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Changes in Homeowners’ Financial Security during the Recent Housing and Mortgage Boom

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Author Info

  • Kate Sabatini
  • Christian E. Weller

Abstract

From the late 1990s through 2005, the U.S. experienced an unprecedented housing boom, which boosted the asset values of many families. This meant, on the one hand, that families with homes had more collateral to borrow against, but it also meant that new home buyers needed to take out larger mortgages to afford a home. After 2001, the U.S. saw a sharp acceleration in the growth rate of household debt. Using data from the Survey of Consumer Finances conducted by the Federal Reserve, which we supplement with data from the Flow of Funds Accounts generated by the Federal Reserve, we consider the effect of the housing and mortgage boom on the financial security of homeowners. The data indicate that all measures of vulnerability are increasing and suggest declining financial security for homeowners after 2000. The increases in financial vulnerability were especially pronounced for minorities, younger families, and lower income families.

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File URL: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_101-150/WP125.pdf
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Bibliographic Info

Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp125.

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Date of creation: 2007
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Handle: RePEc:uma:periwp:wp125

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Related research

Keywords: Mortgages; mortgage payments; variable interest debt; home equity; portfolio allocation;

References

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  1. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
  2. Krumm, Ronald & Kelly, Austin, 1989. "Effects of homeownership on household savings," Journal of Urban Economics, Elsevier, vol. 26(3), pages 281-294, November.
  3. Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 632, Econometric Society.
  4. Green, Richard K. & White, Michelle J., 1997. "Measuring the Benefits of Homeowning: Effects on Children," Journal of Urban Economics, Elsevier, vol. 41(3), pages 441-461, May.
  5. John Harding & Thomas J. Miceli & C.F. Sirmans, 2000. "Do Owners Take Better Care of Their Housing Than Renters?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(4), pages 663-681.
  6. James VanderHoff, 1996. "Adjustable and Fixed Rate Mortgage Termination, Option Values and Local Market Conditions: An Empirical Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(3), pages 379-406.
  7. Baker Dean, 2006. "The Menace of an Unchecked Housing Bubble," The Economists' Voice, De Gruyter, vol. 3(4), pages 1-5, March.
  8. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  9. Posey, Lisa L. & Yavas, Abdullah, 2001. "Adjustable and Fixed Rate Mortgages as a Screening Mechanism for Default Risk," Journal of Urban Economics, Elsevier, vol. 49(1), pages 54-79, January.
  10. N. Edward Coulson, 2002. "Housing policy and the social benefits of home ownership," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 7-16.
  11. Donald R. Haurin & Toby L. Parcel & R. Jean Haurin, 2002. "Does Homeownership Affect Child Outcomes?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 635-666.
  12. Dean Baker, 2002. "The Run-up in Home Prices: A Bubble," Challenge, M.E. Sharpe, Inc., vol. 45(6), pages 93-119, November.
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