Elderly Households and Housing Wealth: Do They Use It or Lose It?
Over 80 percent of households in their 50s are homeowners and housing wealth accounts for over half of total household wealth for most of these homeowners. The evidence in the literature on whether the elderly are consuming their housing wealth has been mixed. Because home sales are infrequent and a high proportion of the elderly continue to own in old age, it appears that the elderly are not consuming housing wealth. There are, however, indications that housing wealth may be a form of self-insurance and that housing wealth is consumed, albeit at very old ages. To date, however, the evidence to support that hypothesis has been weak. This paper examines whether predictors of housing sales are consistent with the insurance story by looking at the extent to which indicators of changes in economic status and access to alternate insurance explain housing sales. The paper also examines the extent to which changes in health status predict housing sales. The results of the probit appear to indicate that, by and large, housing sales in old age for single households is mostly driven by worsening health. Widowhood has a large effect on increasing the probability of selling the house and the effect is larger if the husband is the surviving spouse. There are indications that poor married homeowners are consuming housing wealth and also indications that married households are responding to Medicaid tax incentives. This evidence seems to suggest that, at least among married households, housing decisions are financially motivated; however, the evidence does not by itself validate the insurance story.
|Date of creation:||Jan 2004|
|Contact details of provider:|| Postal: P.O. Box 1248, Ann Arbor, MI 48104|
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/
More information through EDIRC
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.:
- Jesus Fernández-Villaverde & Dirk Krueger, 2007.
"Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data,"
The Review of Economics and Statistics,
MIT Press, vol. 89(3), pages 552-565, August.
- Jesus Fernandez-Villaverde & Dirk Krueger, 2002. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," NBER Working Papers 9382, National Bureau of Economic Research, Inc.
- Levin, Laurence, 1998. "Are assets fungible?: Testing the behavioral theory of life-cycle savings," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 59-83, July.
- James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 1987.
"Aging, Moving, and Housing Wealth,"
NBER Working Papers
2324, National Bureau of Economic Research, Inc.
- Skinner, Jonathan, 1989.
"Housing wealth and aggregate saving,"
Regional Science and Urban Economics,
Elsevier, vol. 19(2), pages 305-324, May.
- Poterba, James M & Venti, Steven F & Wise, David A, 1994. "Targeted Retirement Saving and the Net Worth of Elderly Americans," American Economic Review, American Economic Association, vol. 84(2), pages 180-185, May.
- Jonathan S. Feinstein, 1993.
"Elderly Health, Housing, and Mobility,"
NBER Working Papers
4572, National Bureau of Economic Research, Inc.
- Laurence J. Kotlikoff & Avia Spivak, 1979.
"The Family as an Incomplete Annuities Market,"
UCLA Economics Working Papers
151, UCLA Department of Economics.
- Gary V. Engelhardt, 1995. "House Prices and Home Owner Saving Behavior," NBER Working Papers 5183, National Bureau of Economic Research, Inc.
- Louise Sheiner & David N. Weil, 1992. "The Housing Wealth of the Aged," NBER Working Papers 4115, National Bureau of Economic Research, Inc.
- Kathleen McGarry, 2000. "Testing Parental Altruism: Implications of a Dynamic Model," NBER Working Papers 7593, National Bureau of Economic Research, Inc.
- repec:uwp:jhriss:v:30:y:1995:p:s7-s56 is not listed on IDEAS
- Jonathan Feinstein & Daniel McFadden, 1989.
"The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects,"
in: The Economics of Aging, pages 55-92
National Bureau of Economic Research, Inc.
- Jonathan Feinstein & Daniel McFadden, 1987. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Working Papers 2471, National Bureau of Economic Research, Inc.
- Alan L. Gustman & Thomas L. Steinmeier, 1998.
"Effects of Pensions on Saving: Analysis with Data from the Health and Retirement Study,"
NBER Working Papers
6681, National Bureau of Economic Research, Inc.
- Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
- Lazear, Edward P & Michael, Robert T, 1980. "Family Size and the Distribution of Real Per Capita Income," American Economic Review, American Economic Association, vol. 70(1), pages 91-107, March.
- Jonathan S. Feinstein & Chih-Chin Ho, 2000. "Elderly Asset Management and Health: An Empirical Analysis," NBER Working Papers 7814, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp070. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator)
If references are entirely missing, you can add them using this form.