Demographic Trends, Housing Equity, and the Financial Security of Future Retirees

About 80 percent of households with heads at retirement age own a home.
Aside from Social Security and dedicated retirement saving, home equity is
the primary asset of a large fraction of these homeowners. Thus, the fi nancial security of many older households depends importantly on the value
of their homes. Venti and Wise (1990, 2001, 2004); Megbolugbe, Sa- Aadu,
and Shilling (1997); and Banks et al. (2010) show that housing equity tends
to be withdrawn when households experience shocks to family status like
entry to a nursing home or death of a spouse. If, as these analyses suggest,
housing equity is conserved for a “rainy day,” then the value of housing can
have important implications for the reserve of wealth in the event of such
shocks