Older Homeowners Are Sitting on Trillions in Equity — But Rising Costs Are Eating Away at It
For millions of American families, the family home represents the single most valuable asset that will ever change hands between generations. Baby boomers alone hold an estimated $19 trillion in home equity, and older Americans collectively are expected to pass down trillions in housing wealth over the coming decades. But a closer look at the numbers tells a more complicated story — one in which rising homeownership costs are quietly chipping away at the inheritance that future heirs are counting on.
New data from the Harvard Joint Center for Housing Studies' State of the Nation's Housing 2026 report reveals a troubling trend: homeowners aged 65 and older now carry the highest cost-burden rate of any age group in the country. In 2024, 28% of seniors were spending more than 30% of their income on housing and utilities — the standard threshold economists use to define being "cost-burdened." That figure is not just a financial statistic. It represents real households where a home worth hundreds of thousands of dollars sits alongside an owner who struggles to pay the monthly bills that come with keeping it.
Why Are Seniors So Cost-Burdened Despite Record Equity?
On the surface, the situation can seem paradoxical. How can a homeowner be asset-rich and cash-poor at the same time? The answer lies in the fundamental difference between wealth stored in property and income available to spend each month.
Most older homeowners purchased their homes decades ago and have benefited enormously from long-term appreciation. Their equity has ballooned, especially in the post-pandemic housing market. But equity doesn't pay an electric bill. It doesn't cover property taxes, homeowners insurance, maintenance, or rising utility costs — all of which have increased sharply in recent years.
"Incomes are certainly constrained for this group, which is mostly why the cost-burdened rate is so high," explains Joel Berner, senior economist at Realtor.com. "But it is true that the cost of ownership is increasing for older homeowners in a disproportionate way."
Seniors living on fixed incomes — primarily Social Security and retirement savings — are especially vulnerable to cost increases they cannot easily offset by earning more. When property taxes rise, when insurance premiums spike due to climate-related risks, or when an aging roof finally needs replacing, older homeowners often have few options beyond dipping into savings or borrowing against their home.
The Rising Popularity of Reverse Mortgages
One increasingly common response to this financial squeeze is the reverse mortgage — a loan product that allows homeowners aged 62 and older to borrow against their home equity without making monthly payments. The loan is repaid when the borrower sells the home, moves out, or passes away.
According to the Department of Housing and Urban Development, nearly 28,000 homeowners took out an FHA-insured reverse mortgage in fiscal year 2025, up from approximately 26,500 the year before. That uptick suggests more seniors are turning to their home equity not as a windfall to leave behind, but as a financial lifeline to fund their present-day expenses.
Reverse mortgages can be a legitimate and valuable tool for seniors who need cash flow and have no plans to leave the home to heirs. But they come with significant long-term costs that compound over time, including interest, insurance premiums, and origination fees. Every dollar borrowed reduces the equity left in the home — and every year that passes, interest accrues on the outstanding balance, further shrinking what remains.
What This Means for Heirs
For adult children and other beneficiaries expecting to inherit a home, these trends carry real financial consequences. The inheritance math is straightforward: the final equity available to heirs equals the home's sale value minus any outstanding mortgage, reverse mortgage balance, fees, and costs of sale. As seniors borrow more against their homes to cover daily expenses, that final number gets smaller.
Beyond reverse mortgages, there are other ways that rising costs quietly reduce what heirs ultimately receive:
- Deferred maintenance: When older homeowners can't afford regular upkeep, homes fall into disrepair. By the time a property is inherited, significant investment may be required before it can be sold at full market value.
- Forced early sales: Some seniors who can no longer afford housing costs sell before they had planned, sometimes at suboptimal times in the market, reducing what they have left to pass on through other assets.
- Drawn-down savings: When housing costs consume a large share of income, seniors may liquidate retirement accounts or other investments to compensate, reducing the broader estate.
A Structural Problem With No Easy Fix
The underlying tension here isn't one that will resolve itself as housing values rise further. In fact, in many ways, higher home values make the problem worse. More valuable homes carry higher property tax assessments in most states. They require more expensive insurance. They cost more to maintain and repair. And they sit in markets where downsizing — often suggested as a logical solution — may not produce the cash windfall seniors expect, especially if they're moving to a region with similarly elevated prices.
Policymakers, financial planners, and families alike are beginning to grapple with this reality. The concept of the "great wealth transfer" through real estate remains broadly accurate, but the amount that actually changes hands may fall well short of what current equity figures suggest.
What Older Homeowners and Their Families Can Do Now
Planning ahead is the most effective way to protect both a senior homeowner's financial security and the inheritance they hope to leave behind. Some steps worth considering include:
- Review housing costs annually: Understanding where money is going — property taxes, insurance, utilities, maintenance — helps identify areas where costs can be reduced or planned for.
- Explore property tax relief programs: Many states offer exemptions or deferrals for senior homeowners. These programs are frequently underutilized simply because people don't know they exist.
- Discuss estate plans openly: Families who communicate clearly about expectations — who will inherit the home, whether it will be sold, and what financial obligations are tied to it — are better positioned to avoid costly surprises.
- Consult a HUD-approved housing counselor: Before taking out a reverse mortgage or making any major decision involving home equity, seniors are encouraged to seek independent, professional advice.
- Consider timing and alternatives: In some cases, selling earlier and intentionally distributing the proceeds — rather than leaving a property to be managed by heirs after death — may produce better financial outcomes for everyone involved.
The Bottom Line
The record home equity held by older Americans is real, and it represents an enormous reservoir of generational wealth. But equity is only as valuable as the circumstances under which it is eventually accessed. With rising housing costs placing disproportionate financial pressure on seniors living on fixed incomes, the gap between the wealth that exists on paper and the inheritance that actually transfers to the next generation is likely to grow. For families hoping to benefit from that wealth transfer, the time to understand these dynamics — and plan accordingly — is now.