Using the 1990 Public Use Microdata Sample to Estimate Potential Demand for Reverse Mortgage Products

This article estimates the potential demand for reverse mortgages among elderly home-owning households by using the 1990 U.S. Census Public Use Microdata Sample. The demand for reverse mortgages is considered in terms of both the life-cycle hypothesis and an asset management perspective. These theoretical perspectives, coupled with an analysis of alternative home equity loan instruments, suggest that the elderly are the most likely consumers of reverse mortgages. The primary market for reverse mortgages consists of households with heads over age 69, housing equity exceeding $30,000, and no mortgage. More than 6.7 million households met these criteria in 1989, yielding a market estimate considerably higher than that advanced in earlier studies. These households are widely dispersed among the nine census regions, with only one-third residing in 43 large metropolitan areas. The potential market size is sensitive to the assumed level of equity required to demand a reverse mortgage.