Senior home equity holdings rise to record level

Seniors' home equity holdings set a record in the second quarter as property values continue to increase, albeit at a slower pace than earlier this year.

However, given the ongoing government shutdown, endorsements of Home Equity Conversion Mortgages, the Federal Housing Administration product which makes up the bulk of reverse mortgage lending, are on hold.

The shutdown does not affect proprietary reverse mortgage offerings, nor forward home equity products offered to seniors. Those with balance sheet capacity may also originate and look to get a HECM endorsement once the shutdown ends.

The NRMLA/Riskspan Reverse Mortgage Market Index reached an all-time high of 502.42. In the first quarter, it was 486.69, while one year ago, it was 489.70.

American homeowners 62 or older now have a combined $14.39 trillion in equity, topping the record set one year ago at a revised $14.18 trillion. In the fourth quarter of 2024 and first quarter this year, it was around $13.9 trillion.

The gain in seniors' housing-related wealth was due to an estimated 2.9% (or $474.8 billion) increase in their home values, offset by a 0.9% (or $23 billion) rise in the amount of mortgage debt they carry.

"Inflation is still hitting the pocketbooks for many older Americans, especially when it comes to groceries and healthcare premiums," said National Reverse Mortgage Lenders Association President Steve Irwin in a press release. "Now may be an appropriate time to think about how home equity can be used strategically to help lessen the financial impact that these everyday costs are having."

The impact of home price growth on seniors' equity

Meanwhile, home price growth in September was 3%, the slowest annual increase since 2012, according to the Redfin Home Price Index. This was down from 3.3% in August; earlier this year, annual growth was at 5% to 6%.

The month-to-month gain was 0.2%, unchanged from August, and ahead of a flat month for growth in July.

"Prices are relatively flat because both buyers and sellers are cautious right now," said Redfin senior economist Sheharyar Bokhari in a press release. "Buyers have more options than they did a year ago, but affordability remains stretched and many people are holding off on making major purchases because they're worried about the economy and the possibility of losing their job."

Does the growing share of people not relocating impact equity

Another reason why tappable home equity levels are important, not just to property owners, but also lenders, is that only 11% of the U.S. population relocated last year, an all-time low, according to a Point2Homes study. The data includes both renters and owners, but is not broken down by age.

A decade ago, 14.3% of Americans changed their address, while in the 1960s, the share was 20%.

The increase in homeownership rates from 45% at the start of the 20th Century to 65% after the Great Financial Crisis, had an impact on mobility rates, Point2Homes said.

It also noted the current economic instability, with a volatile jobs market, higher home prices and rising interest rates. Then, the increase in remote work, likely impacted decisions to relocate closer to an office.