Why Generation X is the next frontier of reverse mortgage lending

Much commentary and prognostication have been focused on the demographic potential of baby boomers that would accelerate reverse mortgage demand. For years it was hoped that While we have only scratched the surface of age-eligible households another demographic warrants more attention. Gen X or Generation X. My generation. A generation some refer to as Boomer 2.0.

Defined as the generation of people born between the mid-1960s and the early-1980s Gen Xers account for 66 million Americans. Baby Boomers account for 76 million individuals according to the U.S. Census Bureau.

Sandwiched between the Millennials and Boomers Generation Xers are generally in the middle of their working years and the oldest are approaching retirement and eligibility for Social Security benefits. In other words, they’re on the cusp of becoming age-eligible for the federally insured Home Equity Conversion Mortgage (HECM) and many already meet the minimum age requirement for proprietary or private jumbo reverse mortgages.

Generation X is on track to become the first generation to have a lower standard of living in retirement than their previous generation. Not surprising when you consider company pensions and defined benefit plans once common among boomers are remarkably scarce for this generation.

Consequently, we must grapple with two realities. Generation X is the future reverse mortgage marketplace and boomer homeowners will quickly dwindle in the coming years. By 2035 Boomers will be between the ages of 71 and 89 according to a February Freddie Mac Housing Outlook report.

But more importantly, the projected decline in Baby Boomer households will be significant. This chart shows the projected decrease in baby boomer households with a modest decline in home ownership in the first five years followed by a significantly larger cohort of Boomers who can no longer live in their home or pass away. Freddie Mac projects there will be 9.2 million fewer Boomer households by 2035. The silver tsunami will be more like a receding tide.

One factor that could slow the exit of Baby Boomers from their homes is improvements in healthcare and life expectancy.

All this leaves reverse mortgage lenders and originators to balance two equally important tasks: focusing on attracting current age-eligible borrowers while at the same time educating and preparing the next generation to embrace the power of leveraging one’s home wealth to improve their quality of life in retirement.

One way to do this is to focus on increasing engagement with adult children. Not only should we engage our borrowers’ children but also slowly forge an ongoing relationship that fosters increased trust. After all, you helped their parents enjoy their non-working years with fewer financial worries. Ideally, every adult child should be in our database. If not, we may be foregoing the opportunity to provide a reverse mortgage should their situation be suitable.