| No Place Like Home: Older Adults and Their Housing |
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WP#2006-16 AbstractObjectives: 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. Methods: 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. Results: 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. Discussion: 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. For the full paper please see the Journals of Gerontology Timothy Smeeding is the Director of the Center for Policy Research at Syracuse University. Barbara Boyle Torrey is a Visiting Fellow at the Population Reference Bureau. Johnathan Fisher is a Research Economist at the Bureau of Labor Statistics. David S. Johnson is the Chief of Housing and Household Economic Statistics Division at the Census Bureau. Joseph Marchand is a Ph.D. candidate in economics at Syracuse University. The research reported was performed, in part, pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA, any agency of the Federal government, the Bureau of Labor Statistics, Census Bureau, the Center for Policy Research, the Population Reference Bureau, or Boston College. The authors want to thank the Center for Retirement Research at Boston College and the Social Security Administration for their support of this research. Kati Foley provided excellent help with graphics and table design, and Martha Bonney provided much needed editorial assistance. Helpful references were made by John Quigley and Edgar Olsen. |