At $3.14 Trillion, Senior Home Equity Fares Better Than Most

Total home equity among U.S. seniors ages 62+ fell 2% in the second quarter to $3.14 trillion and is now down 22% from its 2006 peak. Senior home equity has fared much better than the home equity of the overall population, according to a report by the National Reverse Mortgage Lenders Association and RiskSpan.

“The aggregate senior home equity level has withstood market declines better than the equity level of the overall population, which is down 38% from its Q1 2006 peak, due to the relatively fast growth and lower mortgage debt levels of the senior population,” said Allen Jones, RiskSpan chief operating officer, in an email to RMD.

Jones points to two factors that make the aggregate level of senior home equity more resilient. First, he says, is demographics, with the senior popular growing more rapidly than the overall population.

Second, seniors typically have lower loan-to-value ratios.

“Seniors have less leverage (lower LTVs) than the rest of the population, so for a given decline in housing prices, the general population loses more of its equity,” Jones says.

The total amount of home equity held by seniors remains above $3 trillion, but comparatively is at the index level where it was in the second quarter of 2004.

Senior home equity is tracked by the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI). The second quarter index shows a continued decline over the past two quarters and indicates that housing prices in 340 of the 395 metropolitan statistical areas FHFA and RiskSpan track saw quarter-over-quarter declines.

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Debt levels for seniors fell for the 9th straight quarter to $1.02 trillion.

The data shows how the housing market has impacted the value of senior equity versus the equity level of the over-all population, NRMLA said.

“While the senior equity level is 22% off of its Q2 2006 peak, the equity level of the overall population is down 38% from its Q1 2006 peak,” noted Peter Bell, NRMLA president, in a press release. Bell also pointed out that the difference is “due to the relatively fast growth and lower mortgage debt levels of the senior population.”

Written by Elizabeth Ecker

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