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Senior home equity continues to smash records

Hits nearly $7 trillion

Senior housing wealth just keeps climbing.

According to the NRMLA/RiskSpan Reverse Mortgage Market Index, aggregate home equity levels for homeowners 62 hit $6.9 trillion in the second quarter of 2018. That’s a $130 billion jump from the previous quarter.

The RMMI reached an all-time high, climbing from 244.73 in the first quarter to 249.37 in the second quarter of this year.

NRMLA attributes the growth in senior homeowners’ wealth to an estimated $143 billion increase in senior home values, offset by a $12.8 billion increase of senior-held mortgage debt.

NRMLA President and CEO Peter Bell said that for many American families, home equity represents their largest component of personal wealth.

Bell is not wrong. According to Bankrate, one-fifth of Americans are adding nothing to their savings.

Furthermore, the average American has less than $5,000 in a financial account, and those aged 55 to 64 only have $120,000 in retirement savings, according to Bankrate.

“If you consider that the typical retiree household might have one or two incomes from Social Security, a modest pension and/or limited income from low-yielding fixed-income instruments, and, perhaps, a diminished 401(k) account, then home equity becomes their greatest asset and an important resource for funding their future,” Bell said.

More than 1 million seniors have used a reverse mortgage to tap into their home equity, which many equate to less than 1% of the market’s true potential.

But some experts, including Funding Longevity Task Force Chair Shelley Giordano, assert that more seniors will eventually turn to this loan to access their equity.

Giordano said pensions are becoming a thing of the past, and self-directed saving accounts are taking center stage.

“Since seniors are living longer than ever before, and they will have to figure out how to decumulate or distribute their income over an unknown time, they will probably need more options," Giordano said.

“Home equity is an existing asset that 80% of retirees already own,” Giorando concluded. “Nothing new has to be created, the retiree just needs to understand that using a reverse mortgage can contribute to a ‘good retirement.’”

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