Older Homeowners are Financially Confident Aging in Place

Not Much Interest in Home Financing Products for Additional Retirement Income

Only 15% of older homeowners said they would consider using their home's equity for additional funds during retirement; another 43% said maybe; and 41% said they would not consider using their home's equity. The economically disadvantaged group answered similarly. For both groups, the top reasons for not using their home's equity included: 1) not needing extra funds during retirement; and 2) not wanting to owe the bank anything and/or wanting to own their home free and clear.

When asked about the likelihood of using specific home financing products or strategies to generate additional cash or income during retirement, a majority indicated they were not likely to use any, but a few options were of more interest than others. "Selling your home" was the most likely action respondents said they would take to generate additional cash/income (33%), followed by taking out "a small lump sum of equity that could be repaid" (31%), a home improvement loan (26%), or a home equity loan of credit (25%).

Little interest was shown in taking out a reverse mortgage or renting out a room.

Most Older Homeowners Expect to Age in Place

Only 17% of older homeowners said they sold their home, or plan to, during retirement (8% already sold, and 9% plan to sell); another 27% said they may sell; and 56% said they will never sell. Respondents offered a compelling combination of emotional and financial reasons for remaining in their homes, including a "love" of their home, comfort with the area, and that their "home is, or almost is, paid off." The top reasons for staying in their homes did not differ by age group (younger vs. older), but potential future research might explore whether intergenerational households are becoming a more prominent reason for some retirees to stay in their homes.

Only 7% of older homeowners said the process would be "too difficult" to sell their home, so that does not appear to be a barrier for many homeowners. Additionally, 62% said that their goal is to leave their home to their heirs, which may indicate that many view their homes as part of their legacy, another emotional and financial reason to stay in their home. Almost half said their home's equity provides security for costs associated with unexpected emergencies, which, while not explicitly defined by the survey, could be anything from extensive healthcare costs to assisted living or major home repairs.

Amid the larger discussion of mortgaged homeowners being "locked in" to their homes following the post-pandemic jump in mortgage rates, a previously published survey of ours on the "lock-in effect" found that, for homeowners of all ages, households cited a number of non-monetary reasons for planning to remain in their homes longer. These latest survey results corroborate those findings, and they may be especially true for older homeowners, many of whom cited the same non-financial reasons for wanting to stay in their homes longer.

They're Concerned about Inflation, Healthcare Costs, and Assisted Living Costs

Older homeowners expressed the most concern over inflation and the financial and health issues related to getting older. The rising cost of assisted living, coupled with inflation, may be contributing to older homeowners' preference to age in place, since doing so may enable them to better control costs. Already having familiarity with their community and the needs of their home, it's likely they have a strong understanding of their current expenses, including how to maintain or reduce them, if necessary.

Respondents were not asked about their current healthcare programs and insurance (e.g., Medicare, company-sponsored healthcare program, long-term care insurance), but future research might explore how older adults are thinking about, or weighing, affording healthcare costs along with housing costs.

Opportunities to Support Older Homeowners

Of the ideas presented in the survey to support older homeowners in retirement, respondents expressed the most interest in a maintenance service for retirees that makes home improvements and repairs at a lower cost.

Since many older homeowners are on fixed incomes and will likely have accessibility and/or basic maintenance needs as they age in place, interest in such a program makes sense. The connection between housing and health of the aging population has been highlighted in many industry reports;⁵ if older homeowners can have their homes meet their needs as they age, we believe it will likely have societal spillover effects. These might include allowing older homeowners more independence for a longer period of time, a reduction in the frequency of adverse events (e.g., falling or living in unhealthy conditions), and potentially reducing the cost to caretakers and the healthcare system.

Wide-Ranging Implications

We think our survey findings have important implications for older homeowners, their families, and the entire housing market, including the supply of housing, home maintenance programs, and retirement advisory services. Since the research found that only 17% of older homeowners say they have sold or plan to sell their home during retirement – and many who sold their home just bought another home to fit their retirement needs – we believe older homeowners exiting their homes are unlikely to offer much near-term housing supply relief.

As older homeowners age along with their homes, helping them maintain their homes – from home improvement loan products to help with maintenance and repair services – could be supportive of their stated needs in our survey.

Providing cost-effective maintenance and repair programs would help sustain the value and safety of their homes, and potentially reduce unexpected housing-related emergency costs, for which, as a last resort, some homeowners may use their home equity. The research shows that almost half of older homeowners see their home equity as security for unexpected emergency costs. As mentioned previously, home improvement loans or programs could provide benefits on many fronts – including potentially lowering healthcare costs due to safer living conditions. There may also be a way to a better interface with home health care organizations as a strategy to lower or help maintain societal costs.

Even though most older homeowners expressed confidence in their retirement planning, providing objective advice to help them make informed financial choices about their homes earlier in retirement, or prior to retirement, may be another opportunity for the financial services industry. Our research found that over one-third of older homeowners, especially those under 70, are open to financial advice. With housing representing a sizable portion of many homeowners' net worth, we believe it's important that housing and home equity planning be included in holistic retirement planning.

In sum, while a majority of older homeowners feel capable of managing their retirement and income needs, and express little interest in using their home equity for income (with the exception of addressing emergencies), our research indicates areas of potential support for certain older homeowners who may need or benefit from it. Such support could be provided by various organizations within the housing and financial industries. Examples include lenders providing low-cost home improvement loans; home maintenance companies or local organizations/governments providing cost-effective maintenance programs; and retirement-planning advisors including housing/home equity planning in a holistic manner for older homeowners looking for advice. At Fannie Mae, we look forward to working with our industry partners to help support older adult homeowners, including by helping to shed light on their needs via continued research and insights.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

¹ 1-Year 2022 U.S. Census American Community Survey, total adult population based on 15-100-year olds.

² 1-Year 2022 U.S. Census American Community Survey, with projections based on Census Bureau 2023 National Population Projections.

³ The age group 60-plus was chosen because once someone reaches 60-years old, they may be thinking more in-depth about their retirement planning, including income needs and what to do with their home (one can withdraw 401K money at 59 ½ and start social security at age 62).

⁴ Incomes less than $35K if single, less than $50K if two-person household, financial assets (not including home equity) less than $100K if single, less than $300K if two-person household.

⁵ How Well Does the Housing Stock Meet Accessibility Needs? An Analysis of the 2019 American Housing Survey (harvard.edu)