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Potential Beneficiaries from Reverse Mortgage Products for Elderly Homeowners: An Analysis of AHS Data

Posted: 3 Nov 2000  

Sally R. Merrill

Abt Associates, Inc.

Merly Finkel

The Urban Institute

Nandinee K. Kutty

Cornell University - Department of Policy Analysis & Management (PAM)


A variety of reverse mortgage loan programs have been available to elderly households for over a decade. The number of unrestricted reverse mortgage loans issued by the private sector has been quite small. About 12,000 loans have been issued through mid-1992. Some researchers take this to mean that the size of the potential market for reverse mortgages is quite small, while other researchers claim that current low levels of activity reflect supply and demand problems, but that the potential market is in fact quite large. This paper uses American Housing Survey (AHS) data to estimate the potential size of the market for unrestricted reverse mortgages. The 1989 national AHS shows that there are over twelve million elderly homeowners (age 62 and over) who own their homes free and clear. Depending on their income, age and the level of home equity, the group of households most likely to benefit from reverse annuity mortgages is considerably smaller. As one approach to defining a lower bound of the estimate of potential beneficiaries from reverse mortgages, we count the number of homeowners in a prime group consisting of the older elderly, aged 70 or above, with an annual income of $30,000 or less, with home equity between $100,000 and $200,000, who have lived in their homes for over ten years. We estimate that there are about 800,000 elderly households in this prime group. For such households, reverse mortgage payments could represent a substantial percentage increase in income; other definitions of target groups can also be explored using the tables provided. The paper uses the 1985 through 1988 AHS SMSA surveys to identify areas that have a large number of elderly homeowners in the prime target group, and in which these homeowners represent a large fraction of the elderly homeowner population. These locations are likely targets for introduction of reverse mortgage products because any campaign can be targeted towards a high concentration of likely eligible beneficiaries.

JEL Classification: M00

Suggested Citation

Merrill, Sally R. and Finkel, Merly and Kutty, Nandinee K., Potential Beneficiaries from Reverse Mortgage Products for Elderly Homeowners: An Analysis of AHS Data. JOURNAL OF THE REAL ESTATE AND URBAN ECONOMICS ASSOCIATION Vol 22 No 2, Summer 1994. Available at SSRN:

Sally Merrill (Contact Author)

Abt Associates, Inc.

55 Wheeler Street
Cambridge, MA 02138-1168
United States
617-492-7100 (Phone)
617-492-5427 (Fax)

Merly Finkel

The Urban Institute

2100 M Street, NW
Washington, DC 20037
United States

Nandinee Kutty

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

414 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States
607-255-8031 (Phone)
607-255-3794 (Fax)

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