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Housing Debt Hurting Older Americans

by James F. McClister

Older Americans are carrying their housing debt later into life, and as a result, they’re struggling financially.

A lot of attention has been given to student loan debt lately, particularly in regards to the impact it’s having on young homebuyers and sellers. However, mortgage debt is increasingly becoming a problem for older Americans entering retirement. With the albatross of financial obligation weighing heavy around their wallets, more and more of the country’s senior citizens are being forced to delay retirement and cut personal spending budgets, according to a May analysis by the Consumer Financial Protection Bureau.

In 2011, mortgage debt rose to 30 percent – nearly 10 percent more than 2001 levels. One of the primary drivers behind the steep increases, according to a 2012 analysis from The George Washington University, was the refinancing boom that took place during the early 2000s, as well as the acquisition of vacation homes and the newfound option to make smaller down payments.

A Result of Refinancing

John Gist, who led the George Washington research team, found that during the housing boom, nearly half of all Americans born from 1946 to 1964 were opting to refinance their mortgages, and also leverage their home equity more often than any other generation. This led to the congestion of debt among seniors, and they’re only just now starting to feel the effects.

According to a 2013 analyses by Barbara Butrica and Nadia Karamcheva, researchers with Urban Institute, approximate two-thirds of homeowners with mortgages are still working at age 64, compared to only 54 percent among homeowners without lingering housing debt.

A Lasting Trend

Older Americans are dragging their debt into retirement age, and as a result, they’re beginning to struggle financially. Crippling burdens are putting seniors in a volatile position that leaves them susceptible to economic swings.

“Hit with a financial downturn or an unexpected cost, (older Americans) often are in a position where they don’t have the ability to recoup whatever losses they may have suffered,” Stacy Canan, deputy assistant director at the CFPB’s Office for Older Americans, told Bloomberg Businessweek.

Looking forward, the trend of later in life mortgages is likely to endure as Millennials continue avoiding homeownership. A decade ago, homeownership among Americans 35 and younger hovered just above 43 percent. However, today, the same age group’s rate has dropped to 35.9 percent, according to U.S. Census Bureau figures.

Sam Khater, a deputy chief economist for CoreLogic, told Bloomberg that because Millennials are entering the market later that past generations, by definition they’re going to carry their debt later into life.

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