Home Ownership Trends Among Older Americans

Home ownership peaks at age 65, then falls slowly until the age of 75, when the rate of home ownership declines steadily, according to a new report by EBRI.

The EBRI study finds that owning is the most common housing arrangement for older Americans: At the traditional retirement age of 65, more than 8 in 10 Americans report living in houses they own. After 65, home ownership rates fall and at the age of 90, 6 in 10 Americans report living in their own houses.

“Housing is not only an asset, it also provides housing services,” said Sudipto Banerjee, EBRI research associate and author of the report. “That is why housing wealth does not start to decline until people reach very advanced ages.”

EBRI’s research shows that death of a spouse is the most common factor associated with a housing transition: Almost 42 percent of households that went from owning to renting experienced the death of spouses. The next-most common factor is a drop in household income: 30.5 percent of households that made such transitions also reported drops in household income. Just over 1 in 10 households that shift from owning to renting report nursing-home entry of a family member (self or spouse).

The full report, “Own to Rent Transitions and Changes in Housing Equity for Older Americans,”  is published in the July 2012 EBRI Notes, online here.

The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions. The work of EBRI is made possible by funding from its members and sponsors, which includes a broad range of public, private, for-profit and nonprofit organizations.

Nursing Home Entry Rates Rise, Weigh on Wealth Levels

As more American senior citizens are entering nursing homes they face the likelihood that their household wealth will be quickly depleted, according to new research by EBRI.

The EBRI research notes that nursing home stays among older Americans have increased steadily during the past decade: Nursing home stays increased from 6 percent of those age 65 and older in 2000 to 8.5 percent in 2010.

Seniors face a number of retirement planning uncertainties like longevity risk, inflation risk, and investment risk, but perhaps none as critical to their retirement security as health risk. EBRI’s research also shows dramatic differences in wealth levels between those who enter a nursing home and those who do not, based on data from the Health and Retirement Study (HRS).

For instance, after respondents’ first entries into a nursing home, total household wealth fell steadily over a six-year period. By comparison, household wealth increased steadily over the survey periods for those who never entered a nursing home. The EBRI report notes that the average cost for a semi-private nursing home room in the United States is $207 a day (or $75,555 a year) and between 10–20 percent of those who enter a nursing home will stay there for more than five years.

“Given the potentially catastrophic expenditure shock associated with nursing home stays, it is very important to examine how those who entered nursing homes in the past or those who are still living in those facilities manage their portfolios following a nursing home entry,” said Sudipto Banerjee, EBRI research associate and author of the report. “Almost all types of assets decline fast and steadily for those who enter nursing homes. In contrast, similarly aged people who never enter nursing homes experience a steady increase in their assets.”

The full report is published in the June 2012 EBRI Issue Brief, “Effects of Nursing Home Stays on Household Portfolios,” online here. The press release is online here.