A Binomial Probit Analysis of the Home Equity Decisions of Elderly Homeowners

Abstract

This article seeks to determine what factors are most important in the home equity decisions of older homeowners. A binomial probit multivariate regression technique is applied to pooled cross-sectional data from the Panel Study of Income Dynamics. The results indicate that demographic factors, such as retirement, marital, and health status, are much more important determinants than financial factors, such as income, financial assets, and housing costs. The results also indicate that factors correlated with attachment to the home play a relatively large role. The results suggest that governmental strategies that make home ownership more affordable for the elderly may have little effect on their propensity to remain in their home and that programs that treat nonfinancial aspects of elderly home ownership may be more effective.