ABSTRACT Home equity represents the largest component of wealth for households in the US. The accurate estimation of home values is important for different sectors of the economy. The current study develops a new method – grouped generalized ordered probit (GGOP) model – for examining the impact of independent variables on single-family home values. The proposed methodology is developed using home property value data for the greater Orlando region from 2013 to 2022. The host of independent variables considered include structural characteristics, demographic characteristics, land use characteristics, transportation infrastructure characteristics, and temporal characteristics. The model estimation process includes the estimation of a GGOP model, spatial lag GGOP and spatial error GGOP models. The spatial lag model offers significantly improved fit compared to other models. The independent variables such as parcel area, living area, number of bathrooms, population, median income, number of jobs, school quality, proximity to downtown, distance to SunRail stations and year of analysis significantly affect single-family home values in the Greater Orlando region. The model results were validated using data not considered for estimation. An elasticity analysis was also conducted to offer insights on independent variable impact magnitudes. The model findings can be employed to quantify property tax revenues for new developments and homeowner/ community losses in the event of natural disasters.

Abstract Why do homeowners default on mortgages? This paper studies the question using a survey specifically designed for the purpose, with a sample drawn from (and matched to) rich administrative data. I find that a wide variety of typically unobserved liquidity shocks together trigger nearly all defaults, so “strategic” default with no liquidity trigger is much less common than it usually appears. Conversely, even in this uniquely rich data, I find that many foreclosures are not triggered by negative home equity, contrary to the predictions of almost every model in the literature.

Abstract Lowering a borrower's interest rate is one of the most effective ways to reduce a borrower's debt burden. Mortgage refinancing offers a chance to shift debt balances from high‐interest loans into a low‐interest mortgage through “cashing out” some of the home's equity. Using anonymized data on mortgage refinancing behavior, we find that over half of borrowers with high‐interest loans and available home equity do not take advantage of their cash‐out opportunities. While the cash‐out “surcharge” can rationalize this pattern, we leverage a policy change at Fannie Mae that eliminated this surcharge for student‐loan borrowers and find that the presence of a student loan does not significantly affect borrowers' propensity to cash out.

Financing aged care with home equity allowing for government age pension and aged care support

Abstract The medical diagnosis of a disease is common in older age and can carry significant financial costs. For many older adults, equity in a home is their primary component of wealth; however, housing wealth is illiquid. We analyze the relationship between the liquidation of housing wealth through mortgage borrowing on older homeowners’ ability to successfully control a disease. We use data on homeowners aged 65 and older from the 1998–2016 waves of the Health and Retirement Study (N = 3,457). We use biomarkers and physical health indicators to measure disease control following a medical diagnosis of diabetes, heart condition, high blood pressure, lung disease, or cancer. Descriptively, 28% of older homeowners who borrow against home equity are not controlled on their disease, compared to 33% of non-borrowers. Panel data instrumental variable regressions show that each $10,000 borrowed from home equity after diagnosis is associated with a 17-percentage-point reduction in the probability of the disease not being controlled. Many older adults are not able or willing to liquidate housing wealth, and the ability to borrow also depends on changes in home values. Thus, housing wealth is not a uniform social determinant of health but is shaped by older adults’ participation in financial markets. In follow-up research, we have focused on older adults with diabetes and document the role of access to financial resources for the ability of older adults to manage diabetes.

Abstract Using a monthly panel data set of individuals' debt, we show that house price changes can explain a significant fraction of personal debt composition dynamics. We exploit the variation in local house price growth as shocks to homeowners' housing wealth to study the consequential adjustment of debt portfolio. We present direct evidence that homeowners reoptimize their debt structure by using parts of withdrawn home equity to pay down comparatively expensive nonmortgage debt during a housing boom. The effect is strongest for homeowners that have a high debt‐to‐income ratio and live in a municipality with a high literacy level. We find evidence that macroprudential policy and interest rates are important for consumer debt decisions.

House prices rose rapidly in rich societies over the past decade, inhibiting young adults’ access to affordable, family-friendly housing. Over the same period, fertility has declined. Some recent studies have examined the connection between these trends, but the individual-level mechanisms that link house prices to fertility remain underexplored. We address this research gap by using register data on the full population of the Netherlands between 2012 and 2023, a period during which house prices increased dramatically. We link variation in changes in house prices across NUTS-3 regions to yearly conception risks and examine the mediating and moderating role of individual-level homeownership. Results show that increasing house prices are associated with lower fertility, which can partly be explained by the lower propensity of young adults to be homeowners and partly by decreased fertility among renters in more expensive housing markets. In contrast, increasing house prices increase the fertility of homeowners. This positive home equity effect is found only among those who entered into homeownership more than three years ago. These results indicate that rising house prices have likely contributed to the fertility decline observed after 2010 among younger cohorts and may amplify fertility differences between housing market insiders and outsiders.

The study investigates whether frequent job-based relocations, which are typical for military service personnel, are correlated with households’ ability to accumulate housing wealth. Specifically, we investigate whether differences in homeownership rates and home equity values exist for two cohorts of military personnel, the older Korea/Vietnam and the younger post-Vietnam cohorts of servicemembers. The study accounts for individual financial stress and expectations about the economy, and controls for a rich set of demographic and socio-economic factors. Data sources are the 2022 Survey of Consumer Finances and the 2021 National Financial Capability Study. Results show that the two cohorts of military households do not differ from civilian households with regard to the home ownership rate. Greater individual financial stress on one hand and more positive economic expectations on the other hand emerge as two opposing, but stress-related factors linked to lower homeownership rates. The Post-Vietnam military personnel cohort is associated with lower home equity values compared to civilian households, but no difference was found between the Korea/Vietnam cohort and civilian households. From a policy perspective, our findings indicate that housing-focused efforts in the military, such as targeted loan products, relocation allowances, financial education and counseling programs, appear to help military households cope with the demands of military career paths and the transition to post-active life. When limiting the sample to homeowners, the data indicate lower housing wealth accumulation among the younger, Post-Vietnam era military households, compared to civilian households. As frequent military moves may prevent these households from building housing wealth while in the service, this group has had less time to accumulate housing wealth, documenting the role of housing tenure length for wealth accumulation for this unique population group.

The effect of housing wealth on health care spending.

Abstract We explore an overlooked phenomenon in mortgage markets: repayment of underwater mortgages. Using a sample of mortgages terminated between 2007 and 2016, we show that such repayment indeed occurs, and that it is affected by the same factors commonly used in studies of default: the magnitude of home equity and the borrower’s credit score, which captures default cost as well as liquidity. A novel insight is that underwater repayers, unlike most defaulters, are not liquidity constrained, providing a much cleaner environment to study default costs. We estimate lower bounds on these costs. Our results indicate that default costs are substantial.

The increasing population in India necessitates implementing measures to ensure financial stability during their retirement years. A reverse mortgage is a very effective and unique option that allows senior citizens to transform the value of their home equity into a reliable source of income. This study examines the decision-making process of elderly individuals in India regarding reverse mortgage loans using the robust framework of the Theory of Planned Behavior (TPB). This study investigates the impact of the essential characteristics of the TPB model and the mediator role of financial literacy on the intention of older citizens to purchase reverse mortgage loans. The study highlights the lack of understanding among senior personnel regarding financial decisions about adopting reverse mortgages in their old age, specifically concerning their homes by formulating a hypothesis. The study intends to provide significant information to policymakers and financial institutions by examining the role of financial literacy as a mediator within the constructs of the TPB model. Furthermore, the findings enhance the condition of elderly individuals guiding policymakers on improving the range of products and services available to them, implementing a comprehensive strategy for making educated financial decisions and initiating financial literacy programs tailored explicitly for senior residents in India. Therefore, a reverse mortgage is the most suitable choice to ensure a stress-free retirement for elderly individuals in India as it can grant them financial stability and empowerment throughout their later years.

Can everyone tap into the housing piggy bank? Racial disparities in access to home equity

Population aging is a common phenomenon worldwide. The Senior citizen population is generally termed as ‘Asset Rich, Cash Poor’ because they have huge investment in form of residential houses on their names, but lacks liquid resources for their daily requirements. Reverse Mortgage Loan is a financial product which helps senior citizens to convert the home equity into cash so that they can lead their post retirement life respectfully. The senior citizen borrowers need not to repay the loan during their lifetime. After the death of the borrower, the legal heirs can repay the loan and take back the property. Otherwise the bank can sell the property, adjust the loan amount along with interest and refund the balance amount to heirs. This product is very much in demand in western countries like USA, UK, etc. Since its introduction in India, its demand is very low. Past studies reveals that several factors like wish to pass on the property to children, lack of awareness among senior citizens etc. are the main reasons of its low demand. The supply side i.e. bank/financial institutions also face challenges in providing this loan. Present study compares the challenges faced by lenders from the state of Punjab and Haryana in providing this loan.

Abstract In the United States, a significant number of criminal defendants are held in pretrial detention and face substantial financial burdens. Matching individual-level criminal case records to household-level financial data, we exploit the quasi-random assignment of court commissioners to study how pretrial detention affects household solvency. We find that pretrial detention results in higher rates of household insolvency, driven by higher rates of chapter 7 bankruptcies and judgment liens, and higher foreclosure rates during periods of decreasing house prices. We document that the effects spill over to family members and show that home equity can cushion households from insolvency. (JEL D14, G51, K41, K42)

ABSTRACT The rise of corporate investors in the single-family rental (SFR) housing market has raised concerns about impacts on American home equity and wealth, particularly in markets like Atlanta, Georgia, a prime target for these businesses. This study introduces a novel framework that analyzes corporate SFR business activities—home purchase, rental, and sale—to assess their community-level wealth impacts. First, we test our core assumption that corporations have unique bargaining power over individuals in the market. Our hedonic regressions show that corporate investors purchase single-family properties for less and sell for more, when transacting with an individual buyer or seller, compared to individual-to-individual transactions. We then apply our framework, using Atlanta as a case study, to investigate the community wealth impacts of corporate SFR investors. We uncover that the City of Atlanta lost $1.25 billion (2022 dollars) between 2011 and 2021, with predominantly African American neighborhoods bearing more than half of the total loss. The most affected neighborhood suffered a loss proportional to nearly 4% of the total income generated by all of its households. This research has critical implications for those seeking place-based interventions by understanding past, present, and future impacts of corporate SFR investment activities on local housing equity and neighborhood wealth.

The study investigates whether frequent job-based relocations, which are typical for military service personnel, are correlated with households' ability to accumulate housing wealth. Specifically, we investigate whether differences in homeownership rates and home equity values exist for two cohorts of military personnel, the older Korea/Vietnam and the younger post-Vietnam cohorts of servicemembers. The study accounts for individual financial stress and expectations about the economy, and controls for a rich set of demographic and socio-economic factors. Data sources are the 2022 Survey of Consumer Finances and the 2021 National Financial Capability Study. Results show that the two cohorts of military households do not differ from civilian households with regard to the home ownership rate. Greater individual financial stress on one hand and more positive economic expectations on the other hand emerge as two opposing, but stress-related factors linked to lower homeownership rates. The Post-Vietnam military personnel cohort is associated with lower home equity values compared to civilian households, but no difference was found between the Korea/Vietnam cohort and civilian households. From a policy perspective, our findings indicate that housing-focused efforts in the military, such as targeted loan products, relocation allowances, financial education and counseling programs, appear to help military households cope with the demands of military career paths and the transition to post-active life. When limiting the sample to homeowners, the data indicate lower housing wealth accumulation among the younger, Post-Vietnam era military households, compared to civilian households. As frequent military moves may prevent these households from building housing wealth while in the service, this group has had less time to accumulate housing wealth, documenting the role of housing tenure length for wealth accumulation for this unique population group.

Abstract Given the growing housing crisis, researchers increasingly point to housing as a possible risk factor for nursing home (NH) utilization, yet the exact pathways from housing to NH utilization are unclear. The purpose of this integrative review was to develop an understanding of how housing acts as a mechanism that impacts NH utilization in the United States. Five databases were searched in April 2024 and 16 total articles were included. This review highlights four pathways for this relationship: 1) Financial Asset vs. Burden, represents how some leverage home equity to help finance necessary NH placements, while for others the cost-burden of housing may lead to early nursing home placements; 2) Access to Affordable Housing, represents how the supply of affordable housing impacts the ability of NH residents to return to community living; 3) (Mis)match Between Needs and Housing, represents how functional needs rapidly evolve, leading to housing transitions and NH placements; and 4) Compounding Systemic Inequities, represents how systemic inequities in access to affordable, quality housing lead to disparities in NH placement for socio-economically marginalized older adults. The results from this review provide evidence of the relationship between housing and NH utilization across these four pathways; however, due to weak quality of evidence, and limited methodological diversity, more research is needed to strengthen this evidence. Clinicians, researchers, and policymakers should still recognize the importance of housing in NH utilization and seek to target policies and interventions towards improving housing conditions for those at risk for NH placement.

Qualitative research has documented mothers’ critical role in supporting adult children during and after incarceration. Yet, the implications of incarceration for mothers have been relatively unexplored. Wealth research has also largely overlooked the influence of adult children on parental wealth. Using linked mother–child data from the National Longitudinal Survey of Youth 1979 (NLSY79) and the NLSY79 Child and Young Adult study, we investigate whether a child's incarceration influences mothers’ wealth and whether accounting for child incarceration history helps explain the racial wealth gap. We use an event-study analysis and fixed-effects models to assess the evidence that children's incarceration affects three forms of wealth: financial assets, homeownership, and home equity. We find significant relationships between child incarceration and maternal wealth, but the importance of current versus prior child incarceration depends on the type of wealth considered. We also find that child incarceration is much more detrimental in dollar terms for White women than for Black or Hispanic women, but the financial asset penalty associated with child incarceration is larger in percentage terms for Black women than for White women.

Although financial toxicity from cancer care is well documented, how cancer and other high-mortality chronic diseases affect credit overuse and high-risk borrowing remains unknown. We retrospectively analyzed households in the 2012-2018 Health and Retirement Study. Outcomes included nonhousing financial debt and credit card debt. For homeowning households, outcomes also included access to a home equity line of credit (HELOC) and a loan against HELOC. Linear probability regression models compared changes in financial outcomes among households with new cancer diagnosis or major chronic diseases (diabetes, stroke, or heart disease) with those without health shocks. Analyses were stratified by wealth. Among 14,188 households (age 68 years, 42% male, 21% Black, 13% Hispanic), 33% had financial debt, 26% had credit card debt, and 10% of homeowners used HELOC. Below-median wealth households were more likely to be Black or Hispanic. They were less likely to be headed by a female and to have college-level education. In these households, 22% had negative financial wealth (v 0% for above-median wealth), and new cancer was associated with a 4.9 percentage point (PPT) increase in rates of financial debt (13.1% effect size; P = .03; 95% CI, 0.005 to 0.094) and a 3.9 PPT increase in HELOC use (65%; P = .04; 95% CI, 0.002 to 0.076) compared with households with no new health changes. Households developing major chronic diseases were 3.6 PPT more likely to develop financial debt (9.6%; P = .015; 95% CI, 0.007 to 0.065) without affecting HELOC use. Such differences disappeared in above-median wealth households. Below-median wealth households with cancer incurred higher financial debt and refinanced their home more often compared with those without cancer, highlighting credit overuse and borrowing even in a fully insured population.

Abstract In the USA, state-level exemptions determine the amount of property that individuals can protect from creditor liquidation during the debt settlement process. We exploit within-metropolitan statistical area variation in personal bankruptcy exemptions created by state borders and a stacked regression approach to identify the spillover effects of these laws on business credit extended to small firms. Subsequent to exemption increases, we find a reduction of 1–2 percent in originations of business credit. The effect is strongest for the smallest firms, which are more financially constrained. We provide household-level evidence that both business debt and personal debt decline for borrowers whose home equity becomes covered by the exemption, suggesting an overall decrease in credit availability for small businesses. As a result, increases in exemptions lead to fewer small establishments and lower employment, especially in industries dependent on external finance, suggesting that negative real economic effects occur via a credit market channel.