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July 18, 2012 at 10:26 AM
While today’s housing-starts data—up 7% from last month and a whopping 23.6% from last year—suggest a possible comeback in the battered sector, a new study of trends among older Americans suggests that housing “stops” are a factor once Americans hit 75.
The study by Sudipto Banerjee of the Employee Benefit Research Institute (EBRI), a nongovernmental grant-supported research center, found that homeownership peaks among 65-year-olds, then gradually declines till about 75, after which the rate steadily declines with age.
Banerjee, in an interview with AdvisorOne, says advisors should alert their clients to the financial implications of declining home equity.
“People who move from owning to renting typically have much lower income or much lower wealth,” he said. “So if someone wants not to tap into their housing equity or has any intention of leaving it to their children, then they should seriously think of other resources available.”
Driving the loss of income is often the death of a spouse, which would result in lost Social Security benefits. The EBRI study found that a spouse’s death accounted for the largest share, 42%, of housing transitions, with a drop in household income accounting for 31% of transitions. Banerjee pointed out that the two categories can overlap.
