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Aging and the income value of housing wealth

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

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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File URL: http://www.sciencedirect.com/science/article/B6V76-45KNB5P-S/2/69a67dc10f9945e579f186c6d921c73b
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters, in: The Economics of Aging, pages 9-54 National Bureau of Economic Research, Inc.
  2. 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.
  3. Jonathan Feinstein & Daniel McFadden, 1989. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Chapters, in: The Economics of Aging, pages 55-92 National Bureau of Economic Research, Inc.
  4. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
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