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No Place Like Home: Older Adults and Their Housing

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Author Info

  • Timothy Smeeding
  • Barbara Boyle Torrey
  • Jonathon Fisher
  • David S. Johnson
  • Joseph Marchand

Abstract

Objectives: This paper employs new data on the consumption and assets of older Americans to investigate recent research findings that older adults do not convert their home equity into income that can be used for current consumption, as the life-cycle hypothesis predicts. We use data over twenty years from the Consumer Expenditure Survey to examine the asset and consumption trends of older adults, buttressed with additional findings from the Survey of Consumer Finances and the American Housing Survey. Older American's homeownership rates are stable until age 80 and after 80 tend to decline slowly. The homes are increasingly mortgage-free; home equity increases with age, and few older adults take out home equity loans or reverse annuity mortgages. Housing consumption-flows increase with age; non-housing consumption-flows decline after age 60 at a rate of approximately 1.4% a year. The results suggest that most older Americans are not converting their housing assets into consumption despite the life-cycle hypothesis predictions. This is also inconsistent with international trends where homeownership rates fall substantially with age. One reason may be because older Americans may be holding onto their homes to finance long-term care. If this is the case, their economic behavior may be more consistent with the life-cycle hypothesis than previous research suggests.

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Bibliographic Info

Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2006-16.

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Length: 30 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:crr:crrwps:wp2006-16

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Keywords: older Americans; home equity; income; convert; homeownership; mortgages; consumption;

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Cited by:
  1. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "The Composition and Draw-down of Wealth in Retirement," NBER Working Papers 17536, National Bureau of Economic Research, Inc.
  2. Jonathan Fisher & Joseph Marchand, 2014. "Does the retirement consumption puzzle differ across the distribution?," Journal of Economic Inequality, Springer, Springer, vol. 12(2), pages 279-296, June.
  3. Andrea Brandolini & Silvia Magri & Timothy M. Smeeding, 2010. "Asset-based measurement of poverty," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(2), pages 267-284.
  4. Calvo, Esteban & Haverstick, Kelly & Zhivan, Natalia, 2009. "Determinants and Consequences of Moving Decisions for Older Homeowners," MPRA Paper 48964, University Library of Munich, Germany.
  5. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," NBER Working Papers 12981, National Bureau of Economic Research, Inc.
  6. Norris, Sam & Pendakur, Krishna, 2014. "Consumption Inequality in Canada, 1997 to 2009," CLSSRN working papers, Vancouver School of Economics clsrn_admin-2014-29, Vancouver School of Economics, revised 16 Jun 2014.
  7. Kelly Haverstick & Natalia A. Zhivan, 2009. "Older Americans On The Go: How Often, Where, and Why?," Issues in Brief, Center for Retirement Research ib2009-9-18, Center for Retirement Research, revised Sep 2009.
  8. Calvo, Esteban & Haverstick, Kelly & Zhivan, Natalia, 2009. "Older Americans on the Go: Financial and Psychological Effects of Moving," MPRA Paper 48965, University Library of Munich, Germany.
  9. Frick, Joachim R. & Grabka, Markus M. & Smeeding, Timothy M. & Tsakloglou, Panos, 2010. "Distributional Effects of Imputed Rents in Five European Countries," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 167-179.
  10. Jan Rouwendal, 2009. "Housing Wealth and Household Portfolios in an Ageing Society," De Economist, Springer, Springer, vol. 157(1), pages 1-48, March.

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