Spike in senior home equity threatens housing supply

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Despite growth in senior-held mortgage debt, home equity for homeowners 62 and older grew to $6.6 trillion in the fourth quarter of 2017, according to the National Reverse Mortgage Lenders Association and RiskSpan's Reverse Mortgage Market Index.

Though homeowners overall are growing more equity rich on rising home prices, this quarterly $149 billion growth in housing wealth for seniors poses a threat to the market's already tight supply. As home inventory remains scarce, homeowners 62 and older may opt to age in place instead of considering habits like downsizing or retiring elsewhere.

Tapping into equity may be even more appealing to seniors in particular, who often retire with debt, meaning the housing market may continue being robbed of potential home listings.

"Today's retirees are more likely to leave the workforce with a mortgage and other debts that can put stress on monthly cash flow," NRMLA President and CEO Peter Bell said in a press release.

"In these situations, financial products that convert home equity to cash could be used to pay off revolving debt from credit cards and reduce or defer monthly mortgage payments. It's worth doing the math to find out if a mortgage refinance, home equity line of credit, or reverse mortgage loan can help increase financial security during retirement," he said.

In the fourth quarter, the Reverse Mortgage Market Index grew to an all-time high of 238.11 as home prices appreciated by 2%, or $163 billion, quarter-over-quarter. Additional gains in senior home equity were offset by a rise of 0.9%, or $13.4 billion, in senior-held mortgage debt.

NRMLA and RiskSpan's Reverse Mortgage Market Index is based on changes in senior population, house prices and total mortgage debt. The index is updated quarterly.

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Reverse mortgages HELOCs Housing inventory Refinance Housing market Home prices Real estate