Most Americans want their parents to age comfortably in their own homes, but it can be a challenge for both families and the housing market.
Three out of four adults want their parents to be able to age in their own homes, but more than half of Gen Xers don’t feel financially prepared to assist their parents in old age, according to a new study from American Advisors Group.
AAG surveyed 1,500 adults aged 40-55 who have senior parents.
“The retirement savings crisis is real, and many Gen X adult children are telling us that caring for their parents will be extremely difficult and potentially unattainable,” said Eddie Herda, AAG VP of Brand Strategy.
Herda said there is interest in finding financial solutions to help fund their parents’ later years.
More than half of respondents said their parents’ home equity could be a financial solution.
Home equity has soared in the past few years, and with it, HELOC lending has increased. HELOC lending rose to its highest level since 2007 in the first half of 2022.
“After 124 consecutive months of home price increases, it’s no surprise that the percentage of equity-rich homes is the highest we’ve ever seen, and that the percentage of seriously underwater loans is the lowest,” said Rick Sharga, executive vice president of market intelligence at ATTOM.
“While home price appreciation appears to be slowing down due to higher interest rates on mortgage loans, it seems likely that homeowners will continue to build on the record amount of equity they have for the rest of 2022.”
As a result of increased home values, cash-out refinancing jumped in 2021 to $1.2 trillion, its highest level since 2005.
Cash-outs have declined recently as interest rates rise, down 42.2% from last year’s highs, and home price appreciation is slowing.
But appreciation is still expected to end the year at 10% – down from 2021’s 20% – but still leaving homeowners with higher property values.
Senior housing wealth, in particular, hit a record high of $11 trillion.
Aging in place is having a serious impact on the overburdened housing market.
Freddie Mac predicted that around 1.6 million more seniors are staying in their homes than what would have been the case if they “behaved like older generations of homeowners.”
This leads to additional pressure on the already-tight housing market.
“The recent dramatic spike in tenure length is reflected in the growing performance gap between market potential and actual existing-home sales, which is up 48% since the end of 2017,” said Marc Fleming, Chief Economist at First American.
“Homeowners are staying in their homes longer than ever, limiting supply and slowing home sales.”
Ryan Sweet, director of real-time economics at Moody’s Analytics, noted that communities with less movement of people are often negatively economically impacted.
“It can be a bad thing. We have seen that population growth is key for economic activity, so if the boomers move less, some communities will not see the same growth,” he said.
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