Determinants and Consequences of Moving Decisions for Older Homeowners

Esteban CalvoKelly Haverstick Natalia A. Zhivan

WP#2009-16

Abstract

The lore on whether older Americans move is mixed.  While the familiar stereotype is that retirees flock to Florida or Arizona, prior studies have found that their home equity rises modestly over time, suggesting that they tend to stay put.  This paper examines moving trends, determinants, and consequences using the original cohort of the Health and Retirement Study (HRS).  We find that a full 30 percent of homeowners in the HRS cohort move over the 1992-2004 period, but most moves occur close to home.  Overall, two types of movers emerge from the analysis ­– those who affirmatively plan to move and those who react to changing circumstances.  As proxies for these two types, this study uses the presence or absence of a negative shock, such as death of a spouse or entry into a nursing home.  Our results show that the factors that help determine a move are similar for both groups, while the consequences of a move vary.  Homeowners with shocks are more likely to discontinue homeownership and reduce net equity, supporting the hypothesis that households may view housing wealth as insurance against catastrophic events.  Finally, while movers in both groups of homeowners experience improvements in psychological well-being, movers with shocks are impacted most by the shocks themselves.