At $3.14 Trillion, Senior Home Equity Fares Better Than Most

Total home equity among U.S. seniors ages 62+ fell 2% in the second quarter to $3.14 trillion and is now down 22% from its 2006 peak. Senior home equity has fared much better than the home equity of the overall population, according to a report by the National Reverse Mortgage Lenders Association and RiskSpan.

“The aggregate senior home equity level has withstood market declines better than the equity level of the overall population, which is down 38% from its Q1 2006 peak, due to the relatively fast growth and lower mortgage debt levels of the senior population,” said Allen Jones, RiskSpan chief operating officer, in an email to RMD.

Jones points to two factors that make the aggregate level of senior home equity more resilient. First, he says, is demographics, with the senior popular growing more rapidly than the overall population.

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Second, seniors typically have lower loan-to-value ratios.

“Seniors have less leverage (lower LTVs) than the rest of the population, so for a given decline in housing prices, the general population loses more of its equity,” Jones says.

The total amount of home equity held by seniors remains above $3 trillion, but comparatively is at the index level where it was in the second quarter of 2004.

Senior home equity is tracked by the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI). The second quarter index shows a continued decline over the past two quarters and indicates that housing prices in 340 of the 395 metropolitan statistical areas FHFA and RiskSpan track saw quarter-over-quarter declines.

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Debt levels for seniors fell for the 9th straight quarter to $1.02 trillion.

The data shows how the housing market has impacted the value of senior equity versus the equity level of the over-all population, NRMLA said.

“While the senior equity level is 22% off of its Q2 2006 peak, the equity level of the overall population is down 38% from its Q1 2006 peak,” noted Peter Bell, NRMLA president, in a press release. Bell also pointed out that the difference is “due to the relatively fast growth and lower mortgage debt levels of the senior population.”

Written by Elizabeth Ecker

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  • Elizabeth,

    Can you please find out how equity is measured?  Is the analysis done at the MSA or smaller area size level?  How many homes are included in the data which is actually analyzed before extrapolating it to the population as a whole? 

    Intuitively unless seniors are concentrated in areas with lower home value declines, have borrowed less in the measuring period, or have moved proportionately less than other population cohorts, it is hard to comprehend how their equity would hold up better than others.

    Studies based on actual numbers generally distort less than those which analyze percentages.  Providing results in percentages and dollar amounts is normal for either type of analysis.

    • I can’t speak to the methodology of the study, but it seems to make intuitive sense that all else being equal, lower leverage (mortgage debt) would cause senior home equity to be less volatile (both up and down) to home price changes.

      Add to that the idea that more of population is ‘aging’ into the senior age bracket which would naturally add equity dollars to the senior group being measured here.

      • John,

        As to raw numbers, there would be no expected difference since the drop in equity is just a simple math problem of subtracing the drop in home values UNLESS seniors somehow saw a lower net increase in debt or had a greater net reduction than the remainder of the home owning population.  Percentage changes are much different. 

  • I would bet my house that the figures quoted relate only to the primary residence and do not include residential investment properties. The real equity figure based on my reearch is closer 7 trillion dollars post GFC.

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