Not only is the foreclosure rate climbing for older mortgage holders, it is climbing faster than it is for younger ones.
The last blog described two very significant changes in home mortgages among older Americans in the period from 1989 to 2010: a much larger percentage of them have mortgages on their homes, and these mortgages are much larger. Now almost twice as many 65 to 74 year olds continue to have a mortgage to pay, and nearly three times as many 75+ year olds do so. And the median amount of mortgage debt has nearly tripled in this time period for 55 to 64 year olds, while the amount has increased about four and a half times for 65+ year olds. These are the results of a report released earlier this month from the AARP Public Policy Institute.
This report also showed that, although the foreclosure rate for older American mortgage holders is consistently less than for younger ones, the older mortgage holders’ foreclosure rate is climbing faster. Take a look at this data tabulated in the report:
|
Foreclosure Rates by Age |
2007 |
2008 |
2009 |
2010 |
2011 |
% Change 2007–2011 |
|
<50 |
0.42% |
0.97% |
1.84% |
2.83% |
3.48% |
729% |
|
50+ |
0.30% |
0.66% |
1.32% |
2.27% |
2.92% |
873% |
Notice that in every single year, the foreclosure rate was lower for those 50 years old or older than for those under 50. But also notice that the increase in the foreclosure rate was greater for the older Americans.
It makes sense that older homeowners would have a fewer foreclosures as a group. On average they’ve presumably owed their homes longer, bought them when prices were lower, and have had more time to pay down or pay off their mortgages. They would tend to have more income stability, and have had more time to accumulate savings and other resources with which to make mortgage payments if their income was reduced. And more of them would have sold their homes before the bubble burst when they cashed in their home equity for more modest homes.
As for why the foreclosure rate has increased more for older Americans, this flows directly from the two main conclusions of the last blog: because they are much more likely now to be carrying a mortgage at all, and because those mortgages are larger. Instead of no longer having a mortgage from having paid it off, or instead of owing a small balance in the final years of a mortgage with a modest payment, more are stuck with a sizeable obligation into the future.
So, older Americans are vulnerable month-to-month because of higher monthly mortgage obligations. And they are vulnerable long-term because they have less equity in their homes or none at all. They are in the period of their lives when it’s more difficult to get hired or re-trained, when they are more likely to have health issues, and when they are on fixed incomes while expenses continue to rise. So it’s not surprising that more of the current AARP generation is ending up in foreclosure.