The official magazine for the National Association of Realtors (NAR) recently touched on the topic of reverse mortgages, mentioning products such as the Home Equity Conversion Mortgage (HECM) for Purchase (H4P) and addressing topics like the desires of baby boomers to age in place in their homes.
Describing reverse mortgages as originating in 1961 before coming to greater prominence through the establishment of the HECM program during the Reagan administration, one of two recent NAR articles dealing with reverse mortgage-related subject matter stated that home sales and purchases are becoming a more common topic within HECM circles.
“Those who might benefit most are homeowners who want to access capital without affecting their budget or savings, because borrowers have no required principal or interest payments for as long as they are living in the property,” the article said. “A reverse mortgage could also benefit those who might outlive their retirement savings.”
Despite mentioning that a reverse mortgage can be used for the purchase of a new home, much of this article seems designed to introduce real estate agents to the concept of the H4P product.
NAR data also reflects well-documented reporting about the sentiment seniors have toward aging in place.
“According to [NAR] Chief Economist Lawrence Yun, home sales in 2023 fell to their lowest levels in nearly 30 years, but are finally on the uptick as of February,” a second article said. “Boomers are said to be one reason inventory has been in short supply and the housing market has been frozen.”
In terms of issues that could motivate baby boomers to reenter the housing market, retirement might be chief among them, according to Jessica Lautz, deputy chief economist and vice president of research at NAR.
“[Baby boomers] often seek a newer property, and are not necessarily downsizing,” Lautz told the magazine. “The lack of downsizing may be due to the lack of smaller housing inventory, but also the desire for a bigger home.”
A larger home could be needed to better accommodate family members, but both Lautz and Jonathan Miller, CEO of appraisal firm Miller Samuel, agree that the “silver tsunami” — at least as it relates to the idea of the market being flooded with inventory from older homeowners choosing to sell — is unlikely to materialize anytime soon.
Reverse mortgage professionals have explained to RMD that a big focus of referral outreach this year is centered on real estate agents. H4P loans are comparatively underutilized within the reverse mortgage industry and remain a hard sell, but they may be poised for more activity, according to Jon McCue, director of client relations at Reverse Market Insight (RMI).
“We are firm believers that the H4P product is prime to take off,” McCue told RMD in April. “When looking at H4P volumes over the years, interest rates have had very little to do with its success. In fact, the lowest levels of H4P were in the lowest rate environment during the 2020 pandemic as inventory tightened and seniors were not interested in moving given all that was happening.”
