Study: Falling Housing Prices Are Jeopardizing Retirement Security
Falling housing prices can make it almost impossible to get out from under a mortgage you can no longer afford. A new AARP Public Policy Institute analysis says depressed home values are hitting baby boomers and seniors harder than other age groups. Americans over age 50 with homes worth less than their mortgage have a foreclosure rate approximately double the national average, AARP reports.
Foreclosure rates overall on first mortgages are higher for younger borrowers than for those over 50. But older households approaching retirement or already on a fixed income have less time to recover financial losses associated with foreclosure. Some 684,000 Americans ages 50 or older were either delinquent (30 to 180 days late), in foreclosure, or had lost their homes during the six months ending in December 2007, which represents 28 percent of all delinquencies and foreclosures.
Unsurprisingly, having a subprime loan is associated with a higher delinquency and foreclosure rate among all age groups. But AARP says the impact of subprime lending appears to fall disproportionately heavily on older Americans. Homeowners under age 50 with subprime loans are 13 times more likely to be in foreclosure than those with prime loans. At age 50 and above, the number jumps to 17 times more likely to be in foreclosure.
The states where older homeowners have the highest foreclosure rates shadow areas with overall elevated foreclosure rates: California, Colorado, Florida, Nevada, and Michigan.
The study was conducted with a 2.5 million-person random sample that AARP purchased from Experian, one of the three giant credit bureaus. AARP says foreclosure rates among seniors will very likely grow because homeowners are increasingly carrying mortgage debt into retirement.
Another recent paper from the Center for Retirement Research at Boston College projects that as many as a third of older households will be less secure in retirement because of the housing bubble.
Tags: AARP | real estate | retirement | baby boomers | housing market | subprime mortgages | housing | foreclosures
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Reader Comments
AND THE LOSS OF EQUITY AS THEY DOWN-SIZE...
Figure too, that many were expecting to sell their homes for a profit; down-size into a smaller condo' or home, and use the equity/profit, as part of their long-term savings to supplement their retirement income and social security.
Let's hope some of them are wise enough to offer those spare bedrooms to young singles looking for affordable rent.
Let's also hope there is room in some of those homes for the 'offspring' to get back to when they lose their jobs; are on unemployment, and (again) need a shelter at a nominal sum.
I do believe neighborhoods should form groups that will meet and seek to support each other through these times.
If it takes a small sum of money from each and every concerned neighbor and/or family member, to compile a 'bridge loan' that allows another family to stay in their home a few weeks or months longer, they can always ask for some type of collateral or return when the home is sold or refinanced.
People can learn how to create their own 'small bank-like' reserve and resource. It will be a 'grass roots' effort; a kind heart - a commitment to their community, but there can be ways to weather out some of this storm.
We're applying these principals right now, and have helped 3 families keep their homes.
AND THE LOSS OF EQUITY AS THEY DOWN-SIZE...
Figure too, that many were expecting to sell their homes for a profit; down-size into a smaller condo' or home, and use the equity/profit, as part of their long-term savings to supplement their retirement income and social security.
Let's hope some of them are wise enough to offer those spare bedrooms to young singles looking for affordable rent.
Let's also hope there is room in some of those homes for the 'offspring' to get back to when they lose their jobs; are on unemployment, and (again) need a shelter at a nominal sum.
I do believe neighborhoods should form groups that will meet and seek to support each other through these times.
If it takes a small sum of money from each and every concerned neighbor and/or family member, to compile a 'bridge loan' that allows another family to stay in their home a few weeks or months longer, they can always ask for some type of collateral or return when the home is sold or refinanced.
People can learn how to create their own 'small bank-like' reserve and resource. It will be a 'grass roots' effort; a kind heart - a commitment to their community, but there can be ways to weather out some of this storm.
We're applying these principals right now, and have helped 3 families keep their homes.
Hold On
Real estate value will rebound. Real estate is one investment that does respond to supply/demand.
There are a lot of foreclosed properties on the market right now and they're being bought by bargain hunters and investors who know a bargain when they see it.
But as security for retirees, unless they have a very good cash reserve (as in savings of whatever sort), a mortgage is something they should not have unless it is as one of the bargain hunting buys for profit.
Working class retirees should have made sure they had their mortgages paid before retiring as their rule #1 for retiring because they normally must manage a much reduced income for everyday expenses.
Financial planners over-stress savings & investments and under-stress becoming debt free as criteria for retirement security.
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