IDEAS home Printed from https://ideas.repec.org/p/mrr/papers/wp070.html
   My bibliography  Save this paper

Elderly Households and Housing Wealth: Do They Use It or Lose It?

Author

Listed:
  • Lina Walker

    (Unversity of Michigan)

Abstract

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.

Suggested Citation

  • Lina Walker, 2004. "Elderly Households and Housing Wealth: Do They Use It or Lose It?," Working Papers wp070, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp070
    as

    Download full text from publisher

    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp070.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
    6. 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.
    7. Jonathan Feinstein, 1996. "Elderly Health, Housing, and Mobility," NBER Chapters,in: Advances in the Economics of Aging, pages 275-320 National Bureau of Economic Research, Inc.
    8. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    9. Gary V. Engelhardt, 1995. "House Prices and Home Owner Saving Behavior," NBER Working Papers 5183, National Bureau of Economic Research, Inc.
    10. Louise Sheiner & David N. Weil, 1992. "The Housing Wealth of the Aged," NBER Working Papers 4115, National Bureau of Economic Research, Inc.
    11. Kathleen McGarry, 2000. "Testing Parental Altruism: Implications of a Dynamic Model," NBER Working Papers 7593, National Bureau of Economic Research, Inc.
    12. F. Thomas Juster & Richard Suzman, 1995. " An Overview of the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages s7-s56.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. repec:taf:chosxx:v:32:y:2017:i:5:p:638-658 is not listed on IDEAS
    3. Sun Wei & Triest Robert K. & Webb Anthony, 2008. "Optimal Retirement Asset Decumulation Strategies: The Impact of Housing Wealth," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 3(1), pages 1-29, September.
    4. Costa-Font, Joan & Frank, Richard & Swartz, Katherine, 2017. "Access to long-term care after a wealth shock: evidence from the housing bubble and burst," LSE Research Online Documents on Economics 84212, London School of Economics and Political Science, LSE Library.
    5. Pashchenko, Svetlana, 2013. "Accounting for non-annuitization," Journal of Public Economics, Elsevier, vol. 98(C), pages 53-67.
    6. Thomas Davidoff, 2009. "Housing, Health, and Annuities," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 31-52.
    7. Davidoff, Thomas, 2010. "Home equity commitment and long-term care insurance demand," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 44-49, February.
    8. Robert Haveman & Karen Holden & Andrei Romanov & Barbara Wolfe, 2007. "Assessing the maintenance of savings sufficiency over the first decade of retirement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 481-502, August.
    9. Kwan Ok Lee & Gary Painter, 2014. "Housing Tenure Transitions of Older Households: What is the Role of Child Proximity?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(1), pages 109-152, March.
    10. Agnese Romiti & Mariacristina Rossi, 2014. "Wealth decumulation, portfolio composition and financial literacy among European elderly," Carlo Alberto Notebooks 375, Collegio Carlo Alberto.
    11. Painter, Gary & Lee, KwanOk, 2009. "Housing tenure transitions of older households: Life cycle, demographic, and familial factors," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 749-760, November.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/isumius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.