Maintenance and the Home Equity of the Elderly

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Abstract
The empirically observed failure of older households to reduce home equity has long puzzled economists. The magnitude of home equity reduction is understated if self-reported home values of the elderly do not incorporate the market's view of the state of repair. Panel analysis of the American Housing Survey shows that households over age 75 spend approximately $270 less per year on routine home maintenance than younger households and approximately $1,100 less in total expenditures, including repairs, alteration and replacements. The homes of older households are signican tly more likely to fall into disrepair between waves of the AHS. When older households sell their homes, the new owners consider the home to be less nice than the older occupants did, a phenomenon which occurs to a much smaller extent when the seller is younger. Homes sold by older households exhibit weaker price appreciation than those owned by younger households, but this result depends on whether the base price is the purchase price or the estimated value at the start of the panel. Based on purchase-price to purchase price dierences, a year of occupancy by an older household is associated with a 1.5 percent reduction in resale value.

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