Senior Home Equity on the Rise, Reaches $3.2 Trillion in Q4

American seniors now have more home equity than any time seen since mid-2009, reports the National Reverse Mortgage Lenders Association (NRMLA).

Home equity totalled $3.2 trillion for adults age 62 and older during the fourth quarter of 2012, marking the third straight increase on a quarterly basis, according to the NRMLA/Risk Span Reverse Mortgage Market Index (RMMI).

“The positive trends supported by today’s RMMI are good news for senior homeowners, and they contain positive signs for the American economy and housing market,” said Peter Bell, president of the National Reverse Mortgage Lenders Association. 

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In the fourth quarter, the RMMI reached its highest level of 152.59 since the second quarter of 2009. After falling 0.60% to start the year, the RMMI increased slightly in the second quarter before posting significant growth for the third and fourth quarters. 

“In the second half of last year, the RMMI had its strongest two quarters of growth since early 2006,” said Allen Jones, managing director of RiskSpan, the analytics firm which designed and manages the RMMI.  

Over the last 12 months, the total home equity of seniors age 62 and oder increased by $117 billion, up 3.8%. This period also saw seniors’ home values increase by $97 billion (2.3%) as well as  mortgage debt decline by $20 billion (1.8%).

“The equity Americans have built in their homes is often their greatest asset, an important option for funding their future,” Bell said. “The FHA Home Equity Conversion – or reverse mortgage – program has been a useful tool, helping hundreds of thousands of seniors maintain their homes and lead more financially stable lives.”

Chart: Reverse Mortgage Market index

 
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Written by Jason Oliva

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  • While it is great to read that home equity rose 3.8% in the last twelve months, the problem is in the details. The trouble is home values on average only rose 2.3%.

    2.3% is less than the 4% needed to keep pace on a fully drawn HECM based on the HECM model. Further some home values grew by far more than 4% while others much, much less. HECMs in the much less areas would be accruing more potential termination losses while growth rates in excess of 4% may not be helping with recouping FHA losses in other areas.

    Now with Zillow and others predicting a reduction in the rate of home appreciation for this calendar year, 2.3% could be a high for some time to come.

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