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Reverse Mortgages Contributing to Denver Housing Squeeze

The consistently strong reverse mortgage origination numbers from the Denver metropolitan area could have a related dark side for first-time homebuyers.

Citing a recent LendingTree study that showed Denver had the second-highest reverse mortgage usage among borrowers aged 60 and over, the Denver Business Journal speculated that demand for Home Equity Conversion Mortgages could be contributing to the city’s low inventory of available properties for sale.

Tendayi Kapfidze, chief economist at LendingTree, told the DBJ that high rates of HECM usage affect housing crunches in cities — and nationwide.

“Nationally, inventory is tight,” Kapfidze told the publication, adding that other research has shown a general trend toward people remaining in their hometowns and properties rather than moving.

The most recent market report from the Denver Metro Association of Realtors revealed a record-low 3,869 homes for sale, according to the DBJ. That bottleneck has been blamed on increasing demand for housing in the Colorado capital, as well as a lack of new construction — and a dearth of affordable options for older folks who might be considering downsizing.

At the same time, Colorado and other states in the West have seen skyrocketing levels of home equity. Centennial State homeowners gained $22,000 in equity during the four quarters ended 3Q 2017, according to the most recent data from real estate analysis firm CoreLogic. That figure places Colorado well above the the national average of $14,900.

Those states have also been reliable hotspots for reverse mortgage originations based on data from Reverse Market Insight. For instance, Colorado saw a 68% jump in originations in 2017 as compared to the prior year, leading all states.

All that positive news for HECM lenders could spell trouble for first-time homebuyers hoping for more properties to become available for sale.

“As more baby boomers get to retirement, there might be an increase in use of reverse mortgages,” Kapfidze told the DBJ.

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