The numbers of mortgage delinquencies, defaults and North Puget Sound foreclosures (along with the entire US) are rising among a sector of the American population that is often particularly sensitive to the wild gyrations of the economy: retirees. A new report by the American Association of Retired Persons (AARP) revealed that the percentage of foreclosures involving homeowners who are at least 50 years old is not at 2.9 percent. Just five years ago, than number was 0.3 percent.
In the late 20th century, financial planners in America often used the term “nest egg” when advising their retirement-age clients about real estate opportunities. Home ownership has long been touted as the most significant factor of the American Dream, and millions of retirees dutifully stuck to this tenet. When 401(k) plans and other retirement investment portfolios were decimated by the bursting of the Dot-Com bubble, many retirees decided to either draw equity from their primary residences, or to invest in real estate.
Retirees were likely candidates for subprime mortgages due to their non-performing retirement accounts, and many applied for cash-out refinance loans that featured adjustable rates or balloon payments that would soon come due. Most retirees who signed up for these subprime products did so because they believed the value of their primary residences would continue to appreciate. That has not been the case, however, and the AARP is concerned that the foreclosure trend among retirees is bound to continue, potentially leaving millions of older Americans without a home.