1. Homeownership, Social Insurance, and Old-Age Security in the United States and Europe
Mudrazija and Butrica
Discussion by
Stephanie Moulton
The Ohio State University
Retirement Research Consortium, Washington DC
August 4, 2017

2. Homeownership is an Important Asset for Seniors in the US and Europe
Increasing senior homeownership rate; also increasing absolute # of senior homeowners
US: 80.7%
Germany: 58.4%
Spain: 93.3%
Housing wealth makes up a substantial proportion of senior net wealth globally
US: 55% of homeowner net wealth
Germany: 78% of homeowner net wealth
Spain: 85% of homeowner net wealth

3. Homeownership and Retirement Security
Decisions to become a homeowner
Decisions regarding use of home equity
Retirement Security
Home Equity

4. Homeownership and Retirement Security
Individual Preferences & Knowledge
“Policy and Institutional Framework”
Decisions to become a homeowner
Decisions regarding use of home equity
Retirement Security
Mortgage & Credit Markets
Public Policy
Home Equity

5. Other Mechanisms? Home Equity Monthly Housing Costs
Decisions to become a homeowner
Decisions regarding use of home equity
Retirement Security
Residential Stability
Deferred Maintenance
Home Equity
House Price Dynamics

6. Mortgage Debt & Retirement Security
A higher proportion of seniors are entering retirement with mortgage debt
How will this influence the link between homeownership and retirement security?
M & B note increased risk of negative equity for highly leveraged homeowners
Also increases monthly housing cost burden for senior homeowners; may desire to use a reverse mortgage to payoff forward mortgage payments
Differences by cohorts of seniors; reflect less debt aversion among younger cohorts?

7. Home Equity Release
Consistent low rates of equity extraction across countries indicates there are multiple contributing factors, including preferences, market and policy
Source: Haurin and Moulton (2017); European calculations with SHARE data, % of seniors increasing mortgage debt without a move,

8. Dynamics Differ by Channel and Borrowing Constraints
Source: Moulton et al. 2016; Calculations from HUD HECM data and the Federal Reserve Bank of New York/Equifax Consumer Credit Panel (CCP)
Note: Low credit areas are those in the top quartile for %seniors with credit scores under 720; high credit areas are those in the bottom quartile for %seniors with credit scores under 720.

9. Policy Implications
Reduce barriers for those who desire to extract equity
Borrowing constraints
High costs
Increase information about alternatives
Example: Many seniors don’t understand reverse mortgages. In a recent survey, only 47% correctly answered that the balance on reverse mortgage grows over time; 26% responded incorrectly and 27% didn’t know the answer. (Davidoff, Gerhard and Post, 2016)
Better understand the relationships between home equity and social programs
For middle income households, can use of home equity be a tool to delay social security or entry into Medicaid?