Home Price Recovery Takes Hold, Will Reverse Mortgage Markets Follow?

While the reverse mortgage market faces barriers to growth including the implementation and adjustment to new reverse mortgage changes set to go into effect on April 1, and later this year pending congressional approval, the slow but steady home price recovery may already be providing a boost to the market—in some regions.

A preliminary look at areas of strong recovery may indicate the faster the better in terms of reverse mortgage growth in those areas.

Based on the data that is currently available from the Department of Housing and Urban Development, there are some areas currently providing examples where home price data looks to be paralleling a recovery in the reverse mortgage market as well, says John Lunde, Reverse Market Insight President and co-founder.

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Phoenix, for example, is experiencing a reverse mortgage recovery at a 29% increase in volume, year to date. The metro area for Phoenix also appears on the most recent list of improving markets tracked by online real estate hub Zillow, at a 22.9% year-over-year for home prices.

Other areas seeing strong recovery in home prices, according to Zillow’s index include Los Angeles, Miami, Sacremento and Las Vegas. But not all recovering markets mirror a recovery in reverse mortgage lending, with Las Vegas serving as an example at a 12% decline in the lending market despite an 18% uptick in values.

The distinction may be attributable to the speed at which the markets are recovering in the real estate sector, as well as the stability of those markets, Lunde says.

“Las Vegas and Phoenix show similar home price index characteristics, but Phoenix HECM market is growing whereas Vegas is still shrinking,” he says. “I think part of it is that Phoenix home prices are rising faster than Vegas right now and have been more stable over past 3 years. …I think it’s safe to say that home price increases are helping HECM volume, with faster appreciation generally helping boost HECM volumes more than slower growth or declines.”

The home price recovery is one place to look for the reverse mortgage market stabilizing, analysts have told RMD, but product changes and potential legislative changes are still strong factors to consider for the market outlook longer term.

View the most recent RMI report.

Written by Elizabeth Ecker

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  • We have been waiting for that Vegas reverse mortgage market to turn around for some time now, but it’s poised to happen this year.

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