The Effects of Changes of Housing Prices on Retirement Likelihoods
Abstract: During the housing boom between 1995 and 2006, over five trillion dollars in wealth was created. However by 2009, up to 30% was lost in certain metropolitan areas. With over 65% of Americans in 2012 being homeowners, the creation and succeeding loss of wealth could have significant impacts on the balance sheets of households and thus influence retirement decisions. This study uses hazard models to examine the effect of housing and real estate wealth, along with work histories and other covariates, on individuals’ likelihood of retirement, using HRS data from 1992-2010. The models evaluate both the effect of changes in the net values as well as the fluctuations in the percentage change of net values of different housing and real estate variables. I found that in general, higher levels housing and real estate wealth (net values) predicted a lower likelihood of retirement at any given time, holding all else constant. However, large percentage increases in housing wealth (percentage change of net values) associated with the housing boom and bust had the opposite effect and predicts individuals more likely to retire. This suggests that the housing bust may have delayed retirement for many households.
The Effect of Changes of Housing Prices on Retirement Likelihoods
Abstract: During the housing boom between 1995 and 2006, over five trillion dollars in wealth was created. However by 2009, up to 30% was lost in certain metropolitan areas. With over 65% of Americans in 2012 being homeowners, the creation and succeeding loss of wealth could have significant impacts on the balance sheets of households and thus influence retirement decisions. This study uses hazard models to examine the effect of housing and real estate wealth, along with work histories and other covariates, on individuals’ likelihood of retirement, using HRS data from 1992-2010. The models evaluate both the effect of changes in the net values as well as the fluctuations in the percentage change of net values of different housing and real estate variables. I found that in general, higher levels housing and real estate wealth (net values) predicted a lower likelihood of retirement at any given time, holding all else constant. However, large percentage increases in housing wealth (percentage change of net values) associated with the housing boom and bust had the opposite effect and predicts individuals more likely to retire. This suggests that the housing bust may have delayed retirement for many households.