Salient to Investors:
- The Consumer Financial Protection Bureau reports the share of Americans 65 and older with mortgage debt rose to 30% in 2011 with a median debt adjusted for inflation of $79,000, from 22% in 2001 with a median debt of $43,400.
- The increase in mortgage debt makes these households more susceptible to economic swings, increasing the risk of inability to recoup losses.
- John Gist at George Washington University said reasons include the surge in refinancing in the early 2000s and in the post-recession years, the ability to buy with smaller down payments during the housing boom, and the acquisition of vacation homes. Gist said the highest rates of refinancing occurred among boomers – over half in 2004 and 2007.
- The median duration of joblessness for adults 65 years and older was 17.8 weeks in July, versus 13.5 weeks for those 25 to 34.
- Julia Coronado at Graham Capital Mgmt said a mortgage is a source of risk for older households, particularly given the labor market experience.
- Barbara Butrica and Nadia Karamcheva at Urban Institute said 65% of homeowners with mortgages are still working at age 64, versus 54% of those without housing debt.
- Greg Frost at Frost Mortgage Banking said boomers will be the first generation to take advantage of reverse mortgages on a large-scale.
- Donald Frommeyer at the National Association of Mortgage Brokers said boomers do not have the same desire to pay off mortgages as the WWII generation.
- Sam Khater at CoreLogic said as millennials delay buying homes, they may prolong the trend.
- Homeownership for Americans 35 years old and younger fell to 35.9% in Q2, 2014, the lowest quarterly level since 1994, and versus the high of 43.6% in 2004.
Read the full article at http://www.bloomberg.com/news/2014-08-28/boomer-wealth-depressed-by-mortgages-poses-u-s-spending-risk.html
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