LendingTree Ranks Cities with Greatest Reverse Mortgage Usage

Virginia Beach, Va. topped a LendingTree list of cities with the highest usage rates of reverse mortgages, with usual suspects in the West dominating the rest of the rankings.

The Charlotte, N.C.-based online mortgage broker looked at five years of endorsement data from the Department of Housing and Urban Development, then compared that figure to the number of homeowners aged 60 and over in each city.

The coastal town of Virginia Beach took the top spot with 13.8 loans per 1,000 homeowners aged 60 and over between 2012 and 2017 — which LendingTree described as “surprising,” considering the town’s median home value sits at a below-average $224,000.

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The remainder of the top five consisted of cities in regions with steadily increasing property values: Denver, Riverside, Calif., Sacramento, Calif., and Reno, Nev.

“Four of the top 10 were in California, where homeowners typically experience high rates of home price appreciation,” LendingTree chief economist Tendayi Kapfidze wrote in his analysis. “Prices in the four California cities — Riverside, Sacramento, San Francisco, and San Diego — increased 9% in the third quarter in 2017 from the same time last year, well above the national average of 6%. Over the years, sustained appreciation has left these homeowners with ample equity to access in retirement years.”

Conversely, cities with low rates of Home Equity Conversion Mortgage usage generally had lower home values: The bottom 10 by usage had average home prices of $172,000, while the top 10 clocked in at $391,000.

Pittsfield, Mass., a city in the western part of the state, had the lowest rate of reverse mortgage usage, with just 0.3 loans per 1,000 homeowners aged 60 and up. Wichita Falls, Texas; Toledo, Ohio; Detroit; and Youngstown, Ohio rounded out the bottom five, with multiple other cities in the former industrial Midwest ranking low on the list.

“These Rust Belt locales have not experienced sustained periods of robust home price appreciation, and homeowners may not have accumulated a level of home equity to take out reverse mortgages,” Kapfidze wrote. “The colder weather in these states could also mean homeowners are more likely to move to warmer climates for retirement.”

Nationwide, the average rate worked out to be 7.1 in the 100 cities that LendingTree analyzed.

This latest analysis largely tracks with ongoing data from Reverse Market Insight, which has shown robust origination performance in Western states with high levels of home appreciation.

Kapfidze identified concerns about leaving the home to heirs, a history of reverse mortgage scams, and delinquencies as reasons homeowners may not consider a HECM. But he also noted that the top cities’ rates still represent underutilization of the product, and laid out several scenarios in which it might be beneficial for borrowers.

“A reverse mortgage could help homeowners meet their financial goals and improve their quality of life given trends like rising health care costs, and the precarious status of many pension and social assistance programs,” he wrote.

Check out LendingTree’s full statistics.

Written by Alex Spanko

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