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No Place Like Home: Older Adults and Their Housing

Author

Listed:
  • 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.

Suggested Citation

  • Timothy Smeeding & Barbara Boyle Torrey & Jonathon Fisher & David S. Johnson & Joseph Marchand, 2006. "No Place Like Home: Older Adults and Their Housing," Working Papers, Center for Retirement Research at Boston College wp2006-16, Center for Retirement Research.
  • Handle: RePEc:crr:crrwps:wp2006-16
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    Cited by:

    1. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    2. Declan French & Donal McKillop & Tripti Sharma, 2017. "Analysis of Housing Equity Withdrawal by its Forms," CHaRMS Working Papers 17-04, Centre for HeAlth Research at the Management School (CHaRMS).
    3. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 59-80, Summer.
    4. Jonathan Fisher & Joseph Marchand, 2014. "Does the retirement consumption puzzle differ across the distribution?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(2), pages 279-296, June.
    5. Esteban Calvo & Kelly Haverstick & Natalia A. Zhivan, 2009. "Older Americans On The Go: Financial and Psychological Effects of Moving," Issues in Brief ib2009-9-19, Center for Retirement Research, revised 2009.
    6. Andrea Brandolini & Silvia Magri & Timothy M. Smeeding, 2010. "Asset-based measurement of poverty," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(2), pages 267-284.
    7. Calvo, Esteban & Haverstick, Kelly & Zhivan, Natalia, 2009. "Determinants and Consequences of Moving Decisions for Older Homeowners," MPRA Paper 48964, University Library of Munich, Germany.
    8. Bruce Bradbury, 2008. "Housing wealth as retirement saving: Does the Australian Model Lead to Over-Consumption of Housing?," LWS Working papers 7, LIS Cross-National Data Center in Luxembourg.
    9. Begley, Jaclene, 2017. "Legacies of homeownership: Housing wealth and bequests," Journal of Housing Economics, Elsevier, vol. 35(C), pages 37-50.
    10. Chiang, Shu Ling & Tsai, Ming Shann, 2016. "Analyzing an elder’s desire for a reverse mortgage using an economic model that considers house bequest motivation, random death time and stochastic house price," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 202-219.
    11. Timothy Smeeding & Eva Sierminska & Andrea Brandolini, 2006. "Cross National Comparison of Income and Wealth Status in Retirement: First Results from the Luxembourg Wealth Study (LWS)," LWS Working papers 2, LIS Cross-National Data Center in Luxembourg.
    12. Kelly Haverstick & Natalia A. Zhivan, 2009. "Older Americans On The Go: How Often, Where, and Why?," Issues in Brief ib2009-9-18, Center for Retirement Research, revised Sep 2009.
    13. Frick, Joachim R. & Grabka, Markus M. & Smeeding, Timothy M. & Tsakloglou, Panos, 2010. "Distributional effects of imputed rents in five European countries," Journal of Housing Economics, Elsevier, vol. 19(3), pages 167-179, September.
    14. Sam Norris & Krishna Pendakur, 2015. "Consumption inequality in Canada, 1997 to 2009," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 773-792, May.
    15. repec:eee:hapoch:v1_905 is not listed on IDEAS
    16. Marchand, J. & Smeeding, T., 2016. "Poverty and Aging," Handbook of the Economics of Population Aging, Elsevier.
      • Marchand, Joseph & Smeeding, Timothy, 2016. "Poverty and Aging," Working Papers 2016-11, University of Alberta, Department of Economics, revised 20 Nov 2016.
    17. Jan Rouwendal, 2009. "Housing Wealth and Household Portfolios in an Ageing Society," De Economist, Springer, vol. 157(1), pages 1-48, March.

    More about this item

    Keywords

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

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