What is the Impact of Foreclosures on Retirement Security?

Boston College Center for Retirement Research Working Paper No. 2010-20

24 Pages Posted: 20 Nov 2010

See all articles by Anthony Webb

Anthony Webb

Boston College - Center for Retirement Research

Leora Friedberg

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Irena Dushi

U.S. Social Security Administration

Date Written: October 19, 2010

Abstract

Using data from several sources, we show that households nearing retirement have lower rates of housing distress than younger households, as measured by arrears and foreclosure rates. However, almost all of the housing wealth gains observed for cohorts aged 51-56 between 1992 and 2004 were erased by 2010, while their mortgages have grown throughout. As a consequence, their loan-to-value ratios are considerably higher, though the percentage paying more than 30 percent of their household income towards their mortgage remains flat. Worrisomely, their financial wealth also declined between 2004 and 2010. Declines in house prices will adversely affect households that need to liquidate housing wealth, and rising mortgage obligations will increase pressure on retirement resources. We develop an econometric model to show factors associated with housing distress and then use the results to forecast housing distress among older households through 2012. We project that the risk of arrears will increase to 3.4 percent in 2010 and 4.4 percent by 2012. We also find that 6.7 percent of HRS households have children or other relatives who are facing housing distress, potentially putting further pressure on their retirement preparedness.

Keywords: Retirement., Mortgage, Economics

JEL Classification: A10, A11, E2, G21

Suggested Citation

Webb, Anthony and Friedberg, Leora and Dushi, Irena, What is the Impact of Foreclosures on Retirement Security? (October 19, 2010). Boston College Center for Retirement Research Working Paper No. 2010-20. Available at SSRN: https://ssrn.com/abstract=1711929 or http://dx.doi.org/10.2139/ssrn.1711929

Anthony Webb (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Leora Friedberg

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3225 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Irena Dushi

U.S. Social Security Administration ( email )

Washington, DC 20254
United States

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