Americans 62-years old and older now have more equity in their homes than at any time since mid-2009, according to data released by the National Reverse Mortgage Lenders Association (NRMLA). The new information comes from the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI), which analyzes trends in the home values, home equity, and mortgage debt of homeowners 62 and older. The RMMI is updated quarterly and tracks back to the start of 2000.
“The positive trends supported by today’s RMMI are good news for senior homeowners, and they contain positive signs for the American economy and housing market,” said Peter Bell, president of NRMLA. “Thankfully, the recovering real estate market continues to grow seniors’ home equity, creating a valuable resource for them. Tapping into that equity is one option to help fund living expenses, home maintenance costs, or health care needs in retirement. With proper planning, seniors can use their home equity to pay off a forward mortgage and lower their monthly expenses, or they can use it for the financial flexibility needed to hold onto other assets during a down market.”
In the fourth quarter of 2012, the RMMI reached its highest level (152.59) since the second quarter of 2009. After falling to start 2012, the RMMI increased slightly in the second quarter before showing significant growth in the third and fourth quarters.
“In the second half of last year, the RMMI had its strongest two quarters of growth since early 2006,” said Allen Jones, managing director of RiskSpan, the analytics firm which designed and manages the RMMI. “Senior home equity increased by $50 billion between the third and fourth quarters of 2012, driven largely by the increase in the aggregate value of seniors’ homes.”
Over the last 12 months, the total home equity of homeowners 62 and older increased by $117 billion (+3.8 percent), while their home values increased by $97 billion (+2.3 percent) and their mortgage debt declined by $20 billion (-1.8 percent).
The housing value estimate used in the RMMI is based on the Federal Housing Finance Agency’s Q4 2012 all-transactions Indices, which saw housing values increase in 71 percent of the 395 MSAs covered by RiskSpan.
In addition to calculating the RMMI level for the most recent quarter, RiskSpan recalculates historical RMMI levels using the Federal Reserve’s revisions to its historical Home Mortgage Debt figures and FHFA’s revisions to its historical HPI figures. As a result of the Fed’s and FHFA’s revisions to the data they published in Q4 2012, the Q3 2012 RMMI level was upwardly revised from 149.99 to 150.21. Most quarters show similar very small adjustments.
Going back to the start of 2000, the RMMI peaked at 191.22 in the fourth quarter of 2006, when the collective home equity owned by Americans 62 and older hit $4.0 trillion. Since that high water mark, home values have declined 13.6 percent for homeowners 62 and older, and their collective home equity has declined by 20.2 percent.
Over the long term, however, home equity has proven to be a valuable resource. The collective home equity of Americans 62 and older has grown by more than 50 percent since the RMMI’s starting point. In Q1 of 2000, seniors owned $2.1 trillion in home equity, compared to $3.2 trillion today.