More than half of 95-year-olds are living in their own homes.

This surprising statistic from the Employee Benefit Research Institute might cause the casual observer to wonder why some older adults remain homeowners for life while others transition from owning to renting after age 50. The institute’s new report, Own-to-Rent Transitions and Changes in Housing Equity for Older Americans, suggests 3 reasons:

  • Death of a spouse. Almost 42% of households moving from homeownership to rental housing also experience the death of spouses.
  • A drop in household income. A third (30.5%) of homeowners reports a drop in household income before making their transition to rental housing. 
  • Nursing home entry. Just over 1 in 10 households shift from owning to renting after a family member enters a nursing home.

The report uses data collected between 1998 and 2010 though the University of Michigan’s Health and Retirement Study (HRS). The HRS data show that 50-year-olds (3%) are more likely to transition from owning to renting than 65-year-olds (1.6%), but less likely to become renters than 90-year-olds homeowners (4.7%).

High Homeownership Rates

Older Americans are predominately homeowners, according to the study. Homeownership rates peak at age 65 (81.2%), then fall slowly until age 85 (70%). After that, the rate of homeownership starts to decline steadily. Even with these declines, however, almost two-thirds (59%) of 90-year-olds and more than half (54%) of 95-year-olds are homeowners.

Renters show the opposite pattern. More 95-year-olds rent their homes (27%) than 50-year-olds (23%). The homeownership rate hovers around 90% for couples and 60% for singles of all ages.

The penchant for late-life homeownership may have something to do with the fact that housing wealth does not decline at retirement. Home equity levels remain stable from age 68 ($108,288) to age 80 ($108,100) before they begin to decline after age 80.

Ownership Translates into Wealth

Owners generally have higher median incomes than renters, according to the study. Median household income for homeowners between 50 and 64 is $79,758. Households that shift from owning to renting before the traditional retirement age have a median household income of $53,520.

This income difference seems to dissolve as owners and renters age. Owners aged 85 and older have a median household income of $32,263, compared with a median household income of $32,998 for those who shift from owning to renting.

The shift to renting has the strongest impact on the financial wealth of older households between the ages of 50 and 64, according to the study. Households that transition to renting before retirement age have a median financial wealth of $21,434, compared with $110,202 for those that continue to own into their 70s and 80s. New renters aged 85 and above have a median household financial wealth of $125,301, compared with $117,874 for those who continued owning their homes.

These wealth differences could relate to the amount of equity that homeowners have accumulated before their transition to rental housing. Homeowners who decide to rent before age 65 probably have less equity in their homes than those who postpone a move. Therefore, selling doesn’t have a significant effect on their financial wealth. On the other hand, households that transition to rental at an older age have greater equity, which translates into greater personal wealth after the sale.