Housing Wealth and Retirement Timing

Abstract

Labor-supply effects of changes in house value are potentially important but empirically neglected. Using the panel Health and Retirement Study merged to local house prices from the Federal Housing Finance Agency, we estimate the effect of house-price changes on actual and planned retirement timing. While we find no effect of house-price changes on the annual probability of retiring, we find that people respond to rising house prices by revising down their expected retirement age. We estimate that a 10% real increase in house value reduces expected retirement age by about 4 months. Our findings suggest that movements in the housing market may have important labor supply implications, especially in areas experiencing steep price declines.