“Current housing trends suggest today’s older homeowners are even better positioned to use their homes for extra income and more retirement security than they were just two years ago,” according to the Urban Institute’s recently-released Home Equity Patterns among Older American Households report.
Interestingly, the homeownership rate of adults age 65 and older has increased from 79.2 to 80.7 percent from 1998 to 2012, while the overall homeownership rate decreased from 66.4 percent to 65.4 percent in the same time period.
From 1998 to 2012, homeowners 65 and older increased from 75.3 percent to 78.2 percent, but that dropped to 77.2 percent in 2014.
However, older homeowners are “increasingly indebted,” according to the report. Outstanding mortgage debt across all homeowners in the country increased from $2.5 to $11.3 trillion between 1990 and 2006, before decreasing to $9.9 trillion last year. However, homeowners 65 and older with housing debt rose from 23.9 percent to 35 percent between 1998 and 2012. Their median debt rose from $44,000 to $82,000.
The study said that rising medical bills could have possibly been a culprit, as some older homeowners must borrow against their home equity to afford healthcare, or leave them unable to pay the mortgage on the timeline they could have usually. “Changing societal attitudes about debt and a false security in home equity driven by the rapid rise in home values in the early 2000s were probably more important factors,” the study reported.
However, debt levels are still rising, and declining home values between 2006 and 2012, led to a decrease in home equity.
The study found that most older homeowners, regardless of housing debt, accumulated equity in their homes. Before the recession, at the peak, homeowners could have seen an increase of $39,000 to $60,0000, 54 percent, of their incomes “by selling their homes and annuitizing the proceeds,” the report found. But in 2012, that number fell it $49,000, a 50 percent decrease. Homeowner’s equity rose from $117,000 to $166,000 between 20000 and 2006, but fell to $129,000 in 2012.
However, as long as older homeowners don’t have outstanding housing debt, owning a home should be beneficial, as the median home value continues to increase.