Dissertation Research: “Elderly Households and Housing Wealth: Do They Use It or Lose It?”

Published: 2003
Project ID: UM03-D1


Over 80 percent of households in their 50s are homeowners and housing wealth accounts
for over half of total household wealth for most of these homeowners. The evidence in
the literature on whether the elderly are consuming their housing wealth has been mixed.
Because home sales are infrequent and a high proportion of the elderly continue to own
in old age, it appears that the elderly are not consuming housing wealth. There are,
however, indications that housing wealth may be a form of self-insurance and that
housing wealth is consumed, albeit at very old ages. To date, however, the evidence to
support that hypothesis has been weak. This paper examines whether predictors of
housing sales are consistent with the insurance story by looking at the extent to which
indicators of changes in economic status and access to alternate insurance explain
housing sales. The paper also examines the extent to which changes in health status
predict housing sales. The results of the probit appear to indicate that, by and large,
housing sales in old age for single households is mostly driven by worsening health.
Widowhood has a large effect on increasing the probability of selling the house and the
effect is larger if the husband is the surviving spouse. There are indications that poor
married homeowners are consuming housing wealth and also indications that married
households are responding to Medicaid tax incentives. This evidence seems to suggest
that, at least among married households, housing decisions are financially motivated;
however, the evidence does not by itself validate the insurance story.


Lina Walker