Seniors could hold as much as 40% of all U.S. home equity

Figures from the Federal Reserve and NRMLA/RiskSpan analyses show that senior-held home equity in the United States stands at roughly 38.1% of the nation’s total home equity figure

Home equity has reached a new national high of $27.8 trillion in the United States, according to figures from the Federal Reserve and published by the Wall Street Journal. When that figure is compared to data from the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan’s periodic tabulation of senior-held home equity, then American seniors hold 38.12% of the total home equity figure in the United States.

The calculation helps contextualize the total addressable market for the reverse mortgage industry. Homeowners aged 62 and older saw their collective housing wealth increase in Q4 2021 by 3.98% compared to the previous quarter, constituting an increase of approximately $405 billion to a record of $10.6 trillion according to the latest data release from NRMLA/RiskSpan this past April.

A notable portion of these figures are attributable to record levels of home price appreciation (HPA), a figure which helped propel the Home Equity Conversion Mortgage (HECM) portfolio of the Mutual Mortgage Insurance (MMI) Fund to positive territory at the end of 2021.

“The financial performance of the HECM portfolio has improved in each of the last three years and is now positive for the first time since FY 2015,” FHA’s 2021 Annual Report to Congress reads. “The projections of the HECM portfolio’s financial performance are more sensitive to changes in Home Price Appreciation (HPA), and as a result, the strong HPA experienced in recent years explains the increase in the ratio in FY 2021.”

According to information shared by Reverse Market Insight (RMI), total reverse mortgage market penetration currently hovers at roughly 2.19%. Much of the industry believes that the best path forward to increasing market share is through reformed educational initiatives and expanded borrower outreach practices. The reverse mortgage industry first reached 2% penetration in November of 2009, according to reporting at that time by RMD Founder John Yedinak.

Approximately 60% of home equity was tapped by consumers in 2021 via a cash-out refinance, according to data from Black Knight as cited by WSJ.

“The amount of tappable equity increased by a record $1.2 trillion in the first quarter of 2022, to more than $11 trillion, according to Black Knight,” WSJ reported. “Close to 75% of it belongs to borrowers with mortgage rates below 4%, the Black Knight data show. The rate on a 30-year fixed-rate mortgage averaged 5.23% near the beginning of June, according to mortgage giant Freddie Mac.”

Upon the news of the latest senior-held equity milestone, NRMLA President Steve Irwin described the necessity for seniors to explore more options in retirement to stabilize their finances if necessary.

“To help mitigate the risks and concerns surrounding the ability of homeowners to age their way, it is critical that housing wealth is carefully and responsibly considered when developing a comprehensive retirement plan,” Irwin said in April. “For many, housing wealth is indeed their greatest asset, and tapping that equity, under the right circumstances, will enable a secure path to aging security.”

Read the Wall Street Journal report on total U.S. home equity.

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