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What is the Impact of Foreclosures on Retirement Security?


  • Irena Dushi
  • Leora Friedberg
  • Anthony Webb


Using data from several sources, we show that households nearing retirement have lower rates of housing distress than younger households, as measured by arrears and foreclosure rates. However, almost all of the housing wealth gains observed for cohorts aged 51-56 between 1992 and 2004 were erased by 2010, while their mortgages have grown throughout. As a consequence, their loan-to-value ratios are considerably higher, though the percentage paying more than 30 percent of their household income toward their mortgage remains flat. Worrisomely, their financial wealth also declined between 2004 and 2010. Declines in house prices will adversely affect households that need to liquidate housing wealth, and rising mortgage obligations will increase pressure on retirement resources. We develop an econometric model to show factors associated with housing distress and then use the results to forecast housing distress among older households through 2012. We project that the risk of arrears will increase to 3.4 percent in 2010 and 4.4 percent by 2012. We also find that 6.7 percent of HRS households have children or other relatives who are facing housing distress, potentially putting further pressure on their retirement preparedness.

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  • Irena Dushi & Leora Friedberg & Anthony Webb, 2010. "What is the Impact of Foreclosures on Retirement Security?," Working Papers, Center for Retirement Research at Boston College wp2010-16, Center for Retirement Research, revised Nov 2010.
  • Handle: RePEc:crr:crrwps:wp2010-16

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    1. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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    3. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
    4. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    5. Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 45-70, April.
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