Housing Wealth among senior homeowners is on the rise and approached a new high in the first quarter of 2018 touching $6.8 trillion according to data on the NRMLA/Risk Span Reverse Mortgage Market Index (RMMI) released by the National Reverse Mortgage Lenders Association (NRMLA) on Wednesday.
The data indicated that housing wealth among senior homeowners had increased by $177 billion in Q1 when compared to the previous quarter. The rise was driven by an increase of $182 billion or 2.2 percent in housing values among this group. However, mortgage debt among the group increased only 0.3 percent or $5.4 billion compared to the previous quarter, the data revealed.
The RMMI, also rose to 244.73 in the first quarter, reaching its highest point since the index was introduced in 2000.
Home equity among this set of homeowners has been rising steadily since the second quarter last year driven by rising home prices. Yet, seniors are wary of taking loans against their homes. A recent study on how owners are using their home equity found that a very small percentage of borrowers against their home values were seniors. The study found that of all the reasons that people borrowed against their homes, just over 1 percent of home equity loan requests were to fund retirement made by those over the age of 63 years.
According to a report on retirement security published by the Bipartisan Policy Center’s Commission, total home equity among senior homeowners rivals their retirement savings, with the gap between the two narrowing considerably with Americans owning more than $12.5 trillion in home equity in 2017, compared with the $14 trillion held in retirement savings.
The report noted that a variety of mechanisms existed for tapping home equity to fund retirement such as downsizing on homes, using a reverse mortgage or selling a home to rent.
“Federal and state tax policy, however, actually subsidizes the use of home equity for pre-retirement consumption, leaving many retired homeowners burdened with debt and with less equity to support retirement security,” the report said.