It’s no secret that Florida and California have been the hot spots fueling the boom in reverse mortgage popularity. Data recently released by the Office of Federal Housing Enterprise Oversight (OFHEO) point to a big reason why: housing value growth.

Despite a sharp reversal of fortune in the twelve months ended 3/31/07, California and Florida markets take all top 10 spots in the computation of “reverse mortgage friendly communities” for the last five years. This measure compares OFHEO’s rates of home value growth over five years to the average interest rate on monthly-adjusting Home Equity Conversion Mortgages (HECM) - the most popular kind of reverse mortgage - for the same period.

So, for example, a senior homeowner in Bakersfield, CA who who took a HECM reverse mortgage five years ago would have accrued interest on amounts borrowed at an average annual rate of 4.42%. During the same period, the value of his or her home would have appreciated at an astounding 27.13% annual rate - a positive variance of 22.71%! Of course, there are steep closing costs associated with HECM loans that make the true cost of borrowing higher than the just the HECM interest rate. Still, the RM friendly measure is a useful tool to help borrowers and potential borrowers assess the wisdom of taking out a reverse mortgage.

But all is not sunny and golden in Florida and California. Housing bubble troubles are having their impact. Nine of the top ten reverse mortgage friendly communities experienced negative variances for the most recent 12-month period (ended 3/31/07) as home values tumbled and HECM interest rates rose. Miami was the only market out of the top ten to continue showing strong positive variance.

On the other side of the coin, reverse mortgage borrowers in some communities have seen their home equity deteriorate rapidly. Where home values stagnate or decline, the one-two punch of accruing reverse mortgage interest and falling home prices can quickly deplete equity. Still, even for these borrowers there is an upside: with a reverse mortgage you never owe more than the value of the home at the time the loan is repaid.

Index of Reverse Mortgage Friendly Communities
		One-Year				Five-Year
Rank	Most Reverse Mortgage Friendly Communities:	Home Value Growth	Avgerage HECM Rate	Variance		Home Value Growth	Avgerage HECM Rate	Variance
1	Bakersfield, CA	3.82	6.38	-2.56		27.13	4.42	22.71
2	Madera, CA	3.21	6.38	-3.17		26.66	4.42	22.24
3	Miami-Miami Beach-Kendall, FL	11.44	6.38	5.06		26.26	4.42	21.84
4	Riverside-San Bernardino-Ontario, CA	4.14	6.38	-2.24		25.99	4.42	21.57
5	Los Angeles-Long Beach-Glendale, CA	4.82	6.38	-1.56		24.90	4.42	20.48
6	Fresno, CA	0.00	6.38	-6.38		24.74	4.42	20.32
7	Fort Lauderdale-Pompano Beach-Deerfield Beach, FL	2.69	6.38	-3.69		23.42	4.42	19.00
8	Naples-Marco Island, FL	-0.79	6.38	-7.17		23.38	4.42	18.96
9	Port St. Lucie, FL	-0.92	6.38	-7.30		23.38	4.42	18.96
10	Visalia-Porterville, CA	3.04	6.38	-3.34		23.15	4.42	18.73
	Least Reverse Mortgage Friendly Communities:
328	Springfield, OH	-0.69	6.38	-7.07		2.44	4.42	-1.98
329	Saginaw-Saginaw Township North, MI	-0.95	6.38	-7.33		2.39	4.42	-2.03
330	Canton-Massillon, OH	0.76	6.38	-5.62		2.38	4.42	-2.04
331	Greeley, CO	-1.56	6.38	-7.94		2.30	4.42	-2.12
332	Warren-Troy-Farmington Hills, MI	-1.76	6.38	-8.14		2.14	4.42	-2.28
333	Flint, MI	-2.28	6.38	-8.66		2.10	4.42	-2.32
334	Detroit-Livonia-Dearborn, MI	-2.99	6.38	-9.37		1.71	4.42	-2.71
335	Lafayette, IN	3.71	6.38	-2.67		1.63	4.42	-2.79
336	Kokomo, IN	-1.38	6.38	-7.76		1.23	4.42	-3.19
337	Anderson, IN	-0.60	6.38	-6.98		1.02	4.42	-3.40

Use the following links to see information on how reverse mortgage friendly your community is. The new OFHEO data has also been uploaded to the state and metro reverse mortgage information tool.

A Few More Related Articles of Interest:

Reverse Mortgage Friendliness Update (2Q 2007)

Thoughts on Reverse Mortgages in a Down Housing Market

NRRI - National Retirement Risk Index

T-rate Index - Treasury Rate Index

Index Highlights Best (and Worst) Areas For Reverse Mortgages