This new AARP study reveals shifts in mortgage patterns with huge immediate and near-future consequences.
You’d think that older Americans as a group would be more secure in their homes than younger Americans.
Common sense says that a larger percentage of older Americans would have no mortgage debt at all, having had more time to pay off their mortgages.
And those who had mortgages would owe less on them, because they bought their homes when they were less expensive, and have had more time to pay them down.
Some of this is accurate, as revealed by the AARP study released last week.
The percentage of families who owe any mortgage debt is indeed lower for older Americans. Specifically, families in which the head of the household is 55 or older are less likely to have mortgage debt than families in which the head of the household is 35 to 54 years old. About 60% of the younger families are carrying mortgage debt while 56.6% of families headed by 55 to 64 year olds are doing so, 40.5% of families headed by 65 to 74 year olds, and 24.2% of families headed by 75 year olds or older. The older the age category, the less had mortgage debt. As expected.
But, hidden behind this expected result is an extremely problematic development. From 1989 until 2010, the percentage of families which carry mortgage debt hardly changed at all for the age categories 54 and younger. In contrast, for older Americans this percentage has skyrocketed.
For 55 to 64 year olds, the percentage paying mortgage debt has gone up from 37.0% in 1989 to 53.6% in 2010, a 45% increase, for 65 to 74 year olds from 21.7% to 40.5%, an 87% increase, and for those 75 years or older, from 6.3% to 24.2%, a 284% increase.
Thinks about it: instead of being secure in their homes, almost twice as many 65 to 74 year olds continue to be burdened by having to pay a mortgage, and as are nearly three times as many 75 year olds and older.
A similar change is happening with the amount of mortgage debt owed by each of these age groups. Although younger families owe more mortgage debt, older Americans’ mortgage debt has increased much more.
For 55 to 64 year olds, the median mortgage debt amount has nearly tripled, from $33,800 in 1989 to $97,000 in 2010. While for 65 to 74 year olds and also 75 year olds and older, that amount has increased about four and a half times, from $15,400 in 1989 to $70,000 in 2010, and from $11,800 in 1989 to $52,000 in 2010, respectively. These increases make the homes of older Americans much more vulnerable.
Older Americans are facing a
difficult struggle: falling average incomes coupled with rising mortgage payments and property taxes; increasing medical expenses; more debt; and increased longevity. The increases in mortgage borrowing and foreclosures indicate that many older homeowners have been relying on their home equity to finance their needs in retirement and may be running out of options.