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Homeowner Prospects Are Looking Up for Seniors

Residential housing prices are continuing to recover throughout the country. The trend is not occurring everywhere and often is uneven. But it is helping seniors, whose home equity has reached a peak, according to a recent survey. And there are signs that brighter days for older homeowners are also extending to other housing providers dependent on the senior market.

The National Reverse Mortgage Lenders Association sponsors a quarterly report on home values for homeowners age 62 and older (the age group eligible to take out reverse mortgages insured by the government). During the third quarter of last year, senior home equity rose by $74 billion nationwide, marking the largest percentage increase since the end of 2005. Allen Jones, managing director of the firm that compiles the data, RiskSpan, says "this path that we're on is likely to continue."

Nationally, RiskSpan reported, home values among older owners hit $4.23 trillion during the quarter, up from $4.16 trillion the previous quarter. This figure reflected home equity among older owners of $3.15 trillion (up from $3.07 trillion at the end of the second quarter) and mortgage debt of $1.08 trillion (down slightly from $1.09 trillion). However, senior home values are still down nearly 15 percent from their peak reached in the fourth quarter of 2006. Senior home equity is down nearly 22 percent during the same span.

Stronger home sales among seniors are also beginning to show up in residency gains in retirement communities. Senior housing and care communities traditionally gain new members who sell their primary residences to provide funds for entrance fees and other expenses. The plunge in home sales and values dried up this avenue. Many retirement communities have resorted to extensive new membership support strategies to help people afford the communities and make the transition from their own homes.

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[Read: Should Investors Buy the Housing Recovery?]

"We're definitely seeing the improvement in housing having an impact," says Tom Meyers, who specializes in senior community financing as a managing director for Ziegler, a specialty investment firm based in Chicago. At many of the Midwest communities Meyers works with, occupancy rates showed healthy gains last summer, and he expects the trend to continue.

Ziegler calculates a key market metric that is based on the percentage of an area's residents who are old enough to enter a retirement community (the target age group is from the late 70s to early 80s) and who also have the financial means to pay the entrance fee and continuing monthly expenses. Throughout the country, only 10 to 15 percent of such people actually move into communities, although the penetration rate can be much higher, particularly in Eastern markets that have long promoted retirement communities as an attractive lifestyle choice.

"We have a Louisville client with a fabulously successful project," he says. "They just opened and have already filled 68 out of 102 units. They could very well be filled within nine months." The penetration rate for Louisville-area retirement communities is very low--"well under 10 percent," Meyers says--so the project's success reinforces his view that improving housing conditions are helping to unleash strong pent-up demand.

[Read: More Foreclosures Yet to Come?]

Another measure of a housing rebound involves the pace at which people move to other parts of the country. During the recession and related real-estate freeze, national relocation activity dropped sharply. Migration among seniors, long known for their freedom to pick up and move to new locales, plummeted in recent years.

According to recent U.S. Census Bureau reports, however, the pace of migration picked up in 2011 to the highest level since the recession. The pickup in employment markets causes most relocations. Seniors are also part of this trend but even if they don't move, big changes in housing turnover due to migration can affect local real-estate prices and home-sales volumes.

[Read: 10 Ways Your Home Can Pay You Money.]

According to the Census Bureau, the five states with the largest migration gains from April 2010 to July 2012 were Texas, 290,453; Florida, 219,003; North Carolina, 72,136; Colorado, 62,296; and Arizona, 48,259. The five states with the largest migration losses during the same period were New York, -224,468; Illinois, -156,197; California, -104,093; New Jersey, -103,252; and, Michigan, -93,368.

More broadly, older people continue to have the nation's highest homeownership rates. According to the Federal Reserve Board's 2010 Survey of Consumer Finance, here are the percentages of families owning their primary residences by age, for both 2010 and 2007:

Older homeowners do not, however, own the nation's most expensive homes. Here is the Fed's look at the average value of primary residences by age, for both 2010 and 2007:



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