California cities dominate the top 10 U.S. cities where reverse mortgages are most often used, according to a new study by LendingTree. California cities accounted for four of the top 10 slots in LendingTree’s report, but none of them managed to claim the top spot—that honor went to Virginia Beach, Virginia.
To discovery which parts of the country were most fond of reverse mortgages, LendingTree looked at five years’ worth of data (2012 - 2017) drawn from the Federal Housing Authority’s Home Equity Conversion Mortgage (HECM) program. According to LendingTree, they then “compared the number of HECM to the number of homeowners more than 60 years old and calculated a ratio of how many reverse mortgages originated per 1,000 homeowners in the 100 largest cities. Eligibility for the HECM reverse mortgage begins at age 62.”
LendingTree’s research determined that HECMs originated in the 100 studied cities at an average rate of 7.1 loans per 1,000 homeowners over the age of 60. The top city, Virginia Beach, boasted a rate of 13.8 loans per 1,000 homeowners over the age of 60. On the other end of the spectrum, the lowest-rated city, Pittsfield, Massachusetts, came in at a considerably lower rate—0.3 loans per 1,000 over-60 homeowners.
After Virginia Beach, the rest of the top 10 cities for reverse mortgage volume included Denver, Colorado; Riverside, California; Sacramento, California; Reno, Nevada; Las Vegas, Nevada; Austin, Texas; San Francisco, California; El Paso, Texas; and San Diego, California.
As LendingTree Chief Economist Tendayi Kapfidze explains, “Prices in the four California cities … increased 9 percent in the third quarter in 2017 from the same time last year, well above the national average of 6 percent. Over the years, sustained appreciation has left these homeowners with ample equity to access in retirement years.”
The U.S. cities where older Americans are embracing reverse mortgages the least include Pittsfield, Massachusetts; Wichita Falls, Texas; Toledo, Ohio; Detroit, Michigan; Youngstown, Ohio; Madison, Wisconsin; Providence, Rhode Island; Grand Rapids, Michigan; Cleveland, Ohio; and Milwaukee, Wisconsin.
“These Rust Belt locales have not experienced sustained periods of robust home price appreciation and homeowners may not have accumulated a level of home equity to take out reverse mortgages,” Kapfidze said. “The colder weather in these states could also mean homeowners are more likely to move to warmer climates for retirement, whereas in a state like California, homeowners who have accumulated equity may be inclined to stay for the quality of life.”
You can read the full LendingTree report by clicking here.