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Baby Boomers Accelerate Their Advance into Free-and-Clear Homeownership

Paying off the mortgage, once a widespread rite of passage for homeowners approaching retirement, has become less common in recent years. Concerns are mounting that the increasing prevalence of housing debt among older homeowners could compromise financial security in retirement by expanding housing affordability problems, crimping essential non-housing spending, increasing vulnerability to home loss through foreclosure, or limiting the accumulation of housing wealth.

These concerns are amplified by the fact that the large Baby Boomer generation, which includes 33 million owner-occupants, is reaching retirement age with an elevated likelihood of carrying housing debt. Among the oldest Boomer homeowners, who were age 65-69 in 2015, slightly less than 50 percent were mortgage-free, down 10 percentage points compared with Silent Generation homeowners of the same age in 2000. 

In this new edition of Housing Insights, Fannie Mae's Economic & Strategic Research Group uses a cohort analysis – a dynamic means of measuring historical change and projecting likelihood of future change – to investigate whether Baby Boomer homeowners began to extinguish their housing debts more rapidly as the economy emerged from recession, and to explore Boomers’ future likelihood of owning their homes outright.

The study reveals that Boomers attained free-and-clear homeownership at an accelerated pace between 2010 and 2015, a period of economic and housing market recovery. However, even assuming that the accelerated post-recession gains in free-and-clear homeownership continue, cohort projections reveal that Boomers are unlikely to be mortgage-free at retirement at the same rate as their predecessors. 

Read our latest edition of Housing Insights and hear from the author, Patrick Simmons, in his related Perspectives blog.

Baby Boomers Accelerate Their Advance into Free-and-Clear Homeownership (PDF)