Many reasons have been cited for metro Denver’s trend of record-low inventory of homes for sale — 3,869 listings, according to the Denver Metro Association of Realtors’ latest market trends report — including high demand, the slow pace of new home construction and empty nesters hanging onto their homes for lack of affordable tradeup options.
Here’s one more that doesn’t get talked about as much: Denver ranks second in the nation for older homeowners opting for reverse mortgages, according to a new report from LendingTree Inc.
Among Denver-area homeowners over the age of 60, 13.5 out of 1,000 opts for a reverse mortgage, nearly double the national average of 7.1.
Only Virginia Beach, Virginia has a higher rate, the report says. And only five cities have rates higher than 13 percent, also including Riverside and Sacramento , California, and Reno, Nevada.
Of those cities, Denver has by far the highest media home price of $418,100.
Under a reverse mortgage, a homeowner can borrow money against the value of their home, receiving funds in the form of a fixed monthly payment or line of credit. No repayment is required until the borrower dies, moves or sells the home.
Tendayi Kapfidze, LendingTree’s chief economist, said faster home appreciation tends to be the biggest factor in the cities at the top of the list. That’s certainly true in Denver, where the latest S&P/Case-Shiller Home Prices Indices report showed single-family home resale prices in metro Denver up 7 percent from a year earlier.
Homeowners who’ve seen considerable appreciation are more likely to tap into the equity through a reverse mortgage, which is only open to people 62 or older, Kapfidze said.
A high volume of reverse mortgages can have a side effect for the housing market overall. Kapfidze said that typically, someone first makes the decision to stay in his or her home, then looks into a reverse mortgage as an income stream. The end result is the home stays with the current occupant rather than coming on the market for sale.
Though it’s not the only reason, Kapfidze said, it is one reason the local and national supply of homes for sale is noticeably lacking.
“Nationally, inventory is tight,” he said, noting demographers have also documented a decline in mobility across the U.S. as people are tending to stay where they are longer.
Kapfidze said he also expects some bad news for real estate watchers hoping more homes will come on the market as baby boomers begin retiring in large numbers. That demographic cohort also has a large amount of home equity, he said, if they didn’t strip it out in the housing boom of the 2000s.
“As more baby boomers get to retirement, there might be an increase in use of reverse mortgages,” Kapfidze said.