Exploring the Rise of Mortgage Borrowing Among Older Americans

44 Pages Posted: 14 May 2018

See all articles by J. Michael Collins

J. Michael Collins

University of Wisconsin - Madison

Erik Hembre

University of Illinois at Chicago - Department of Economics

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2018

Abstract

This paper documents and examines the rise in mortgage usage among older Americans over the past 30 years. It uses data from a variety of sources including the Health and Retirement Study, Decennial Census, American Community Survey, Survey of Consumer Finances, and the American Housing Survey. We begin by documenting the large increase in mortgage usage among older Americans across age and income distributions. We then use regression analysis to test for causes of the mortgage increase and subgroup heterogeneity, in particular focusing on changing health, bequest motives, and tax policy incentives.

This paper found that:

-Americans over age 60 are more than three times as likely to have mortgage debt in 2015 compared to 1980, a 24-percentage point increase. This is a consistent increase across the income distribution.

-Increases to homeownership account for some of the rise in mortgages, but this has increased by only 9 percentage points among Americans over age 60 between 1980 and 2015.

-Younger age groups have had much smaller increases, and sometimes decreases, in mortgage usage and homeownership over the same time period.

-Changes in household characteristics, such as education, urbanization, race, income, and marriage rates explain only a small portion of the increase in mortgage rates.

-Households with below-median assets, and those without pensions, account for a greater share of the rise in older households’ mortgage borrowing.

-Changes in subjective health and bequest motives explain little of the rise in mortgage rates. Variation in the mortgage interest deduction explains part of the differential increase in mortgage usage by age. The policy implications of the paper are:

-Policymakers should be aware that the beneficiaries of mortgage and homeownership subsidies, such as the mortgage interest deduction, have changed substantially over the past 30 years.

-Increased mortgage usage has coincided with less total debt among seniors relative to younger cohorts and has not resulted in increased delinquency. This may indicate that the negative aspects of increased mortgage usage are limited.

-Further investigation into the causes and consequences of mortgage usage is needed in considering appropriate policy responses.

Suggested Citation

Collins, J. Michael and Hembre, Erik and Urban, Carly, Exploring the Rise of Mortgage Borrowing Among Older Americans (May 2018). Available at SSRN: https://ssrn.com/abstract=3171777 or http://dx.doi.org/10.2139/ssrn.3171777

J. Michael Collins (Contact Author)

University of Wisconsin - Madison ( email )

United States
6086160369 (Phone)

Erik Hembre

University of Illinois at Chicago - Department of Economics ( email )

725 University Hall (UH)
Chicago, IL 60607-7121
United States

HOME PAGE: http://www.ssc.wisc.edu/~hembre/

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States
4069942005 (Phone)

HOME PAGE: http://www.montana.edu/urban

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