06-26-2025
An enduring feature of the American housing market is that home ownership rates among the elderly are very high. In previous research with Mike Eriksen, we found home ownership peaks at age 72 at 80%, remains essentially flat until age 80, is 52% at age 90, and 23% at age 100.
Of course, the typical older American does not live to be a centenarian. In fact, the majority of older owners die owning their homes, so a large share of elderly housing wealth is bequeathed. For these decedents, 16% of equity was spent down in the last two years of life, 52% was transferred to surviving spouses, and the remaining 32% went to other heirs.
For housing and finance economists, this is something of a puzzle. It is at odds with the theoretical predictions from life-cycle models of consumption that predict housing wealth eventually should be consumed, triggered by an own-to-rent tenure transition, as well as finance models that emphasize the value of diversification, unless the elderly face substantial uncertainty, are highly risk averse, or financial markets are incomplete.
In ongoing research, Eriksen and I examine whether and to what extent bequest motives explain the desire to hold housing late in life. With such a motive, housing may be a convenient location for bequeathable assets, especially for homeowners with modest wealth and bequest intentions who have the bulk of their portfolio in housing.
For the rich, as the size of intended bequests grows relative to housing wealth, housing may be a less-important location. Of course, holding substantial housing assets late in life could also represent self-insurance against uncertainty, such as mortality risk. Without intention, bequests may be left by those who die earlier than expected.
Specifically, we draw on detailed longitudinal data for older homeowners from the 1998-2018 waves of the Health and Retirement Study (HRS). The HRS is a large, nationally representative survey of individuals 50 and older (and their spouses/partners) with interviews every two years until death. After passing, the next of kin are interviewed about the economic circumstances at death and the disposition of any assets in the estate.
Therefore, the HRS provides a complete picture of housing and wealth through the end of life. Bequest intentions are measured directly from questions on the (subjective) likelihood of leaving a bequest of various sizes, administered each survey wave.
Our empirical analysis suggests that bequest motives may be an important reason the elderly home ownership rate is so high in the United States. Our findings indicate that for every $100,000 in intended bequests, there is a 6.7 percentage point increase in the likelihood an older homeowner stays in their home and ages in place. If older Americans relinquished their desire to leave bequests, the rate of home sales by older Americans would double.
Gary Engelhardt is a professor of economics at Syracuse University. He is a Research Fellow of Purdue’s Dean V. White Real Estate Finance Program, which is directed by Professor Mike Eriksen. The center prepares students for careers in real estate with specialized minors, coursework and experiential learning opportunities while providing thought leadership in economics, finance and accounting related to the built environment.
