Net Worth and Housing Equity in Retirement

42 Pages Posted: 21 Dec 2007 Last revised: 2 Jun 2021

See all articles by Todd M. Sinai

Todd M. Sinai

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Nicholas S. Souleles

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

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Date Written: December 2007

Abstract

This paper documents the trends in the life-cycle profiles of net worth and housing equity between 1983 and 2004. The net worth of older households significantly increased during the housing boom of recent years. However, net worth grew by more than housing equity, in part because other assets also appreciated at the same time. Moreover, the younger elderly offset rising house prices by increasing their housing debt, and used some of the proceeds to invest in other assets. We also consider how much of their housing equity older households can actually tap, using reverse mortgages. This fraction is lower at younger ages, such that young retirees can consume less than half of their housing equity. These results imply that 'consumable' net worth is smaller than standard calculations of net worth.

Suggested Citation

Sinai, Todd M. and Souleles, Nicholas S., Net Worth and Housing Equity in Retirement (December 2007). NBER Working Paper No. w13693, Available at SSRN: https://ssrn.com/abstract=1077819

Todd M. Sinai (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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National Bureau of Economic Research (NBER)

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Nicholas S. Souleles

University of Pennsylvania - Finance Department ( email )

The Wharton School
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Philadelphia, PA 19104
United States
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215-898-6200 (Fax)

HOME PAGE: http://finance.wharton.upenn.edu/~souleles

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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