (Be aware that these costs vary greatly from one state to another.)
Pay close attention to the benefit period. While the typical number of years an individual needs long-term care coverage is three years, there’s no way to tell what you may need. If you can afford the higher premium, it may be best to go with the longer benefit period, say, five years or longer.
Be aware of the elimination period. The standard is 90 days, but it can be as long as one year. This is not a minor factor, since nursing home care at $8,000 per month could cost you $24,000 with a 90-day waiting period before benefits kick in. The waiting period you choose should match the amount of liquid assets you expect to have available to cover it.
When you take a policy, be prepared to pay the premium for the rest of your life. If you take a policy at 60, stop making the payments at 80, then you need long-term care at 85, you’ll get no benefits from the lapsed policy.
According to the website Consumer Affairs, long-term care insurance premiums look something like this:
Now, the screenshot above reflects only sample averages for very specific policies at ages 55 and 65. The actual premium you will pay will be based on a combination of factors, including your age at the time of purchase, any health conditions you have, as well as the dollar amount and term of the benefits your policy will include.
Finally, given how complicated long-term care insurance is, it wouldn’t be overkill to have the policy reviewed by an attorney before accepting it. If so, an attorney who specializes in elder care will be your best choice.
Who Needs Long-Term Care Coverage?
The short answer to this question is everyone. The unfortunate reality is that people turning 65 have an almost 70% chance of needing some type of long-term care services during their lifetimes. Approximately 37% will require institutional care. And statistically, women and single individuals are more likely to require long-term care than men and married individuals.
If you’re unsure if you need long-term care, check out Jeff’s post, Long term care insurance: do you really need it?.
Though it isn’t well-known outside the industry, there are two basic types of long-term care coverage available. The first is a standalone long-term-care insurance policy.
Like a life insurance policy, medical underwriting will be performed. The insurance company will consider your age, your health condition, your family health history, your occupation, requested benefit levels, and other factors in approving your application and setting the premium level. This is the more costly of the two options.
The other is a hybrid policy. Most commonly, this is life insurance with long-term care benefits. You’ll purchase a basic life insurance policy, then add a long-term care rider to the policy. This will increase the premium on the life insurance policy, but it will be much less expensive than a standalone long-term-care policy.
Meanwhile, you’ll also have a death benefit from the life insurance policy, in addition to long-term-care coverage. But the policy may also include using some or all the death benefits to pay the long-term-care benefits. Your beneficiaries will receive only the amount of the unused death benefit upon your death.
Most of the best life insurance companies offer life insurance policies with this rider.
Another variant of this option is to use an annuity with long-term care rider. Annuities are designed to provide an income stream, very similar to a pension. But similar to a life insurance policy with a long-term care insurance rider, you can also add the rider to an annuity.
Again, it will be less expensive than purchasing a standalone long-term-care policy. And the long-term-care benefits may reduce any death benefit in your annuity. But the provision will be much less expensive than purchasing a standalone long-term-care policy.
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Finding the Right Policy
Long-term care insurance is one of the more complicated insurance types. It also includes more potential variables than other policies. For example, not only will you not know if you will need the coverage at all, but you won’t know when, to what degree, what level of care will be required, or how long it will be needed.
Because of all these variables, the cost of a long-term care insurance policy can be all over the place. But it may be better to pay a little bit more for a more comprehensive policy than to price-shop for the least expensive plan.
Before deciding to purchase a long-term-care insurance policy, first review Jeff’s Podcast episode: Long Term Care Insurance – How much do you need? Given how complicated long-term-care insurance is, it’s best to go in with as much knowledge as possible.
How We Found the Best Long-Term Care Insurance Companies
We used the following criteria to determine the best long-term care insurance companies of 2023:
Maximum Benefits: Given that the cost of long-term care can easily run into hundreds of thousands of dollars, we favored companies with the most generous lifetime benefits.
Benefit Period: One of the most basic problems with long-term care is the uncertainty. There’s no way to know in advance what level of care you might need, or how long it might be necessary. For that reason, we favor the companies that provide the most flexibility in this area.
Waiting/Elimination Period: Just as most insurance policies have deductibles, long-term care insurance uses the waiting period in much the same way. The standard delay on benefits is 90 days. But we prefer companies that offer longer waiting periods, since this will represent an opportunity to lower the cost.
Speaking of cost, as much as we would like to provide a list of average costs per provider, this information simply is not available. That’s because long-term care insurance is highly customized. There’s nothing approximating a “one-size-fits-all” policy, as each policy premium is determined by a multitude of factors.
These include your age at the time you purchase the policy, your general health condition, your family health history, the length and amount of coverage you need, and many other factors. The only way to get a reliable premium figure will be to contact one of the companies above and get a quote.
Best Long Term Care Insurance FAQs
What is long-term care insurance?
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Long-term care insurance is a type of coverage that will provide benefits to pay for your personal care when you’re no longer able to do so for yourself. While the typical long-term-care scenario involves a nursing home, it also applies in lesser situations. That can include assisted living arrangements, home nursing care, and even family care. The policy will begin paying benefits when you qualify for care based on inability to perform several of the ADLs.
What does long-term care insurance cover?
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As mentioned earlier, long-term care insurance benefits begin to apply when you are unable to perform activities of basic living. Depending on the type of policy you have, you’ll receive benefits for a stay in a nursing home, an assisted living facility, skilled nursing care, an adult day care, hospice, and even home care provided by your family.
Some policies will even provide for the cost of modifying your home to better accommodate your capabilities, or the purchase of certain helpful equipment.
How long does long-term care insurance work?
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A typical long-term-care insurance policy will pay benefits between two and five years, though some will go as long as seven, and a few providers offer lifetime benefits. You should be aware that you will need to qualify for whatever coverage term you prefer, and the longer the term, the higher the premium will be.
Is long-term care insurance worth it?
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It really depends on your perceived need for the coverage, and your ability to pay the premiums. Need can be determined by your family history. If you have multiple family members who require long-term care, having the coverage for yourself will be highly desirable. But if you’re in excellent health, and there’s little history of a need for care in your family, you may want to pass on the coverage.
And of course, given the high cost of the premiums, your ability to afford coverage can never be ignored. But if you have very limited financial means, Medicaid may provide benefits for long-term care. However, to qualify your total assets must generally be below $2,000.
Summary of the Best Long-Term Care Insurance Companies
Let’s wrap up this guide by giving you one more look at our list of the seven best long-term care insurance companies of 2023:
Long-term care insurance isn’t inexpensive. But given the unusually high likelihood that will be needed at some point in your life, it’s a policy worth having if you can afford it. And if you can’t, consider taking an annuity or a whole life insurance policy with a long-term care provision.