Home Equity Grows to $6.1 Trillion for Reverse Mortgage-Age Seniors

U.S. homeowners age 62 and older saw a $152 billion increase in home equity during the third quarter of 2016, bringing the aggregate value of equity held by these homeowners to $6.1 trillion, according to new data from the National Reverse Mortgage Lenders Association (NRMLA).

The increase realized during the third quarter was driven largely by a 2.3% growth in senior home values, which helped push the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI) up to 217.34—an all-time high since the quarterly index was first published in 2000.

“The upward trajectory of the RMMI tells us that housing wealth continues to provide senior homeowners with a financial resource they can use to support their needs during their retirement years when income is dependent on Social Security, investment assets, and pensions,” said Peter Bell, NRMLA president and CEO, in a press release.screen-shot-2016-12-20-at-3-54-48-pm

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Rising senior home equity arrives during a time when recent studies and policy commissions this year have highlighted the use of reverse mortgages as a possible retirement solution for aging Americans, many of whom are approaching retirement age with higher debt and less resources for saving.

Only 29% of households aged 50-64 will leave the workforce with a traditional pension, compared to 49% of today’s age 65 and older households, according to findings published last week by the Joint Center for Housing Studies at Harvard University.

Additionally, 60% of pre-retires aged 61-61 have at least one source of long-term debt, and 26% have multiple sources of debt, according to a study from the George Washington University School of Business cited by Harvard researchers.

This combination of constraints raises “serious concerns” about the financial stability of future retirees and their ability to manage the costs of aging, including paying for long-term care, NRMLA states.

But increases in senior home equity, which continues to grow at a multi-billion-dollar clip, is encouraging, especially when considering the potential for tapping into this selling amount of housing wealth for retirement.

“The positive trend is also reassuring for homeowners nearing retirement age who are less likely than their predecessors to leave the workplace with a defined benefit plan and also more likely to have long-term debt,” Bell said.

Written by Jason Oliva

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  • It would be very useful if you could include a link to the source of the RMMI $6.1T Q3 figure. I have never been able to locate that particular quarterly report on the RiskSpan web site.

    • There is no place to link to on the RiskSpan site. The figure is derived from a proprietary index, the Reverse Mortgage Market Index (RMMI), developed and calculated quarterly for NRMLA by RiskSpan that draws data from several sources including the Census Bureau (demographics for those entering and leaving the RM eligible age band), Federal Home Loan Banks (home values), Household Debt (Federal Reserve), etc. The index and a diagram of its inputs have been presented over the years at various NRMLA conferences.

      • Thanks for the clarification, Peter. I had seen the diagram on occasion in the past but did not know its source.

  • On one hand there is positive news in a growing home equity. It works out to about $2,500 per senior. Yet we know that not all seniors own a home and in many cases the home is owned by more than one senior. From that a significant but not substantial percentage needs to be shaved off the total for life tenancies since the remaindermen hold more projected equity than a senior life tenant.

    We also know that the growth is generally more highly concentrated in some areas of the country over others. Generally those with higher value homes gain a significant amount of the total growth.

    Since there is no measuring standards that are adopted by groups having opposing views and purposes, there is a tendency to see higher results than when such measuring standards are in place.

    Then RMD reported some interesting insight from Dr. Chris Mayer at http://reversemortgagedaily.com/2016/12/11/researchers-reveal-biggest-roadblocks-to-reverse-mortgage-borrowing/

    Certainly information provided by Dr. Mayer must be questioned at its face due to his involvement in our industry but that does not mean that the data is not worth considering. He focuses first is on the lower rate of homeownership of those entering retirement and mortgage debt is generally getting higher. Yet he does not state if average home value is growing or getting smaller as to this group.

    Home equity appears to be a significant measure but it is not nearly as significant as knowing the two independent components from which home equity is derived, 1) home value and 2) total debt for which the home is collateral. Having that broken down by MSA and age brackets of 3 years would be even more useful.

    While the report is encouraging, it is hard, almost impossible to use in analyzing our local markets. To most of us the rise in home values is far more useful than the rise in debt on the home. Home equity is the difference between the two and, therefore mildly useful.

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