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Aging and the income value of housing wealth

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  • Venti, Steven F.
  • Wise, David A.

Abstract

The potential of reverse annuity mortgages to increase the current income of the elderly is analyzed. We conclude that most low-income elderly also have little housing equity, although this is not always the case. In general, a reverse annuity mortgage would substantially affect the income only of the single elderly who are very old -- whose life expectancy is short. On the other hand, if the transfer were in the form of a lump sum amount -- rather than an annuity -- the payment would increase the liquid wealth of most elderly families by a large fraction. Thus legislation that would facilitate the market for reverse mortgages could improve substantially the financial status of a small proportion of the elderly. But the specter of a large number of poor widows with vast amounts of "locked-in" housing equity does not reflect the reality. Most low-income elderly have relatively little housing wealth.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 44 (1991)
Issue (Month): 3 (April)
Pages: 371-397

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Handle: RePEc:eee:pubeco:v:44:y:1991:i:3:p:371-397

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Jonathan Feinstein & Daniel McFadden, 1987. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Working Papers 2471, National Bureau of Economic Research, Inc.
  2. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
  3. Steven F. Venti & David A. Wise, 1987. "Aging, Moving, and Housing Wealth," NBER Working Papers 2324, National Bureau of Economic Research, Inc.
  4. Shefrin, Hersh M & Thaler, Richard H, 1988. "The Behavioral Life-Cycle Hypothesis," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 609-43, October.
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