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Reverse mortgage volume nearly doubles from last year

National Mortgage Professional
Feb 28, 2007

On second homes, baby boomers not acting differently than their parentsMortgagePress.comBaby boomer home-buying habits In 2004, 43 million American households with heads aged 50 or older owned their main residences, according to "Housing Trends Among Baby Boomers," a study conducted by Gary V. Engelhardt and jointly sponsored by Radian and the Research Institute for Housing America. Fifteen percent of this group, or 6.6 million households, also owned second homes. The second home market is relatively small, but there will be sustained future growth in second home mortgage activity due to the sheer size of the baby boom cohort and not because baby boomers own these properties at a higher rate than older generations. Doug Duncan, the Mortgage Bankers Association's (MBA's) chief economist and senior vice president of research and business development, said, "This study provides a wealth of valuable market intelligence for MBA members. There have been relatively few scientific studies on second home ownership and mortgage activity. The report indicates that baby boomers are not acting differently than their parents when it comes to second home ownership. However, the baby boom cohort is so large; even if they follow typical buying patterns, they will have significant impacts on many local housing markets." Key findings from the study include: • 6.6 million homeowners aged 50 and older own second homes. • Second home purchases are geographically concentrated in well known vacation areas. As a result, local and regional economic conditions related to employment growth and migration will have important influences on the collateral value and credit risk of these properties. • Mortgage debt outstanding on second homes is estimated to total $126 billion. Only a small percentage of second homes owned by those 50 and over have outstanding mortgages. Second home mortgage originations comprised only about four percent of overall mortgage market originations. • The typical second home is held for about 15 years, but turnover is high: 45 percent of older homeowners with such homes disposed of them within the six year window of the data analyzed. Changes in marital status and health, rather than income or employment, drove the decision to dispose of second homes and, hence, prepay second home mortgages. • Most second home owners make limited use of their homes: one half spend two weeks or less and two thirds spend four weeks or less per year in these homes. Also, only 12 percent of owners intend to sell their main homes and eventually occupy their second homes. • Second homes are a small portion of the typical asset portfolio of an older household and are not important drivers of investment decisions. For more information, visit www.housingamerica.org.
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