Secret #50 – Housing Bubbles Hurt Older Home Owners, Too

Real estate bubbles hurt first-home buyers who buy near the top of the market, of course, but real estate bubbles also hurt last-home sellers who have to sell near the bottom of the market.

Home equity is the largest part of the typical 75+ year old’s net worth. The Federal Reserve's Survey of Consumer Finances in 2019 found the median net worth of households headed by people 75 years old and older was only $255,000. Their median home equity was $118,000, or nearly half of their total net worth (46%).

More sustainable house price increases would mean older folks who have to sell in their later years aren't punished as much financially for having a sickness or death in the family in the wrong year of the housing price cycle. 

Similarly, younger folks wouldn't be punished as much financially for falling in love, getting married, or wanting to start a family, and buying a house in the wrong year in the housing price cycle.

And our overall economy would be much larger if we had more sustainable house price increases. The U.S. would be permanently richer because housing busts can reduce national economic growth for years.

The volatility of house prices devastates first-home buyers who buy near the top of the cycle but that huge price volatility also devastates older folks who have to sell their homes near the bottom of the cycle.