Reversing the trend: the recent expansion of the reverse mortgage market
AbstractReverse mortgages allow elderly homeowners to tap into their housing wealth without having to sell or move out of their homes. However, very few eligible homeowners have used reverse mortgages to achieve consumption smoothing until recently when the reverse mortgage market in the United States witnessed substantial growth. This paper examines 1989-2007 loan-level reverse mortgage data and presents a number of findings. First, I show that recent reverse mortgage borrowers are significantly different from earlier borrowers in many respects. Second, I find that borrowers who take the line-of-credit payment plan, single male borrowers, and borrowers with higher house values exit their homes sooner than other reverse mortgage borrowers. Third, I combine the reverse mortgage data with county-level house price data to show that elderly homeowners are more likely to purchase reverse mortgages when the local housing market is at its peak. This finding suggests that the 2000-05 housing market boom may be partially responsible for the rapid growth of reverse mortgage markets. Lastly, I show that the Federal Housing Administration (FHA) mortgage limits, which cap the amount of housing wealth that an eligible homeowner can borrow against, have no effect on the demand for reverse mortgages. The findings have important implications to both policy-making and the economics of housing and aging.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-42.
Date of creation: 2009
Date of revision:
Other versions of this item:
- Hui Shan, 2011. "Reversing the Trend: The Recent Expansion of the Reverse Mortgage Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 743-768, December.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sally R. Merrill & Meryl Finkel & Nandinee K. Kutty, 1994. "Potential Beneficiaries from Reverse Mortgage Products for Elderly Homeowners: An Analysis of American Housing Survey Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(2), pages 257-299.
- Christopher J. Mayer & Katerina V. Simons, 1994. "Reverse Mortgages and the Liquidity of Housing Wealth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(2), pages 235-255.
- Venti, Steven F. & Wise, David A., 1991.
"Aging and the income value of housing wealth,"
Journal of Public Economics,
Elsevier, vol. 44(3), pages 371-397, April.
- Steven F. Venti & David A. Wise, 2004.
"Aging and Housing Equity: Another Look,"
in: Perspectives on the Economics of Aging, pages 127-180
National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 1989.
"Aging, Moving, and Housing Wealth,"
NBER Working Papers
2324, National Bureau of Economic Research, Inc.
- repec:crr:issbrf:ib2007-7-7 is not listed on IDEAS
- Todd Sinai & Nicholas S. Souleles, 2007.
"Net Worth and Housing Equity in Retirement,"
NBER Working Papers
13693, National Bureau of Economic Research, Inc.
- Sinai, Todd & Souleles, Nicholas S., 2007. "Net worth and housing equity in retirement," CFS Working Paper Series 2007/34, Center for Financial Studies (CFS).
- Todd Sinai & Nicholas Souleles, 2007. "Net worth and housing equity in retirement," Working Papers 07-33, Federal Reserve Bank of Philadelphia.
- Bradford Case & Ann B. Schnare, 1994. "Preliminary Evaluation of the HECM Reverse Mortgage Program," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(2), pages 301-346.
- Irina A. Telyukova & Makoto Nakajima, 2011.
"Reverse Mortgage Loans: A Quantitative Analysis,"
2011 Meeting Papers
387, Society for Economic Dynamics.
- Elsa Fornero & Maria Cristina Rossi & Maria Cesira Urzì Brancati, 2011. "Explaining why, right or wrong, (Italian) households do not like reverse mortgages," CeRP Working Papers 123, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Makoto Nakajima, 2012. "Everything you always wanted to know about reverse mortgages but were afraid to ask," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 19-31.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs) The email address of this maintainer does not seem to be valid anymore. Please ask Kris Vajs to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.