Senior-held home equity falls for the first time in a decade

Collective housing wealth for homeowners at or over the age of 62 fell in the fourth quarter of 2022: RMMI

The collective housing wealth for homeowners at or over the age of 62 fell in the fourth quarter of 2022, the first time a drop has been recorded in more than a decade, according to the Reverse Mortgage Market Index (RMMI), the latest such release from the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan.

Reduction in senior-held equity

The RMMI values in prior quarters were slightly adjusted based on updated values in the Z1 Flow of Funds Accounts data from the Federal Reserve, which dropped the adjustments in historical RMMI values, according to an announcement of the new data.

As a result, the RMMI decreased slightly in Q4 2022, dropping to 433.25 from a recalibrated level of 434.32 in Q3 2022. The informational release notes that this is the first drop the RMMI index has seen since 2011. When the drop occurred, collective senior home equity levels stood at $3.3 trillion.

NRMLA and RiskSpan attribute the drop to a decline in senior-held home equity from a peak of $12.42T in Q3 2022 to $12.39T in Q4 2022.

“The decline in equity resulted from an increase of $30 billion in senior home debt while home values remained relatively unchanged due to the continued cooling of the housing market,” the firms note in the latest RMMI quarterly update.

Still, the larger market factors that have impacted the broader mortgage industry should not be ignored, according to Steve Irwin, NRMLA president.

“Housing markets nationwide experienced unprecedented growth over the past decade,” Irwin said. “While many of these markets are starting to see declines in home values, the key takeaway here is that older homeowners are still sitting on $12.39 trillion in housing wealth that can be used strategically as part of a retirement plan to enhance retirement security.”

RMMI trends

While senior-held home equity and home price appreciation have generally continued to rise, growth has been softer in recent months when compared to 2021 and early 2022. While the RMMI recorded an increase in Q3 2022, that increase was softer than what had been seen recently.

In Q3 2021, the RMMI index rose by 4%, topping $10 trillion for the first time, while the index grew by 3.98% in Q4 2021. The RMMI grew by 4.91% during Q1 2022 — when it first topped $11 trillion. In Q2 2022, the RMMI grew by 4.10%.

The collective senior housing wealth figure reached a threshold of over $9 trillion for the first time in July 2021, and $8 trillion for the first time in April 2021. It had previously topped $7 trillion for the first time in March 2019.

Home price appreciation: Slower growth

Home price appreciation is also softening across the national housing market. According to recent data from CoreLogic, the slowdown in home prices has hit the Western region the hardest, and the reverse mortgage industry’s biggest state for business has typically been California.

“While annual U.S home price growth rose for the 133rd straight month in February, the 4.4% increase was the lowest recorded since 2019,” according to CoreLogic’s April 2023 U.S. Home Price Insights report. “Eight states and districts recorded annual home price losses, with much of the depreciation seen in the relatively expensive Western U.S., including California, Idaho, Oregon, Washington and Utah.”

Still, there are home price elements that indicate positive momentum, according to Selma Hepp, CoreLogic’s chief economist.

“[W]hile housing market challenges remain, particularly in light of mortgage rate volatility and the ongoing banking turmoil, pent-up homebuyer demand is responding favorably to lower rates in many markets,” she said. “This trend holds true even in the West, leading to a solid monthly gain in home prices in February. U.S. home prices rose by 0.8% in February, double the month-over-month increase historically seen and indicating that prices in most markets have already bottomed out.”

CoreLogic explained in a previous report that home price appreciation dropped to its lowest level in two years this past November.

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