The Problem with Being House-Rich - Skip to content

The Problem with Being House-Rich


There are risks to American homeowners who are house-rich

“According to the National Association of Realtors, the median price of a house in the United States is worth $190,000 more than it was a decade ago.” So begins a recent blog post by Ben Carson on the website A Wealth of Common Sense. What’s not noted is that median home prices remain 25-45% above their pre-pandemic levels in numerous housing markets.

Just how much-unrealized gains held in home equity did American homeowners accumulate? Actually, all income groups did quite well, according to this chart from the National Association of Realtors. If you’ve noticed the lower wealth gains for homeowners who’ve owned their homes for 15 years or more, keep in mind the massive decline in home prices from 2008-2011, which would erode gains in the first four years.

Why is housing wealth so important? As we know,  for most Americans, their home represents

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Editor in Chief:
As a prominent commentator and Editor in Chief at, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
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  1. (An important ongoing cost that was not covered particularly for seniors are HOA dues and fees. The growth in this cost area particularly for seniors has been explosive especially since HOA costs were relatively concentrated to places such as NYC and specific living situations, like condos and coops, until a few decades ago.)

    But basically a fundamental question still looms. Why are first time borrowers staying away from reverse mortgages, particularly HECMs? By the number of HECM endorsements in this fiscal year and last, it would appear that liquidity on homes will not be as problematic for new retirees as we, as an industry, say; yet independent (i.e. of this industry) study after independent study have indicated that seniors are entering retirement with less retirement resources and more debt than the generation that went through the Great Depression and World War II.

    The lack of correlation as to the need for more liquidity in retirement is seen in even one of our best years for HECM endorsements in a decade, last fiscal year. There were 28,700 HECM Refi endorsements and about 35,700 first time HECM borrower endorsements of the approximately 64,400 total HECM endorsements last fiscal year. This fiscal year there will be approximately 29,000 first time HECM borrower endorsements compared to around just 4,000 HECM Refi endorsements for total HECM endorsements of about 33,000. That represents a drop of about 6,700 first time HECM borrower endorsements which is about a 10.4% of the total HECM endorsements for last fiscal year while the drop in HECM Refi borrowers will be about 24,700 or about 38.4% of the total HECM endorsements for last fiscal year. The drop in total HECM endorsements should be about 31,400 or a percentage loss in total HECM endorsements compared to last fiscal year of 48.8%. So while higher expected rates have been particularly hard on HECM Refi endorsements, that was not as true for HECM first time borrower endorsements. The percentage loss in HECM Refi endorsements will be 86.1% when compared to last fiscal year’s total HECM Refi endorsements, while the loss percentage in HECM first time borrower endorsements will be about 18.8%.

    With the basic problem of seniors entering into retirement with less retirement assets and more debt, it is not surprising that the higher expected rates were less impactful on HECM first time borrower endorsements than on HECM Refi endorsements; however, the question remains why is the HECM first time borrower endorsement level so low for both last fiscal year and this. Perhaps all of the consumer protections added to HECMs since the end of fiscal year 2013 have helped lower HECM endorsement production. With all of the excellent consumer protections added at the end of fiscal year 2013 and during fiscal 2014, why was a rather harsh financial assessment needed and why were the drops in PLFs and the expected rate floor in determining PLFs necessary on 10/2/2017? The HECM portion of the MMIF seems bloated when compared to the reserve mandated by law. Can some of that be used to allow for higher PLFs and an increase in the expected rate floor in determining PLFs in the future? With it now being the middle of September, the last month in this fiscal year, it seems the answer will have to wait for at least another fiscal year.

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